farmers' income

Supporting dairy farmers’ income with affordable and innovative tools

Marketing 11 June 2021 News

Efficiency is a great support for the achievement of sustainability, but it is not enough. At some point, it will be necessary to incur major investments to renovate and innovate our dairy farm properly.

We certainly can do better with efficiency¹, and this has to be the first rule towards sustainability.

The environmental sustainability goals to be achieved by 2030 are ambitious: they deserve awareness, action, determination, as well as economic means.

In the European Union, small and medium-sized dairy farms are still far from satisfactory levels of income that could make further investments possible (Poczta et al., 2020)¹.

And peculiar challenges of the milk market still persist¹.

Furthermore, some issues tend to worsen more in developing countries rather than in developed areas: this is the case, for example, of the antimicrobial resistance (AMR) phenomenon².

The urgency behind all the aspects we need to face to achieve sustainability makes it clearer than ever: we must promote inclusive economic growth, build resilience, support equal rights to economic resources and property rights, at national and international level.

The scenario depicted by the FAO³is that of a declining extreme poverty since 1990, but with a still high number of people living in these conditions. To give some figures, one in five people in developing countries lived with less than US $ 1.90 per individual per day in 2013 (World Bank, 2017).

Poverty rates have declined but progress has been not equitable, and this cannot be accepted.

The whole livestock production can play a role in helping rural society achieve its livelihood goals³. Its contribution to ending poverty has already been described, and goes along with the rapid growth expected for this sector.

Livestock production can provide enough safe⁴and nutritious⁵ food for everyone; it is vital for other business activities⁶, in that it creates economic value; it is fundamental for society⁷. Moreover, it plays an essential role in supporting poor rural households to maintain their livelihood conditions.

All in all, it carries a great potential with many beneficial effects that may not be fully captured, especially by those living in poverty.

Both micro- and macroeconomic factors influence the effective capacity of the livestock sector to convert the expected rapid growth into poverty decrease³.

Since these factors include, among others, the ability of producers to use available assets to generate income and the possibility for consumers to get some advantages from more competitive prices, the solution is to be sought in a better value distribution¹ and in making innovation, technology, tools and strategies available and affordable for everyone⁸.

It will help reduce poverty, it will help boost sustainable development.

This was another valid reason for OZOLEA to launch the SSafeMILK project. Dairy is one of the valuable productions of the livestock sector. With its project, OZOLEA’s commits to the implementation of the income of 1.4 billion dairy farmers worldwide by boosting productivity and certifying product value for better price negotiation.

Globally, it is a helping hand for them to make sustainable development happen on their farms.

¹ We need cohesion and sharing results to make consumers understand the importance of paying the fair price for milk.

https://www.ozolea.it/we-need-cohesion-and-sharing-results-to-make-consumers-understand-the-importance-of-paying-the-fair-price-for-milk/

²AMR: for a global action, no one must be left behind.

https://www.ozolea.it/amr-for-a-global-action-no-one-must-be-left-behind/

³ Transforming the livestock sector through the Sustainable Development Goals.

http://www.fao.org/3/CA1201EN/ca1201en.pdf

⁴ Prevention and control in livestock productions mean more food safety, more food security and good health.

https://www.ozolea.it/prevention-and-control-in-livestock-productions-mean-more-food-safety-more-food-security-and-good-health/

⁵ Save your milk, don’t waste it: the world must be nourished.

https://www.ozolea.it/save-your-milk-dont-waste-it-the-world-must-be-nourished/

⁶Livestock husbandry has a multiplier effect on other business activities.

https://www.ozolea.it/livestock-husbandry-has-a-multiplier-effect-on-other-business-activities/

⁷What dairy farmers do for the place they live and work in.

https://www.ozolea.it/what-dairy-farmers-do-for-the-place-they-live-and-work-in/

⁸Are we ready enough for the agricultural transition?

https://www.ozolea.it/are-we-ready-enough-for-the-agricultural-transition/

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We need cohesion and to share results to make consumers understand the importance of paying the fair price for milk

Marketing 23 April 2021 News

The production of milk is estimated at around 155 million tons per year in the EU dairy sector. The main producers are Germany, France, Poland, the Netherlands, Italy and Spain, accounting for 70% of the EU production.

A substantial and pervasive sector, highly heterogeneous as well. Undoubtedly, a fundamental role in milk production is carried out by medium-large specialized dairy farms, which are more than half of the dairy farms in the EU. Their share of milk production ranges from 24% (Czech Republic) to 99.9% (some Spanish and Portuguese regions) of the EU total production.

A sector that has experienced a profound revolution over the last few decades, proving the ability to improve efficiency by reducing the number of animals and increasing quantities of milk produced.

Specialized dairy farms have an advantageous production potential that allows high levels of productivity. On the contrary, the remaining part of small and medium-sized farms shows financial indicators (such as financial assistance and debt sustainability, efficiency, profitability) that are insufficient to allow satisfactory levels of income suitable for further investments (Poczta et al., 2020).

Regardless of the type, dairy farms in every EU Member state share the same challenges (European Parliament, 2018). Milk price volatility is undoubtedly the main problem, accompanied by an objective difficulty in predicting both the price and milk volumes to be produced and placed on the market.

Specialization offers advantages, but it binds producers to a single output – milk. In cases of sudden market shocks, this can be a disadvantage compared to those dairy farms that differentiate. Even small companies are affected by market shocks, not being able to rely on adequate financial support to buffer potential shocks.

Introducing young dairy farmers remains critical (only 11% of producers are under 40): there are also difficulties in attracting new generations to dairy farms.

