EDF Congress 2014 in Switzerland

Congress report: 2014 EDF Congress in Switzerland
EDF Congress 2014 in Switzerland
Tradition meets market: Milk production with new possibilities
This report was prepared by the members of EDF STAR with main contributions from ERIK ENGELBREKTS (Växa, Sweden), RICHARD SIMPSON (Kingshay, UK),
MARGITA STEFANIKOVA (SZPM, Slovakia), JOSÉ DA COSTA ALVES (Portugal), ANDRÉ MEIER (Convis, Luxembourg) and STEFFI WILLE-SONK (EDF, Germany)
In a nutshell: What we have learnt from the Swiss colleagues (Abstract)
With about 4 billion tons of milk produced
per year the dairy sector is a very important one for the Swiss agriculture, in
particular cheese is a core product. Swiss
dairy farms are comparably small in scale
(Ø 25 cows per farm). Land for agricultural use is really scarce and expensive in
Switzerland (which also limits farm
growth). Available agricultural areas are
dominated by grassland. It is the major
base for feeding the cows. Swiss farmers
developed special expertise in making
much milk from grass − not only because
of its dominating role in the agricultural
landscape but also as the access to
(protein) concentrate feed is limited and
prices for it are very high: Imported soybean meal and rape seed meal are subject to high tariffs. All feed used must be
GMO-free. However, home-grown concentrates are only available to a limited
extent due to the scarce (arable) land.
In recent years the Swiss dairy sector
faced strong structural changes. And also
global developments demanded concessions. So, Swiss market protection was
reduced (not removed), subsidies decreased and quota was abolished (in
2009). Particularly, increased liberalization had a strong impact on the dairy
sector. Today Switzerland is a bit closer
to the global market than before. On the
world market, the Swiss dairy sector is
not competitive with standard dairy
products. Compared to neighbouring
countries milk production (and processing) is more expensive in the (more
or less) isolated and expensive country
Switzerland with high standards. So, the
sector still needs protection and public
money as well as ideas and strategies for
producing premium products with highadded value from the Swiss milk (e.g.
hay milk, special Swiss cheese brands) −
products that can be sold at high prices
also on the global market. This market is
also important for the Swiss dairy sector
as not all milk produced by Swiss dairy
farms can be sold at the attractive but
saturated domestic market.
To grant the high milk prices, that Swiss
farms receive today, a strong price support
(e.g. subsidy of 12.3 Euro Ct/kg for milk
that goes into cheese production) is needed. And, with exception of cheese, other
major dairy products still need to be subject to tariffs to protect the border to
fight imports. These measures secure Swiss
farmers a milk price which pays for the
high costs and gives a good income. Additional subsides for environmental services
and performances contribute to it, too.
1
Thus, there are two markets in one in
Switzerland: a domestic one and an international one. To control the produced
volumes to some extent to keep this system running an A-B-C-milk system was
installed. The A-B-C-milk system gives
indications on volumes by different milk
prices for the different segments: The Asegment includes dairy products for the
domestic market (border protection) and
those without border protection but being subject to price support (e.g.
cheese). In the B-segment dairy products
without border protection AND without
price support (domestic market or EU
market) are considered. In the Csegment only dairy products for the export outside the EU (no support) are included. This system of “two-markets”
with A-B-C milk requires very complex
mechanisms for administration.
Although, according to Swiss experts, the
abolishment of quota clearly had a lower
impact on the sector than the opening of
the Swiss market, it offered new opportunities for Swiss farms. For the same
market they developed very different
strategies considering the individual conditions and skills they have to evolve
their business activities in line with the
new market requirements. □
Congress report: 2014 EDF Congress in Switzerland
Detailed report: What we have learnt from the Swiss colleagues (Full text)
I
n 2014, the Swiss EDF branch invited
EDF members and guests to Switzerland for the annual EDF Congress to learn
about Swiss milk production. Nearly 350
people from different European countries
and from regions outside of Europe (e.g.
Australia, Canada, and USA) followed the
invitation. The venue was the city of Winterthur, near to Zurich.
The EDF Congress combines presentations
and speeches in plenary sessions with workshops on individual topics and farm visits to
make the visitors familiar with the conditions and systems to produce milk in the
visited country. In the spirit of EDF, people
were in Switzerland to listen, to learn and
to share knowledge and experiences in order to strengthening the own business. EDF
President KATRINE LECORNU opened the
2014 congress and on everyone’s mind is
the abolishing of milk quota in the EU in
March 2015. What challenges and what opportunities are waiting around that corner?
Switzerland has been down that road, ending their quota system in 2009. So what can
be learnt from the Swiss farmers?
Small-scale farming mainly on grass
Milk production in Switzerland is a smallscale business compared to the neighbouring countries as well as compared to the
EDF group. But dairy farming is very important for Swiss agriculture. This was reported to the delegates by BERNARD LEHMANN (Swiss Federal Office for Agriculture,
FOAG) and STEFAN HAGENBUCH (SwissMilk,
Schweizer Milchproduzenten SMP). The total number of dairy cows is 584,000 divided
on 23,490 dairy farms. This gives an average herd size of 25 cows per farm. Annually, about 4 billion tons of milk are produced thereof 3.43 billion tons are processed; the rest is used for household consumption and for feeding the calves.
Switzerland is also a country of grassland:
80 % of the (only) 1.61 million hectares of
productive, open agricultural landscape
and the 0.54 million hectares of alpine
pastures used for farming is grassland. The
overall agricultural land is scarce and expensive in Switzerland − and arable land
even more. When managed intensively,
grassland that is not dry in summer has a
high yield potential: up to 600 m above sea
level 110 to 140 dt DM/ha and 600 to 900
m above sea level 90 to 120 dt DM/ha. According to the Swiss Grassland Society a
numerous number of farms achieve yields
of 6,500 kg of milk per cow and year with
the use of grassland roughage alone. What
an incredible performance!
