There are “several major obstacles to overcome with regard to supply, consumer demand and public policy” to enable the dairy industry to reach EU organic farming targets, according to new analysis.
ING Research has published a report on the EU’s Farm to Fork (F2F) strategy, a central aspect of the Green Deal, with specific focus on the impact of this strategy on the EU’s dairy sector.
ING examined the F2F programme’s targets, including its goal to have at least 25% of all farmland under organic farming in 2030 and its “potential to bring about change in EU farming, while also looking at obstacles that will ultimately determine if it will be successful”.
It is worth noting that the 25% target applies to overall EU agricultural land – it is unlikely there will be specific targets set for sectors, including dairy.
The research highlights that this is a “complex target” to reach, as it “involves commitment from every stakeholder in the value chain, a balance that is hard to reach within the dairy supply chain, from farmer to consumer”.
Thijs Geijer, senior economist at ING and report author said:
“The F2F strategy has high ambitions in changing Europe’s farming ecosystem for the better, placing sustainability at the heart of farming practices.
“While much needed, the effects of this will be felt by Europe’s farmers, food producers and consumers due to the costs that come with such a transition.
“When taking the dairy sector as an example, it becomes clear there are several major obstacles to overcome with regard to supply, consumer demand and public policy before the F2F ambitions can be met.”
Kiran Sanchit, managing director, head of Food and Agri EMEA, ING, added:
“While aspects of the F2F strategy are still being debated in Brussels, the Green Deal and specifically the F2F strategy confronts the food and farming industry with the reality that a major transition towards climate neutral operations is expected across the board.
“The focus on an organic target of 25% in the F2F strategy seems not [yet] to be fully embraced by most of the major companies in the dairy industry, looking at most of these company’s current sustainability strategy and targets.
“These tend to focus more on greenhouse gas and methane emissions through other routes than only organic. Are there actually more roads that lead to Rome instead of setting an organic target only?
“Still, by taking a proactive and ambitious approach in sustainable KPI setting and including these in, for example, financing arrangements, companies are better positioned to contribute to the Green Deal in any way or form and I believe this will benefit the success of their entire business.”
Only 1 in 5 willing to spend more on sustainable food
The report states that an increase in organic dairy farming “puts pressure on milk volumes and leads to a higher cost price”.
“This could leave dairy processing plants underutilised. Companies that rely on exports and dairy commodities will especially face difficulties translating additional costs into higher product prices,” the report notes.
“While the number of organic dairy farmers is growing, transition-related costs and risks are a major hurdle for more farmers to follow suit. If society expects farmers to change tack, the bill for their extra efforts must be paid by someone in the end.
“It will take continued effort from companies and policymakers to ensure consumers value sustainability-related efforts made in agriculture.
“Currently, only one in five EU consumers [are] willing to spend more on sustainable food, according to a survey by BEUC – the European consumer organisation.
“On top of that, limited demand for organic dairy in the export and commodity markets is a bottleneck because that’s where many dairy companies are earning a large share of their revenue.”
‘Nowhere near the ambition’
The report notes that Austria is the “frontrunner” as almost a quarter (22%) of the dairy herd is organic. In major dairy-producing countries like Germany, France and the Netherlands, the share lies between 2.5% to 5.5%.
Looking at historial patterns of growth in the organic share of the EU dairy herd, the report estimates that the share could end up at around 8% in 2030 – “nowhere near the F2F ambition”.
“EU projections show a slight decrease in the dairy herd this decade. With that in mind, assuming a 25% share for organic in the dairy herd means the number of organic dairy cows would have to multiply by almost six to around four million in 2030,” the report continues.
“We estimate more than 100,000 dairy farmers would have to convert from conventional to organic farming in such a scenario.
“There is definitely interest among dairy farmers to make this step, but the transition period of at least two years and uncertainty about future organic milk prices also poses additional risks for farmers.
“Once converted, the financial perspective can become more attractive because organic milk trades at a premium. Whether this premium is enough to compensate for lower milk production on organic farms [on average more than 20% lower] and a higher cost price per litre differs from farm to farm.”
Ireland’s struggle to meet organic targets
Overall, Ireland will struggle to meet the EU organic targets, according to the EU Commissioner for Agriculture.
Speaking at a press conference after the commission’s action plan for development of organic production was adopted recently, Janusz Wojciechowski said that Ireland is one of the member states in which the development of organic farming “is very slow and very small”.
Presently, about 8.5% of the EU’s total agricultural area is farmed organically, and the trends show that with the present growth rate, the EU could reach between 15% and 18% by 2030.
Ireland’s share of total agricultural land currently under organic production is around 2% (74,000ha), one of the lowest in Europe.
Based on 2020 Basic Payment Scheme (BPS) details, the county with the largest area of land under organic production is Cork, with 8,990ha. Galway has an organic area of 6,616ha and Kerry has an area of 5,503ha.
Carlow has the lowest area of 239ha, while Louth has an area of 244ha, and Dublin has a figure of 377ha.
Organic Farming Scheme closing this month
The Organic Farming Scheme will close for applications from farmers on Friday, April 30.
The reopening of the scheme is expected to result in an increase of up to 30% in the number of farmers farming organically in Ireland this year.
The Organic Trust will be holding the final of its webinars tonight (Thursday, April 8) at 8:00pm to aid farmers in the completion of the paperwork required for the scheme application process. Further details can be found on the Organic Trust website.