In addition to this, dairy needs to cope with pressures due to climate change, which impacts the production of animal feed. The 2018 fodder crisis, very hard for Northern Europe countries, is a clear sign. Moreover, the strong demand for soy pushes the price on the market to figures that are hardly to be faced by dairy farmers.

Even occupying a weaker position in the bargaining process is a challenge. The value of the supply chain is more concentrated in transformation and retail, and not equally distributed along the supply chain. Similarly, fluctuations in the market are largely transmitted to milk producers.

Undoubtedly, the tendency to produce more and more milk to meet these difficulties, by enlarging dairy herds, cannot be the solution to dairy farmers’ problems, and there is a reason why.

The milk market is quite peculiar. Milk, a highly perishable raw material, is the traded product, and it needs to be managed in a very short time. Processors are sometimes called to manage surplus quantities of milk, which, however, are unlikely to find a place due to market demand. All this must be coordinated with fast logistics and taking into account the influence of other variables on the market. So, basically, it’s a matter of efficiency.

Milk and dairy products, even if matured, have their shelf-life. Therefore, it is difficult to draw comparisons with markets for other food products, such as wine, which also follows completely different consumption trends with respect to dairy products. Not to mention its history: a terrific recovery since 1986, when methanol claimed victims and severely put the wine industry in crisis in Northern Italy.

The concept of the supply chain is not simple. It is used in a “neutral” way to describe production processes. In general, it is a concept that can be ascribed to “an economic circuit, characterized by an ordered succession of production cycles for the realization of a good” (Scarano, 1989).

In order for the economic circuit to work, relationships within the supply chain and the dialogue between operators deserve more attention. Given the common problems, how advantageous can operating independently still be?

One option could be to seek all possible synergies for building a relationship and a medium and long-term policy, in which the objectives and results are equally shared throughout the supply chain. the result would be a greater profit margin for all operators in the supply chain.

Unfortunately, the dairy industry’s attempts to defend itself from public opinion still remain within the sector: cohesion is needed to get them out the supply chain and convey them to the consumer, so that they come to understand the importance of paying the right value for milk.

Furthermore, for a more proficuous future for the entire dairy supply chain, the value recognized by the consumer must be distributed equally throughout the supply chain. And this means having an even stronger dairy supply chain.

OZOLEA’s SSafeMILK project was created to be a sustainability project, from any point of view. Among the goals, it aims to promote an approach that is going to be profitable for everyone and only if every actor in the milk chain is ready to properly converge on and share objectives, responsibilities and profits.

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Are we ready enough for the agricultural transition?

Marketing 16 April 2021 News

Current and continuous pressure on the intensive livestock farming systems is really challenging the dairy sector.

Public opinion is unfortunately in part shaped by outsiders that do not really know difficulties in primary production, along the dairy supply chain and among operators. But they also seem to not see our improvements.

We would really appreciate a different approach to the issue: a one-to-one dialogue with us would rather be useful than pointing the finger at livestock farming. We have a lot to say about the matter.

We are aware that an agricultural transition to sustainability is now, more than ever, needed for the future. The main aim would be the protection of animal and human health and the environment, as well.

We also have to cope with an increasing population and a society that is also changing its life-style.

Any type of farm production system we choose to conduct, we have to be consistent with the specific decision and know that economic, social and environmental sustainability requires profound conviction.

Production systems such as conservation agriculture, high nature value (HNV) farming, agroecology and organic farming are recognized as generally more sustainable than intensive farming.

Among these systems, organic farming is the most regulated and applied. A large-scale transition to organic farming would mean reduction of total consumption of inputs such as pesticides, fertilisers and antibiotics, thus with beneficial effects on the environment.

However, it would also reduce total crop and livestock production, since it relies on lower production densities and output.

With current food consumption patterns, the impact would also be on food prices and the need to farm marginal land or import food, especially for the European Union.

This is not something that can meet the food demand of a growing population.

Sustainability and consumer demands have to face farmer’s income, societal and life-style considerations and overall market forces. From the dairy supply chain point of view, this means that all the operators have to share and endeavor to join forces in achieving goals that are clearly common to any of them.

From a better distribution of added value, any of them will benefit.

In this context and as we said many times, our goal as dairy farmers should be efficiency in farm management. And, with a fast, growing population, we have to produce more and more food.

Innovation has provided dairy farmers with strategies and tools for the implementation of precision farming. This is a production system that aims to optimize agricultural output by using less inputs (labor, antibiotics, agrochemicals, natural resources, etc.) and more rationally.

Despite its potential to contribute to the sustainability of the dairy sector, precision livestock farming is not affordable for all dairy farmers, especially for those who run a small business. It requires major investments on dairy farms since it means including high technology in the farm routine (let’s think of automatic milking systems).

Therefore, two main considerations emerge from this discussion.

First, sustainability in dairy farming production clearly asks for the adoption of a wide range of more efficient practices.

Thus, the solution to the environmental issue has to be well balanced between intensive farming systems and less intensive production models, considering the current context.

Second, there should be more accessibility to innovative tools and knowledge for all dairy farmers.

It is for these reasons that OZOLEA has deliberately chosen to meet both conventional dairy production and organic dairy farming with tools that are innocuous, effective, sustainable, safe and affordable for every dairy farmer.

By combining the use of these products with the implementation of the SSafeMILK protocols, OZOLEA aims to enhance best practices dissemination and scientific research, helping dairy farmers to shape the path towards a more sustainable dairy production and increase their profit.

Some issues of this article can be investigated in this report by the European Environment Agency (2021).