Dairy Farmers Cut Production Costs Substantially in 2015

GLOBAL - Dairy farmers substantially decreased their costs of milk production in 2015, according to new results in the International Farm Comparison Network's (IFCN) Dairy Report 2016.

14 October 2016

2 minute read

Costs of milk production decreased from 46 USD to 40.5 USD/100 kg milk, an average of all farms analysed shows.

Just as 2014 was a top year for many in the dairy world, 2015 proved the worst in recent decades for most. Indeed, the average milk price in the world dropped 33 per cent from a very high level in 2014 to an average of 29.4 USD/100 kg Energy Corrected Milk (4.0 per cent fat and 3.3 per cent protein) in 2015.

Dr Torsten Hemme, Managing Director of the IFCN, said: “We are now in the third milk price crisis since 2007. This crisis and also other factors have created the biggest shifts in dairy competitiveness I have ever seen in my entire career as dairy economist.”

On average, farms reduced their costs with 5.5 USD/100 kg ECM. Strong cost reductions took place in Western Europe and Central and Eastern European Countries due to exchange rate and post quota effects, while costs were stable or rising in China, India, US due to inflation rates, labour and feed. However, reductions in milk prices were stronger than the decline in costs. As a result farm income experienced a serious drop in 2015, which continued in 2016.

According to Dr Amit Saha, who leads farm analysis at IFCN: “Worst hit dairy farmers in terms of profitability in 2015 were in Western Europe, North America and Oceania, where over 75 per cent did not cover their full economic costs. In other regions the situation was less dire, with roughly 30 per cent of farms not covering their costs.”