The outstanding capabilities of the Swiss
dairy farmers in the production of superior roughage and forage were also reflected in the figures of the EDF Cost of Production Comparison presented and discussed during the congress days: The 10
Swiss EDF farms only needed a very low
amount of concentrate feed to produce
one kg of milk (about 120 g per kg ECM)
meaning a lot of milk was just produced
out of forage. Other national EDF groups
followed this performance only in a considerable distance. Thus, roughage and
forage production was one aspect where
the delegates could learn from the Swiss.
A bit more liberalization and less support
Looking at the whole Swiss dairy sector,
structural changes are taking place in
Switzerland at the same speed as in other
European markets like Germany, Austria,
Italy and France says BERNARD LEHMANN
(FOAG). He added that those changes also
take place further down in the value
chain, e.g. a declining number of cheese
factories since 15 years. Along with the
structural changes, Switzerland has liberalized its dairy market to some extent
(bilateral trade agreements with EU).
Since the year 2000 Switzerland has abolished export tariffs on cheese traded with
the EU (fully liberalized since 2007), export subsidies (since 2008), subsidies for
domestic consumption and milk quota
(2009). Beside of this the public payments for supporting dairy markets have
declined from 700 million to 300 million
CHF during the same period.
The current Swiss agricultural policy relies on three pillars: ‘direct payments’,
‘production + marketing’ and ‘structural
improvements’. The new agricultural policy for 2014 to 2017 will take a direction
similar to what the rest of Europe recognizes as the “greening” of the CAP where
there will be less direct payments for
supporting production and more support
for ecological performance as for example biodiversity, food safety, resource efficiency and landscape maintenance.
BERNARD LEHMANN (FOAG) also expressed his concern about the risk that
food production could only be seen as a
by-product rather than as the important
source for feeding the population.
Two dairy markets in one country
As a result from the abolishment of
cheese tariffs, both import and export of
cheese with the EU have increased; the
trade balance (export vs. import) has de-
2
creased. The volume of Swiss cheese imports rose in the last years, as STEFAN
HAGENBUCH (SMP) showed, but Switzerland still is a net exporter of dairy products. Whilst the border to EU is open for
cheese, tariffs and trade quotas for other
dairy products (liquid milk, butter, SMP,
WMP, cream, yoghurt, etc.) are still effective. That limits the imports to the domestic market and, by that, protects the
Swiss sector. This has made Switzerland a
country with two dairy markets, an international and a domestic one, says BERNARD LEHMANN (FOAG).
To stay competitive on the global cheese
market, Swiss milk delivered to Swiss
cheese industry is subsidised with public
money (commodity price support). The
cheese subsidy is currently 15 Swiss Rappen per kg of milk which is approximately
12.3 Euro Ct per kg. This subsidy enables
cheese processors to obtain a “real” purchase price of raw milk which is in line
with the EU price. However, supplying
farms receive a much higher farm-gate
price for their deliveries as it is topped
up with this cheese subsidy.
High Swiss milk price in figures
So as a consequence of the still existing
market protection for parts of the dairy
products and the price support for milk delivered to cheese production, the Swiss domestic milk price is clearly higher than in
neighbouring countries. This also was confirmed by WILLEM KOOPS (ZuivelNL), presenting the results of 2013 LTO International Milk Price Comparison of 16 dairy major
processors in Europe. EMMI, a leading Swiss
processor, paid a price of 49.65 Euro Ct/kg
on average of 2013. However, annual average milk price of the 16 EU companies
reached 37.95 Ct/kg.
In terms of EU milk prices, WILLEM KOOPS
(ZuivelNL) showed that, although lower
than the Swiss one, the average LTO milk
price reached a high in 2013. It was by
4.03 Ct (almost +12 %) higher then milk
price in 2012. In the comparison, again
Finnish Hämeenlinan paid the highest
price in the amount of 45.18 Ct/kg and
UK First Milk paid the lowest with 33.99
Ct/kg. Comparing 2012 and 2013 milk
prices, Belgian Milcobel reached the highest price increase in the amount of +8.05
Ct/kg which means an increase of +26 %.
According to WILLEM KOOPS’ estimation,
in summer time the milk price will drop
to the level of 2011 and will reach approximately 35 to 36 Ct/kg.
Congress report: 2014 EDF Congress in Switzerland
The difference in Swiss milk price compared to EU prices is influenced by fluctuations in exchange rate but in general this
difference is stable to some extent as
MARKUS WILLIGMAN (EMMI) showed. There
was obviously no negative effect of the
abolishment of milk quota in 2009 on the
Swiss prices. Market opening for cheese
has had a much stronger effect. Of course,
the Swiss milk price is still subsidised and
by that kept on a higher level which reduces the competitive pressure coming from
the global market. But milk prices in Switzerland are, nevertheless, influenced by
the EU market. They commonly follow the
volatility of the EU prices with a lag equal
to the current cheese subsidy, RENÉ
SCHWAGER from NORDOSTMILCH AG, a
farmer-owned producer organization
which processes 450 million kg of milk annually, told to the delegates.
The effect of quota abolishment on the
volume of produced milk was limited too,
RENÉ SCHWAGER (Nordostmilch) continued. The increase in milk volume in Switzerland after the end of quota in 2009
until 2012 was approximately 8 %, from
3.2 billion kg to 3.47 billion kg.
