European dairy farmers prepare for a difficult 2022

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Dairy farmers across Europe are preparing for a costly 2022, followed by a journey into the unknowns of the new CAP in 2023.

They say conditions are very difficult for farmers seeking to meet rising milk prices by increasing supply.

Danish, German, French, Portuguese and Irish milk producers have raised their concerns with the European Milk Board, and it is clear that there is particular concern until 2023 in Denmark and Portugal, caused by the plans of the CAP of the two countries.

The European Milk Board is made up of 21 dairy producer associations, and the Landsforeningen af ​​Danske Mælkeproducenter (LDM) in Denmark told the EMB that its new PAC will take €23,597 away from the average Danish dairy farm, in the redistribution of funds between Pillars I and Pillar II, with the government proposing to compensate for these losses through slaughter premiums for young animals.

The Associação dos produtores de leite de Portugal (APROLEP) told the EMB that its strategic plan for the CAP ignores the challenges for the country’s dairy sector and instead proposes 100% convergence that reduces more than 50 % income support for dairy producers.

Agrolep members also fear a proposed new CAP payment for silage maize offering only half of the aid granted for grain maize.

EMB members across Europe have made a litany of complaints that could help explain the continent’s slow milk production in 2021 and poor prospects for increased supply in 2022.

Danish dairy farmers say a national carbon tax is underway which will add between 6 cents and 7.3 cents per liter of milk produced.

“We sincerely hope that politicians will also see it as their responsibility to explain to retailers and consumers why farmers need a higher price for their produce,” said LDM President Kjartan Poulsen, who is vice-president of the EMB.

He said Danish farmers were also worried about the lack of young people to take over the farms. “Anyone who wants to get into milk production faces huge challenges in every EU member state. Young farmers, in particular, have to deal with the investment capital required.

LDM has calculated that the start-up capital in Denmark for a farm with 210 cows and 150 hectares of land is around 3.87 million euros.

There is €2.3 million for real estate and fixed assets; €1.2 million for the financing of herds, equipment and movable property; commercial, general and administrative expenses for €70,000; and initial costs for power, operating costs, etc. of €300,000.

LDM suggested that financing the start-up capital requires an equity loan of €500,000 (interest rate of 9%), a 30-year mortgage of €1.9m, a 15-year bank loan of €1m € and a working capital loan of €300,000.

This financing results in annual interest and principal payments of €270,000, so the income per cow must be €1,560, to cover all interest, installment and salary expenses. The required income is €1,882 per cow if the remuneration of a farm manager is taken into account.

EMB members across Europe have made a litany of complaints that could help explain the continent’s slow milk production in 2021 and poor prospects for increased supply in 2022. File photo :Andy Gibson.

According to LDM, it is practically impossible for a young man or woman to finance a dairy farm in Denmark with their own funds. The Danish organization says: “Parents need to lend some of the money to their child, or acquire capital from people who have money, or somehow share a farm for some time with the previous owner.

“That’s why Danish farmers are getting older and older, because they can’t sell their farm at a price that covers their loans. Over the past 12 months, 5% of dairy farms have closed. Agricultural land is easy to sell to financial funds, but not livestock.

This, says LDM, puts dairy production in Denmark in a “tricky position”.

Adrien Lefèvre, president of the Association des Producteurs de Lait Indépendants (APLI), told the EMB that French dairy farmers are also struggling to find young people to take over the farms. Irish dairy farmers have focused on dramatically rising fertilizer prices as their main concern for 2022.

ICMSA is the Irish member of the EMB, and its policy officer, Paul Smyth, explained that manure is an important input for Irish spring calving herds to maximize the grazing season and take full advantage of fresh grass.

“The hope is that a mild spring will lead to good growing conditions, easing some of the pressure on input costs,” Smyth said.

According to EMB member Arbeitsgemeinschaft bäuerliche Landwirtschaft (AbL), in Germany the cost of producing milk last October was 46.13 c/kg, but the price of milk on the farm was only 37.45c/kg. The costs here are a calculation of the minimum price dairy farmers must pay to cover the cost of production and generate a decent income for themselves and their family members working on the farm.

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