Production Costs Undermine Milk Price Recovery

SPAIN - Despite the slight recovery in prices, production costs undermine the profitability of dairy farms in Spain.
calendar icon 3 February 2012
clock icon 2 minute read

Throughout this week the dairy industry has been paying farmers for the milk they delivered in December. The Union of Small Farmers and Ranchers (UPA) stated that the prices have seen a slight increase from the previous month.

November ended with settlements to the farmers of 0.335 € / liter. The price varied between 0.339 and 0.337 in December. This improvement was due primarily to an increase in sales of cheese during December. The forecast of EPS for the first month of the year is repeated in December prices.

However, there are major differences in what they pay for the various industries operating in Spain. In this sense, UPA has required industries to update the average prices of the European Union, and urges them to seek new markets and diversify production.

Despite this positive trend in prices, UPA reports that dairy farmers have suffered a loss of income during 2011, due to the considerable increase in production costs, such as fodder and feed, and consequently also of the drought that has ruined the crops of the farmers own corn and fodder.

Thus, the prices of fodder have continued to climb throughout the year from 172 euros / tonne to € 227 / t put on arrival. The average rise in the price of alfalfa in 2011 over the previous year has exceeded 25 per cent. The same has happened with the price of straw, which finished the year with strong gains, and energy widely used in dairy farms to keep the milk refrigerated, with increases of up to 17 per cent. Likewise, the price of concentrate for dairy cattle has risen around 20 per cent last year.

The land-based farming / grazing have also suffered significant losses due to drought, which reduced the production of grass and silage corn for about 40 per cent.

The great increase of production costs must be added the financial difficulties. Access to credit to refinance the farm is affecting a critical role in the viability of these, as well as cooperative structures that must withstand heavy indebtedness of its members and in some cases difficult to recover unpaid. And now must repay the loans granted in previous ICO campaigns.

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