When it comes to ensuring a fair position for producers in the value chain, transparency in terms of costs and prices plays a very big role. The Agriculture and Food Chain Observatory (AFCO) recently held its first meeting in order to (hopefully) create the framework for exactly that. The methodologies already exist in the dairy sector. For many years now, the BAL has been regularly producing cost and price calculations using a representative methodology. For example, the latest EU figures have just been published: Average cost coverage over five years was only 88 per cent.
EU average: Farm-gate milk prices and subsidies are still not enough for cost-covering milk production.
If you look at the EU figures since 2017, it becomes clear that a high cost-coverage shortfall is the bitter everyday reality for farmers. This shortfall ranged between -22 per cent (2018) and -6 per cent (2023) over the last years. The only exception was 2022. In the latest cost calculations published by the Bureau for Rural Sociology and Agriculture (BAL), it is stated: The massive increase in farm input costs, especially for fertilisers, feed and energy since 2020, is eating into the profits from higher farm-gate milk prices. After 2022, the one instance of cost-covering farm-gate milk prices, the cost coverage shortfall became significantly worse as of 2023 because farm-gate prices fell once again while farm input costs remained very high.
EU average - Source: BAL, 2024
“This important information about (negative) producer margins must be used to finally introduce measures that usher in producer prices that ensure full cost coverage,” says Kjartan Poulsen, President of the European Milk Board asbl (EMB). The EMB has commissioned the BAL to carry out EU cost calculations in order to inform the sector and the public at large about these key figures. “The calculation methodology is very important because it is representative and, above all else, because it also includes an appropriate income for producers,” says Poulsen. According to EMB Vice-President Elmar Hannen, datasets as well as potential calculation methodologies already exist in the EU at a very promising level. The EMB would be glad to share their fair calculation methodology with the EU so that it can finally make some real progress on the issue of cost coverage. Generally speaking, the European Commission must also improve the data used in the Farm Accountancy Data Network (FADN) in order to create an updated EU dataset.
Even when it comes to the newly-created AFCO, Hannen has an important demand of the European Commission: “At no point should we lose sight of the fact that the ultimate goal of the Observatory is to improve the position of producers along the value chain.” The reasons for this are well known – farmers are leaving the sector in droves, it is impossible for the next generation to enter the sector due to the lack of any kind of profitability, and this means that food production in the EU hangs in the balance. “If the Observatory is to make a real contribution, then this goal cannot be torpedoed by other interests. Many different interest groups have sent representatives to the Observatory. However, this should not mean that the goal of fair producer income is abandoned.” The EMB expects the European Commission to chair the group such that inconsequential results that miss the mark are avoided. “We expect that non-constructive contributions from stakeholders that have no interest in improving the position of producers will be called as such and that we will finally start working on full cost covering prices for farmers,” underlines Hannen.
The EU cost and price figures from the BAL paint a clear picture of the reality in the dairy sector in all its harshness. Ignoring this data is no longer an option for the EU. “Farmers will not stand for this any longer. They have locked their sights on the Observatory and the future reform proposals by the European Commission. If these aspects do not deliver, then there is a threat of EU-wide protests once again as well as a dangerous collapse in the agricultural sector and in food production in the EU,” says Kjartan Poulsen.
