Post on 11-Jan-2016
transcript
By Peter Hinrichs & Petra JaegersbergFederal Agricultural Research Centre (FAL),
Braunschweig, Germany
End User Meeting Brussels, 14.06.2001
Working Package 4 (Economics)First Year´s Example
Where are the farms locatedthat are the most vulnerable
with regard to a milk price reduction?
VulnerabilityBy Peter Hinrichs & Petra Jaegersberg
Vulnerability ...- in this context - means, how strongly a dairy farm will be “hurt“ by a price drop.
... has to be defined in economic terms:- The surplus for net investments (farm growth) vanishes- the liquidity reserve shrinks below a critical amount, and/or- the income does no longer pay for the farmer´s basic needs.
Defining a vulnerablility indicator:Relation between milk price as product-bound parameter and a criterion denoting the whole farm´s economic performance, the Family Farm Income. From this, we subtract the amount the unpaid family workers‘ need for their living, which is derived from the paid workers` net wages.
VulnerabilityBy Peter Hinrichs & Petra Jaegersberg
0,00 €
Price drop
Com-pens-ation
Family workers
`Income
claim
Paid Wages
Paid Rents, Interest and
VAT on Investment
Farm Net Value Added
Family Farm Income
Surplus available for net investment, more consumption or risk prevention(as long as subsidies remain unchanged)
Net Sub-
sidies
Calculation scheme of the surplus available for net investment and/or improved liquidity.
VulnerabilityBy Peter Hinrichs & Petra Jaegersberg
Our primary vulnerability indicator:Surplus of Family Farm Income over income claims of family workers, per milk quantity produced and sold (expressed in € / 100 kg milk).
This surplus is used for: Net investment (farm growth)More consumptionLiquidity risk prevention
Our criterion: If the FFI - Income claims
> 0: the long term losses do not exceed the initial decrease of receipts, and the farms have a chance to recover form the initial impact
<< 0: the farms will be handicapped materially.
The amount of the price drop was taken from the actual mid-2001 discussion about the New Agenda: 0,0525 € per kg milk. A compensation of 66 % is assumed. The resulting price drop: 0,0175 € per kg milk.
Available Surplus (€ /100 kg milk) in Europe‘s milk producing farms
(by member country)
Compensation
Final price decline
Family workers' income claim (after tax) per 100 kg milk sold
Total wages paid per 100 kg milk sold
Total net payments for other external factors, per 100 kg milk sold
BDK
DGR
EF
IRLIL
NLA
PTSF
SUK
3 289
4 627
23 958
6 130
10 814
252
12 734
2 912
1 508
2 709
3 738
15 895
27 174
457
4 681
Net subsidies
-30,00 0,00 30,00 60,00€Milk Prod1000t
Peter Hinrichs & Petra Jaegersberg: Vulnerability
Available Surplus (€/100 kg milk) in Europe‘s milk producing farms
by FADN farm type
CompensationFinal price decline
Net Subsidies Family workers' income claim (after tax) / 100 kgM soldTotal wages paid per 100 kg milk soldTotal net payments for other external factors, per 100 kg milk sold
411
412
431
432
44
6711
712
721
723
81
82
69 667
21 072
6 954
130
896
502
2 805
1 668
116
14 664
514
Farm Type
Milk Prod. 1000 t
2 805
-30 0 30 60€
Peter Hinrichs & Petra Jaegersberg: Vulnerability
Available surplus (€/100 kg milk) in Europe‘s milk producing farms
by production system
Common systems (P1) 9 901
Lowland systems (G2) 17 670
Upland systems (G3) 3 481
Intensive grass (G1) 29 841
Conventional (CG1 (M1/2)) 22 018
Low-input (CG2 (M1/2)) 4 707
Small mixed (CG3 (M1/2)) 5 628
Industrial (L1) 6 650
Commercial (L2) 10 420
Small-scale (L3) 665
Low-input grassland 9 635
Extens. Grass (XX) 269(IRE only)
-30,00 0,00 30,00
Net SubsidiesCompensationFinal price decline
Family workers' income claim (after tax) / 100 kgM soldTotal wages paid per 100 kg milk soldTotal net payments for other external factors, per 100 kg milk sold
Peter Hinrichs & Petra Jaegersberg: Vulnerability
CompensationFinal price decline
Family workers' income claim (after tax) / 100 kgM soldTotal wages paid per 100 kg milk soldTotal net payments for other external factors, per 100 kg milk sold
D-Sachsen, 81, Convent.