The A-B-C of Swiss milk production
At the time of abolishment of milk quota in
2009, a private initiative to control the
milk supply was founded, as STEFAN HAGENBUCH reported: Interprofession Swiss
Milk (IPSM), where 95 % of all members of
SwissMilk (national umbrella organisation of
the Swiss milk producers) stand behind it.
IPSM controls and maintains the major milk
market segmentation tool (A-B-C milk system). It also stands behind quality standards and enhances market transparency.
Milk market segmentation into A-, B- and
C-milk with appropriate price indications
shall support the producers in realising a
product-specific payment for the supplied
raw milk, depending on the realised value
at point of sale:
For each of the three segments a price
indication is given by the Interprofession
depending on the marketable volumes.
This approach shall also contribute to
prevent milk quantities which are above
the market demand. Milk producers shall
be able to better plan their delivery volumes. Hence, market quantities can be
controlled and higher prices can be ensured to a certain extent: But this system
of A-B-C milk requires complex mechanisms for administration as BERNARD LEHMANN (FOAG) stated.
High production costs
As learned from different speakers Swiss
farm-gate prices for milk are above EUaverage but that is also true for the production costs on the farms but also on
processing stage. This was confirmed by
RENÉ SCHWAGER (Nordostmilch). Both
cause higher retail prices of Swiss dairy
products and are negatively impacting
the competitiveness of Swiss dairy products on the world market.
Looking only at the dairy farms over the
last years farm-gates prices for milk already decreased but on the other hand a
significant reduction in costs was not
achieved. The reason for the high production costs are manifold as BERNARD LEHMANN (FOAG) explained: e.g. very small
size of the Swiss farms, different regulations in terms of environment, very expensive feed (but low fluctuations in prices)
due to the to be reached GMO-free status
and the tariff-protected, closed feedstuff
market (e.g. soybean meal, rape seed
meal); anyhow the structure of the market
for inputs is a problem in general. Also
other domestic goods and services are
more expensive in Switzerland. But on the
other hand Swiss farmers also have more
money and are willing to pay more. Being
able to produce at competitive prices is a
major challenge for the future.
Less competitive on global perspective
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The A-segment includes protected
dairy products for the domestic market
(= subject to border protection) and for
supported dairy products (= subject to
commodity price support; e.g. cheese
subsidy, “Schoggi law”, etc.). The Asegment accounts for about 85 % of the
Swiss milk production volume.
In the B-segment dairy products without border protection AND without
price support for the domestic market or the EU market are listed.
In the C-segment there are only dairy
products for the export outside the
EU without any support.
The different level of costs and returns of
the Swiss farms compared to their colleagues in the neighbouring European
countries were also confirmed by the results of the 2014 EDF Cost of Production
Comparison. STEFFI WILLE-SONK, Scientific staff of EDF, showed that full economic costs of production summed up for
about 49.3 Ct per kg energy-corrected
milk (ECM) for the average European EDF
farm (289 farms). However on the 10
Swiss EDF farms only, total costs of production were clearly higher with 77.0 Ct
per kg on average. But the Swiss also received much higher returns of 70.6 Ct per
kg ECM compared the average European
3
EDF farm which only got 43.9 Ct per kg in
total for milk and animals and from public payments coupled to dairy production.
Looking at the entrepreneur’s result
(entrepreneur’s profit I, excl. decoupled
payments), all European EDF farms as well
as the Swiss EDF farms only, made a loss of
5.4 and 6.4 Ct/kg. The results improved for
both groups when decoupled farm payments were taken into account: For the average European EDF farm an entrepreneurial loss of 1.9 Ct/kg remained (pro-rated,
decoupled farm payments averaged for 3.2
Ct/kg). However, the result of the Swiss
farms improved strongly due to the very
high public payments they received (10.1
Ct/kg). Those completely balanced the entrepreneurial loss and even turned it into a
comparably high profit of 3.7 Ct/kg.
The competitive disadvantage of the Swiss
farms on the global market due to high cost
of production, which were discussed in the
different lectures during the plenary session, finds expression in a high break-evenpoint II as the EDF figures illustrate: A milk
price of about 57.7 Ct per kg ECM is needed
to cover full economic cost of production.
However for the average European EDF
farm, it is only 41.2 Ct per kg ECM.
Milk needs to be sold...
The Swiss population is milk-loving people where the per capita consumption of
dairy products equivalent is 380 kg per
year. This places Switzerland as number
two on an international level, STEFAN
HAGENBUCH (SMP) reports. Only the Swedish consumers consume more. French,
Dutch and German consumers rank slightly behind the Swiss ones. About 1,200
CHF are monthly spent for food and nonalcoholic beverages per Swiss household
(2.2 persons) which is about 6.8 % of the
gross household income.
So, the Swiss domestic market is an attractive market but it is also a saturated one.
Consumption is more or less stable. Private
labels already have a high share in the
market. There is only less space for more
brands (=more added value). So, growing
in the domestic market is difficult. All milk
produced by the farmers being above domestic consumption needs to be exported.
The big challenge for the Swiss sector is a
very low experience in exports and quite
few successful business cases of new export
projects, RENÉ SCHWAGER (Nordostmilch)
thinks. But the Swiss have to improve their
export possibilities and in particular to develop niche markets for their dairy products to compensate the disadvantages in
production costs through added value.
Congress report: 2014 EDF Congress in Switzerland
4
Congress report: 2014 EDF Congress in Switzerland
High quality and added value
will have 100 % in their future assortment.
40 % of all Swiss milk is being processed
into cheese which is an important product for the Swiss dairy sector. Added
value through well recognized brands is
important when differentiating the Swiss
cheese both on the domestic and the international market. To produce cheese
from non-silage milk is something that
differentiates some of the Swiss production. Some 100,000 cows are being feed
hay instead of silage; in that way the risk
of spores in the milk is reduced and special cheese can be made from it. STEFAN
HAGENBUCH (SMP) also showed the low
average Somatic Cell Count of the Swiss
dairy cows; another example for the superior Swiss quality which is communicated as added value to the consumer.
