Organic milk producers in Germany currently face a 24% shortfall in relation to costs, according to a new report.
The German Farm Economics and Rural Studies Office (BAL) carried out the annual study on production costs for organic milk, which aims to complement the Milk Marker Index (MMI).
The European Milk Board (EMA), German dairy farmers’ association Bundesverband Deutscher Milohviehhalte (BDM) and the German producer organisation, MEG Milk Board, commissioned the research.
The current calculations show that such milk producers in Germany were paid an average of 48.66c/kg for the 2020/2021 marketing year.
However, the study reveals that production costs stood at 64.39c/kg when producers are getting a fair remuneration for their work.
It means that producers were faced with a shortfall of 24%.
Not viable
From 2016 to 2021, organic dairy farmers in Germany spent an average of 51.98c/kg of milk on inputs and general operating costs; that doesn’t include wages.
As a result, farmers were left with just 8.07c/kg of milk in hand as payment for their work.
When this is converted, it means that organic milk suppliers receive only 34% of the income based on applicable collective agreements set in the cost calculation.
“According to these facts, organic milk is by no means socially and economically sustainable,” the EMB warned.
For the marketing year 2020/21, the MMI for organic milk was 96; this is a 4% reduction in production costs for German organic milk producers compared to the reference year of 2015/2016.
In the marketing year 2020/21, the milk price only covered 76% of producers’ production costs; this means there was a shortfall of 24%.
Cost calculations
The EMB said from cost calculations carried out in eight countries, including Ireland, “it is very clear that even conventional dairy farmers are not being paid cost-covering prices”.
A study by EMB in 2019 found the cost of producing one kilogram of milk in Ireland had risen to 34.21c/kg; this was mainly due to increased feed costs associated with severe droughts.
The average milk price in 2019 was 31.26c/kg, which implies a shortfall of 9%.
The solution?
The EMB said to counteract what it describes as a “chronic shortfall” for organic milk producers, a legally-prescribed crisis instrument is needed.
It said the Market Responsibility Programme (MRP) observes and reacts to market signals, e.g. by temporarily adjusting production volumes in times of crisis.