F-BasseNorm, 411, IntGrass
I-Lombardia, 411, Industrial
I-EmiRom, 411, Commerc.
Netherlands, 411, IntGrass
Ireland, 411, Lowland
UK-WestEngl, 411, IntGrass
GR-Mak-Thrak, 81, Commerc.
E-Galicia, 411, IntGrass
PT-NorCent, 411, Commerc.
Austria, 411, LI-Grass
S-Skog&Mell, 411, LI-Grass
Available Surplus (€/100 kg milk) in selected groups of European dairy farms
(by EU farm type & production system)
186
969
696
865
3080
1086
76
1333
528
3300
778
451
Region Type ProdSyskt
MilkHerd size
Milk yield
Milk price
Wage Rate
Perm. Past. ha / k t M
Conc. Feed €
/100 kg Milk
145 6916 30,0 9,4 120 6
42 5324 34,2 7,3 98 5
126 7557 45,2 7,9 0 9
32 5531 48,4 7,4 0 12
64 7478 33,1 10,5 57 5
41 4699 31,0 5,3 161 5
94 6501 32,4 8,6 47 6
15 3965 32,2 1,9 12
18 4667 28,1 2,8 17 6
24 5854 29,4 1,6 2 11
14 4874 34,7 4,9 210 5
30 7987 34,8 13,5 145 11
0
Net Subsidies
0 30€
Peter Hinrichs & Petra Jaegersberg: Vulnerability
€ 0
20.000
40.000
60.000
80.000
100.000
2000 2001 2002 2003 2004 2005 2006
MP -17 %MP -5,6%MP - 0% MP-17%, high loans
2007
Family Farm Income of a 100 cow farm in Eastern Germany, with different milk price projections
and the influence of high loansPeter Hinrichs & Petra Jaegersberg:
Vulnerability
-40.000
-20.000
£ 0
20.000
40.000
60.000
80.000
1997 1998 1999 2000 2001 2002 2003 2004
Baseline MP -17 %MP -5,6 %
Family Farm Income of a 165 cow farm in Wales/UK with the effect of exchange rate & milk price
Peter Hinrichs & Petra Jaegersberg: Vulnerability
VulnerabilityBy Peter Hinrichs & Petra Jaegersberg
Summary
1) The most vulnerable farms are those ones that are already handicapped without a price drop.
2) There are great national differences: Italy, Ireland, Spain, Greece, Austria and versus Sweden, Finland and Germany (without subsidies), Denmark and Portugal. 3) Within the countries, the regional variance is less spectacular, although in the Mediterranian countries, it is much greater than in Northern Europe.
4) A special case is the UK where the strong British Pound distorted the price / cost relation remarkably.
VulnerabilityBy Peter Hinrichs & Petra Jaegersberg
Summary (cont.)
5) A comparison of the EU farm types shows that there is no specialization bonus in most of the countries. In the contrary, the mixed (livestock) farms looked more successful in the year 1997/98 than the specialized dairy farms, due mainly to higher subsidies for crops and non-dairy livestock.
6) Grouping by production system revealed advantages of:- dairy farms without permanent grassland (commerc./industr.)- large herds (scale effects, labour productivity, investment costs)
7) Additionally, there are significant effects of the Milk Prices, the Wages, the Land Rents, and Interest on borrowed capital.