At the same time, COOP is recognizing
the increase of cross-border shopping the
recent years, enabling consumers to buy
cheaper products abroad. The crossborder shopping is mainly driven by consumers going for cheaper meat products
and while shopping, dairy products also
end up in the shopping basket. According
to ROLAND FREFEL’s figures the crossborder shopping for dairy products went
up by 59 million kg from 2012 to 2013. So
also, Swiss consumers are price-driven to
some extent putting pressure on processors and producers to work on competitiveness on global level.
Need of improvement in the value chain
There is a number of processors collecting and/or processing the Swiss milk.
Some are privately owned and others are
cooperatively owned by the farmers. But
looking at the whole sector it becomes
obvious that market concentration is
quite high in Switzerland. Few big market
players control the access to the attractive but limited domestic market: In
terms of dairy, the value chain goes from
23,400 farmers (via collecting cooperatives and pools) through 530 cheese dairies and 3 (main) processors (with 80 %
market share), to 2 (main) retailers ending up at the markets of 8,100,000 Swiss
consumers and export.
This market changed dramatically in particular in the recent years, as AGATHE
LAVILLE (Barry Callebaut) reported:
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Dairy trade is growing very fast.
Importance of market players especially on the import side changed
strongly. Particularly, China gained
huge importance as importer which
was not foreseen in that way by the
market experts some years ago.
EU market and world market have converged, which means new and unknown
volatility for the EU market on the one
hand and a higher dairy price level on
the world market on the other hand.
Less incentive but the need to adapt
Working on cost of production and on
competitiveness on global perspective
was also mentioned by AGATHE LAVILLE,
representing Barry Callebaut, a leading
company in chocolate and cocoa products. In light of the huge differences in
costs and profitability between the dairy
farms, this is not only a challenge for the
Swiss farms. Working on farm-individual
competitiveness is relevant for all farms
and their managers that would like to
persist also in the next decades.
One of the big players, the leading Swiss
dairy processor EMMI, works with a vision
to become successful on long-term in an
open market. MARKUS WILLIMANN, head
of business unit ingredients at EMMI, gave
his view on what happened after the end
of quota and what will be important for
the future: The Swiss dairy sector has a
position on an open market with premium
products. However, it takes time to build
up value added markets and meanwhile
safety nets are crucial.
But there is a difference in what a farm
should have on long-term perspective
(= making an entrepreneur’s profit) and
what it needs on short-time to keep the
business running (= paying cash costs and
having an income to live). Although not
profitable from entrepreneur’s perspective most EDF farms were able to pay
cash costs and to remunerate family
workers, as STEFFI WILLE-SONK (EDF) reported. So similar to previous years, money for the MUSTs, the crucial costs, was
available. Due to that, is there only less
incentive to improve the business by increasing productivity and reducing costs?
Or as EDF president KATRINE LECORNU
asked later on: Is the situation too good
for use? Or should it be worse to wake us
up?
For the second largest retailer of dairy
products, meeting consumer demand is
crucial when developing the market. That
was what ROLAND FREFEL from COOP told
the delegates. There are different trends
visible: The current share of organic milk
is 27 % and this share is increasing. The
trend of buying “locally produced” is also
on the move and COOP is therefore adding
product lines which they market under the
label “Miini region”. The demand for products produced with non-GMO feedstuff
comes along with the trend for local and
organic products; something that COOP
Because as the results of 136 long-term
EDF farms show only a minor share of
those farms could reduce production
costs (not considering steadily increasing
costs for feedstuff purchases and decreasing costs for milk quota) in the last
analysed years. Productivity of land, labour and capital did not change significantly in this period. But there seems to
be potential for further improvements.
And there is, for sure, a need for it driven by more competition that comes along
with the increasing internationalisation of
the dairy market.
5
Due to their huge importance in trade
flows milk powder and butter are the key
products in terms of formation of milk
prices at the global market. The development of farm-gate milk prices cannot be
foreseen but it can be anticipated when
having a look at these commodities:
AGATHE LAVILLE (Barry Callebaut)
showed that farm-gate milk prices are
following a mixed price calculated for
major commodities as powder and butter
with a 3-months delay. Information like
these can help farmers to adapt constantly and flexible to short-term market
developments and to manage volatility
risks.
However, on long-term perspective it is
important to adapt to the new framework
conditions by developing a suitable and
sustainable (in the context of “lasting” or
“enduring”) strategy and evolving the
farm in accordance to this strategy.
Six farms, six strategies: in the same market
Long-term adaption to new conditions
and finding the best strategy for the farm
was in the main focus during the farm
visits offered to the congress delegates.
Already a panel discussion between three
Swiss dairy farmers, URS JUCKER (largescale farm with 200 cows with highoutput though intensive farming), JOSH
PITT (milking 65 cows in a low-input system based on maximum use of pasture
and block-calving) and THOMAS MEIER
(keeping 45 cows on a traditional family
farm with slow growth, just as land might
be available) on the opening day showed
that there can be very different, very individual strategies for developing successful business activities in terms of
dairy production for the same market…
after more than 30 years of milk quota!
The abolishment of milk quota offered
new opportunities for Swiss dairy farmers
as presented during the farm visits:
Congress report: 2014 EDF Congress in Switzerland
Intensive and large-scale in Swiss context: Working with partners
A high output per cubicle place and pooling of investments and know-how by cooperating with partners for labour, machinery and buildings were the main focus of
discussion with HELEN and PETER SUTER
who farm near Mϋhlau, South of Zurich.
They own a large-scale family farm with
120 cows with an intensive production system: 10,400 kg per cow per 305 days of
lactation. Milk is sold to Emmi on an A, B
and C pricing structure for processing into
cheese. THE SUTERS took over the original
13 ha farm with 18 cows from PETER’S parents in 1992. In an intensive dairy region
where land is very scarce the SUTERS have
been able to grow their business to 120
cows today, producing over 950,000 kg of
milk per year. The end of quota made the
expansion possible; however partnerships also were needed: They made the
growth by partner up with other farms,
Producing milk, processing and marketing it together with partners
Farming has been a tradition in the family
of MARTIN and ELSBETH PFISTER for generations. MARTIN’s parents bought the
farm in 1954. Today the production of
milk is organised as a joint venture with
another farm. Next to the farming activities the PFISTERS run a plant to process
their milk. About 450,000 kg of milk per
year are processed into fresh products.
Since 1998 MARTIN has put all his energy
and time into the processing activity including the whole marketing concept. The
end of quota did not change the amount
of milk the PFISTER family together with
their partners was able to produce and
process with both of the businesses. In
the future he will again concentrate more
Simple processes and optimal balance between low input and high output
Simple working processes and finding the
optimal balance between low input and
high output was the focus of the visit to
WERNER & LISA SCHENK’s farm, near
Wäldi in the North East of Switzerland.
They bought the farm from WERNER’s
parents in 1991 and built the farmhouse
and cow housing, with a silage pit added
later. They have recently purchased the
neighbour’s farm, allowing them to milk
a total of 65 cows on 29 hectares of land.
The herd is a mix of Red Holstein crossed
with Swiss Fleckvieh and Montbeliards
that have recently been introduced to
giving input as land and/or labour. Three
farms are currently involved in the operation which also gives strength to the business with additional know-how. With a
healthy cow enable to produce well they
run their system in a free range barn built
in 2001. The parlour, a double 8 side-byside is situated in the old tied-up barn
close to the new free-range barn. Milking
is done twice a day; due to the partnership
more people are involved which makes it
necessary to have good routines for the
work. They use SOP (standard operating
procedures) as a tool to support this. The
Holstein cows are fed on a TMR ration of
45 % maize silage, 45 % grass silage, plus
hay, barley and protein concentrates plus
some summer grazing. Feeding with a mix
on the feed table and extra concentrate in
the feed-station, in this way they control
the concentrate input. Total land use is 53
hectare which they use to produce most of
the feed needed. However due to the lack
of land some additional maize needs to be
purchased and due to the manure restriction they need to export some of the
manure (at cost of 8 CHF per m³ sold). Only 10 hectares of land is close enough to be
grazed but this qualifies for the 130 CHF
per hectare government subsidy. Silages
are stored in two silage pits and three tower
silos. The tower silos are twice as expensive
to build compared to pits, so future expansion of storage will be with another pit. Replacements are homebred, with calves
reared to 100 kg on the farm before going to
a contract rearer 100 km away in the mountains and returning to the farm to calve
down at 24 months of age. By doing this the
number of cows can be at the current level
without need of more land. For raising a
heifer they pay 100 CHF per month up to 26
months thereafter 95 CHF per month.
Monthly meetings are held with all partners
to discuss future strategy. The future focus
is on maintaining high yields from healthy,
long living cows, with as high a proportion
of milk from forage as possible.
on the farming activity to improve in that
area and optimise costs. Today the farm
has 80 cows which are kept in a freerange barn built between 1994 and 1999.
The buildings are simple; many of them
were built by own labour force. For milking a tandem parlour with 5 milking units
is operated. Next to MARTIN, two employees perform the farm work. They are motivated by a profit-sharing scheme. Cows
receive a TMR with grass and maize silage.
In summer time they are also allowed to
graze in the fields to some extent. Next to
silage from maize and grass also barley
and wheat are produced and processed on
the farm in the farm’s grinding and mixing
plant. Growing own soybeans started as an
experiment. The cows only receive homegrown concentrates. The farm aims to
produce in the closed circuit system. Cre-
ating and maintaining sustainability is a
fundamental goal… much more important
than growing in size or yield or any other
number. In the future also the management of slurry shall be integrated in the
closed circuit system. The processing
plant is operated with 4 full-time and 11
part-time workers. Products are marketed
to shops, hospitals, retirement homes and
local markets. The business is a selfmarketing member with EMMI: EMMI collects the milk surplus e.g. during summer
holidays and delivers additional milk to
the plant in case there is a deficit. A good
relation to the customers is very important for the PFISTERS. This shall be further strengthening in the future. Also the
work with the neighbouring farms shall be
intensified… otherwise they could be the
next competitors.
provide a more robust cow that milks
well. They are producing 8,500 kg of
milk per cow with 4.30 % fat and 3.46 %
protein. Their future focus is on a grazing cow with good body condition. Cows
graze for 20 hours in the summer on a 16
hectare grazing block divided into day
and night paddocks and are fed maize silage at milking. The maize silage is carted from the field at harvest and stored
as wrapped round bales, to allow summer feeding with minimal heating and
wastage. In the winter months a simple
covered, moveable feed barrier is used
to allow cows to self-feed silage in the
clamp, with maize fed in feed troughs on
the yard. The ration consists of 50 %
maize, 25 % grass silage and 25 % sugar
beet pulp, plus around 700 kg of concentrates fed per cow per year. Cows are
milked in the old cow shed with five
milking units. Home bred replacements
are contract reared in the mountain areas until calving at 30 months of age. The
end of quota offered WERNER and other milk producers in the region the possibility to actively market their milk
through their own company. Milk is currently sold to Thurmilch AG. The farm
was providing a very respectable financial return and WERNER & LISA were continually focussed on controlling costs and
optimising labour efficiency to further
improve their work-life balance.
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Congress report: 2014 EDF Congress in Switzerland
Swiss-style low-input production with
low costs and high labour efficiency
A high milk output per hectare of grazing
land with minimal costs and a high labour efficiency was the focus of the visit
to MARKUS & LUCIA BÜHLMANN who farm
near Rothenburg, Lucerne. The farm has
been in the family for many generations,
focussing on milk production and piglet
rearing. The farm is blessed with a very
even summer rainfall of around 100 mm
per month and an annual total of 1,300
mm. This promotes good grass growing
conditions that are well exploited by this
system. The 60 spring calving cows are
crossbreds with New Zealand genetics
and weigh 400 to 500 kg. The Jersey influence is being increased to further reduce bodyweight. Cows are artificially
inseminated for only 24 days at the start
Products that consumers demand and
are willing to pay a higher price for
The mountain farm “Egghof” was bought by
MARTIN & ROSEMARIE SENN in 1989. Since
2004 they also rent an Alp farm. The farming business of the SENNS is quite small.
Less than 20 dairy cows are kept in a freerange barn planed and built by MARTIN in
2008. A tandem milking parlour with three
boxes is used for milking. This small herd is
easy to manage and it is less work for MARTIN who works full time on the farm. However, ROSMARIE works part-time outside
the farm. In the summer they are helped
by an Alp worker. The herd is 100 % Jersey
breed with a production of 6,800 kg of milk
per cow per year with 6.0 % fat and 4.0 %
protein. The farmer has a special passion
for Jersey cows. Artificial insemination is
Know the strength of your product (hay
milk) and make a profit from it
Cooperation with their milk processor to
market a unique product was a focus of
the discussion with CHRISTOF BAUMGARTNER who farm near Märwil, in the North
East corner of Switzerland. Specialising in
silage free milk production, with investment in an efficient hay drying system,
attracts a premium price for milk sold for
local processing into un-pasteurised
cheese. CHRISTOF took over the management of the farm from his parents earlier
this year, although with CHRISTOF working
4 days a week at a local agricultural college, his parents are still actively involved
in the running of the farm. The farm started when 9 ha of land was purchased in
1976, with further land added over the
of the breeding season, before an Angus
bull is running with the herd. Young
stock is reared on 10 hectares of land
away from the main farm. Production is
5,600 litres per annual lactation at 4.4 %
fat and 3.6 % protein. The target is to increase to 6,000 per cow, to give an output of 12 to 13,000 litres per hectare.
For the BÜHLMANNS the end of quota
meant (and still means) to be able to
increase the milk deliveries in accordance to managing additional land. Milk
is produced under an ‘Integrated Production’ label that qualifies for an additional subsidy and is sold to Emmi since there
are no local cheese makers. Cows graze
the 19 hectares on a rotational paddock
system from calving in February through
to October and are then all dried-off in
December. Hay and silage are fed in winter and at the start of the grazing season
and then once grass supply is adequate,
no additional feed is fed during the grazing season. The grazing area is split into
17 paddocks, with a fresh paddock allocation of grass each day. The target
grass grazing height is 7cm in the Spring,
8 cm in the Summer and 9 cm in the Autumn, with all swards grazed down to 3.5
cm throughout the grazing season. Some
pre-mowing is carried out to maintain
sward quality. The swards are a mix of
ryegrass, Kentucky blue grass and some
clover, that receive 150 kg Nitrogen per
hectare, comprising of 60 kg N per ha of
inorganic nitrogen plus pig and cow slurry. The focus on efficient, low input milk
production results in one of the highest
levels of profitability within the EDF
group. Future plans are to further increase the efficiency of the system, generating income but not work.
only used when the pedigree bull, they
have, is blood related to the cow. All female calves are reared and sold off when
they have excess stock. Male calves are
reared for sale as bulls or fattened for private beef sales. Feeding bases on natural
pastures. This is what is farm’s land can be
used for. Thus, cows graze in summer and
receive hay and artificially dried alfalfa in
addition. As the use of silage is not accepted by the milk buyers, in winter cows are
fed hay combined with left-over potatoes
from industry or dried sugar beet pulp. The
farm also rears heifer of other farms on its
Alp pastures. Core strategy is to produce
products that customers want to buy and
willing to pay for a higher price. The SENNS
are working together with local cheese
makers and butchers. They receive a very
high milk price (and additional high non-
milk returns) and have, due to that, a good
income from the farming business. But they
also need to deliver milk of very high quality milk. Securing the good milk price and
selling more milk at top prices is also important for the future. Already before the
end of quota the farm was not regulated
in deliveries. Their milk buyers organised
the amount of milk that could be delivered depending on the cheese sales and
its price. The farm was free to deliver milk
also to other business partners, but deliveries were hardly increased: The farm milked
15 cows in 2006, 16 in 2010 and has now
18. In the future they would like to fill up
all 22 places in the shed with milking cows.
But it is not only profit which is important
for the SENNS. Farming is also passion for
them. They enjoy it and by that it brings a
lot of personal satisfaction to their life.
years, to now cover 36 hectares. Competition for land is high, with neighbouring
vegetable produces paying premium prices, so the farm is split into blocks several
kilometres apart. The herd of 63 Holstein
and Red Holstein cows produces 8,100 kg
milk per year. Some crossbreeding has
taken place in recent years, with Montbeliard sexed semen used to breed a more
robust cow. 80 % of the young stock is
home-bred and grazed in the Alps in the
summer months, to calve at 25 months of
age. Six cuts of hay are taken each year,
with the grass cut and wilted in the field
for two to three days, to 69 to 70 % dry
matter and then picked up with a forage
wagon and transferred to the hay stores.
Investment in two hay stores with a capacity of 3,500 m³ allows the hay to be
ventilated with warm air to dry it to 91 %
dry matter. The summer ration comprises
of 25 % grazing, 10 % concentrates and 65
% grass freshly cut and unloaded into the
shed. The winter ration is 80 % hay, 10 %
concentrates and 10 % pelleted maize.
Contractors are used for most of the arable crop work, with wheat, sugar beet and
maize grown. The whole maize plant is
harvested and then artificially dried and
pelleted to give a high value feed. The
business was providing good returns. Securing a good milk price is considered
more important than expanding the business (difficult due to the low land availability). The end of quota means for
CHRISTOF that he is now actively involved with his milk processor developing a ‘hay milk’ brand to add further value. And moreover he can now deliver as
much milk as he prefers to do.
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Congress report: 2014 EDF Congress in Switzerland
8
Congress report: 2014 EDF Congress in Switzerland
Next to the farm visits also workshops
have been provided to the delegates to
stimulate the discussions on different
topics. As usually, the EDF STAR members
provided workshops on the results of
EDF’s Cost of Production Comparison
(CoP). Farmers that delivered their
farms’ figures could join and discuss different issues and questions.
–
–
Labour is an important aspect but optimizing the business is a complex issue
Four CoP workshops where offered in total. One of it dealt with different questions on farm labour as the costs for family and hired workers is one of most important cost item in the dairy operation
with an average share of 19 % on the total costs. Also the variation in working
hour input between EDF farms is huge as
the latest results of the EDF Cost of Production Comparison showed. So, what is
the reason for it and what can we learn
in order to improve labour efficiency?
In total 15 farms participated in this workshop and the range in which the labour input varied was from 70 to 20 hours per cow
and year, when also taking milk yield into
account it ranged from 217 to 808 hours
per 100,000 kg ECM. The farm in the group
with the lowest labour input per cow per
year operates an AMS system with clear
procedures for the daily routines. The farm
is family-run with medium yields per cow.
Special attention is paid to the feeding as
e.g. too much starch (in particular in combination with a high yield) makes cows very
“lazy” and keeps them from visiting the robot regularly on their own. The farmer has
written down protocols on when and what
actions to take with “problem cows”; all to
ensure that the work in the barn and for
the 3 AMS goes as smooth as possible. So
only very, very little hours of work need to
be delivered per day by the family workers.
The farmer is very happy with his work-lifebalance. However, the farm was not a very
profitable one. So, was a low labour input
and high quality of life bought at (too) high
costs for automation technologies?
A good share of farms in the labour workshop had hired workers. So, productivity
of hired workers was also discussed. Motivating them to perform highly productive
and efficient was considered as a real
challenge. Key points mentioned have
been the following ones:
–
Keep it simple! Try to reduce the risk of
failure when instructing hired personnel: e.g. use a GREEN button for on and
a RED for off in your milking parlour to
start/end all technical processes.
Perform the work your workers have to
do yourself for a period of time to find
out how the working procedures
should be organized to be most efficient and to show your workers what is
possible in terms of needed working
time and quality. This will encourage
and help them “being in your shoes”.
Be present during the daily work. By
that you can correct, follow up and
motivate your staff. Be with them
that will encourage them!
a big profit if it is going well; but only
slightly downward changes in milk price
can also cause big financial losses. So,
the discussion in the workshop showed
that analysing the farm’s labour situation
and improving labour productivity is important. Many farms still have potential
in this area. However, improving the
whole dairy business is a complex issue
and therefore looking at the working
hours alone is not enough. There must be
any overall strategy for the farm.
More money for silage-free milk
–
–
Structure the processes and set a
rhythm where it is difficult to “breakout” as e.g. the hanging behind of a
worker would interfere strongly the
other workers: e.g. running the parlour for 24 hours a day operated by
three shifts forces the workers of
each shift to finish their work always
on-time. One shift must be done with
the work because the next shift is already waiting to take over.
Consider the work-life-balance (= personal needs in terms of working times
and breaks) of your workers when
structuring the processes and developing the working rhythm at your farm,
e.g.: Do your milkers generally prefer
to work eight hours straight with only
a small break in-between or do they
prefer to come for some hours in the
morning to milk the cows and again for
some hours in the evening with some
free hours in-between?
Aiming for profit or high yield was another question that was heavily discussed
since one farm had a high working hour
input due to milking three times a day. Is
it worth given the high hourly labour
costs the farm faces? At the end of the
discussion it was more or less concluded
that it is a matter of finding the optimum
production level to maximize profit.
However, that optimum will vary depending on the different input and price levels
of capital, labour and feed − whereas a
main driver for increasing milk yield is
the level of capital invested (with much
capital invested reducing intensity is
hardly possible if you want to stay profitable). It was also pointed out that profit
per farm is THE important measure: If
you only have a small margin per kg of
milk you need to milk more cows than a
farm with a larger margin per kg of milk
to achieve the same profit per farm. But
also your risk is higher: A small margin
per kg means less financial leeway in
times of low milk prices. In combination
with a large scale of your dairy business
(and a high share of cash costs coming
along with increasing size) you can make
9
Other workshops held by Swiss experts in
cooperation with farmers dealt with topics
around feeding, roughage production,
breeding and more. Silage-free milk production to increase the margin by achieving
a higher milk price was discussed in one of
the workshops. Swiss farmers are experts in
that as about 30 % of all Swiss milk is produced without silage (about 1.15 million
tons). This milk is processed to 65,821 tons
of cheese which are exported by 54 %.
Compared to conventional milk, for nonsilage milk farmers receive additional public payments of 3 Swiss Rappen per kg (2.5
EUR Ct per kg) next to a higher milk price
(Ø 75.9 Swiss Rappen per kg which is about
62.4 EUR Ct per kg). The final price for the
non-silage milk is strongly depending on the
type of cheese and the marketing. Packaging and branding are very important. Milk
composition of non-silage milk is not significantly different from conventional milk.
There is only a higher concentration of
omega-3 fatty acids and linoleic acids in it.
But microbiology is different from that in
conventional milk which enables a longer
cheese maturation causing the typical
unique taste. Making non-silage milk requires enough hay in very good quality; in
particular the content of sugar is very relevant. And, of course, the risk of weather is
high for hay making.
Advice for high-quality forage
The production and the use of highquality grass and hay were subject to discussions in several other workshops.
When looking at the CoP figures it becomes obvious that Swiss farmers have a
special expertise in that as they achieve
an extraordinary performance in milk delivered from non-concentrate feed. Of
course they have good natural conditions
for growing grass including a sufficient
rainfall over the year but they also care
for it in a special way. Producing highquality fresh grass and roughage (even at
higher costs due to field size, shape, location and also the low availability of
land) and making as much milk as possible
from it makes sense in the Swiss context,
Congress report: 2014 EDF Congress in Switzerland
in particular in the light of the very high
prices for concentrate feed: GMO-free
feed is needed in animal feeding. At the
same time the Swiss feed market is rather
closed, imports e.g. for soybean meal and
rape meal are expensive due to high import tariffs. On the other hand the domestic production of concentrates that can be
used for feeding is strongly limited due to
the scarce agricultural land. Also, the ecological extensification of the land, which
was promoted for several years, contributed to it. As a result, Swiss feed prices are
rather stable over time but very high compared to prices in the neighbouring countries. For that reason special attention
needs to be paid to home-grown forage. In
the workshops Swiss farmers explained the
delegates their strategies in forage production and also mentioned some special
details that have proven in practice:
–
–
Utilise the grass before the ears are
emerging (stadium 3) than the yields
are high in energy and protein.
Start early with grazing in spring as
this promotes a thicker grass cover.
–
–
Keep pastures in good shape, avoid old
botany. Adjust intensity of use to the
situation. Avoid overutilization as this
promotes weeds and underutilization
causing lower quality of forage.
The grass mixture must be appropriate to the location. The use of grassclover-mixtures was recommended by
several Swiss farmers for several reasons: High content of protein and energy. Flexible use for silage, hay and/
or grazing. Good weed suppression.
High yields even in dry periods. A
moderate fertilisation is possible.
–
Fertilisation, anyhow, should be appropriate to the intensity of use.
–
Use silage bales to lower the weather
risk through high flexibility.
Although natural conditions at home will
be different from the Swiss one, the one or
the other farmer, for sure, will think of
the advice when coming home and will
check own behaviour in terms of grassland
management. This is also an area where a
part of the EDF farms still has unused po-
EDF Congress 2015, Rostock, Germany, 24th to 26th of June:
„25 years of entrepreneurship: Always looking to the future!“
tential. More attention to this part of the
business will help to improve profitability.
But not only providing high-quality forage
is important. Also a cow is needed that
makes most out of it; the cow must be
able to deliver maximum milk from forage
but not maximum milk at all as the highest
milk yield does not necessarily means a
high income and profit. This is where Swiss
cattle breeders pay attention to. Selecting
a breed suitable to the own production
system − which can be very different even
in such a small country as Switzerland − is
important for the success. Different breeds
with different profiles for the different
production systems must be provided, and
farmers must take influence by selecting
the most suitable one.
Our thank goes to the Swiss EDF branch
and their helpers for organising the 2014
congress and showing us their strategies
for milk production. Next to an insight into the Swiss sector and food for thoughts
on various aspect related to dairying the
congress delegates also received many
practical tips and ideas for changes and
improvements on the own farm. □
tures, workshops and during the farm visits congress delegates
can exchange and discuss with colleagues from home and abroad
to collect ideas for the own strategy development.
In 2015, about 300 dairy farmers are expected to come to Rostock, Germany to join the 2015 congress of the EDF club. Under
the motto “25 years of entrepreneurship: Always looking to the
future” EDF will not only celebrate its 25th anniversary but EDF
members and friends will also discuss entrepreneurial strategies
in times of political upheaval: 25 years ago the reunification of
Germany meant new opportunities for farmers in the Eastern and
Western part of the country. Now in 2015, dairy farmers can
again break new grounds as the milk quota exit will change
framework conditions for dairy farming in Europe. How did EDF
members and other dairy farmers have used the new opportunities which arose 25 years ago? What have been the challenges in
the past and what entrepreneurial skills will need the dairy farmers of tomorrow to further develop his or her business? In lec-
“As founding member of EDF I am very happy to organise the
anniversary congress in Germany” says Professor FOLKHARD
ISERMEYER, president of the Thünen-Institute. “MecklenburgVorpommern is the right place to embolden European dairy
farmers to look positively to the future also in times of political
upheaval. Dairy farmers in this region have proven their entrepreneurial expertise and are often well prepared for the future”, adds HENNING HELMS, dairy farmer from this region and
EDF council member for Germany. ECKHARD MEINERS, German
dairy farmer from Bützow in Mecklenburg-Vorpommern confirms: “In the last 25 years I have learnt what is important for
me and my family. Today I am not afraid of the future, which
for sure will bring new challenges for us dairy farmers.” □
10