European Dairy Sector Research Articles

Inbreeding and pedigree analysis of the European red dairy cattle

BackgroundRed dairy cattle breeds have an important role in the European dairy sector because of their functional characteristics and good health. Extensive pedigree information is available for these breeds and provides a unique opportunity to examine their population structure, such as effective population size, depth of the pedigree, and effective number of founders and ancestors, and inbreeding levels. Animals with the highest genetic contributions were identified. Pedigree data included 9,073,403 animals that were born between 1900 and 2019 from Denmark, Finland, Germany, Latvia, Lithuania, the Netherlands, Norway, Poland, and Sweden, and covered 32 breeds. The numerically largest breeds were Red Dairy Cattle and Meuse-Rhine-Yssel.ResultsThe deepest average complete generation equivalent (9.39) was found for Red Dairy Cattle in 2017. Mean pedigree completeness ranged from 0.6 for Finncattle to 7.51 for Red Dairy Cattle. An effective population size of 166 animals was estimated for the total pedigree and ranged from 35 (Rotes Höhenvieh) to 226 (Red Dairy Cattle). Average generation intervals were between 5 and 7 years. The mean inbreeding coefficient for animals born between 1960 and 2018 was 1.5%, with the highest inbreeding coefficients observed for Traditional Angler (4.2%) and Rotes Höhenvieh (4.1%). The most influential animal was a Dutch Meuse-Rhine-Yssel bull born in 1960. The mean inbreeding level for animals born between 2016 and 2018 was 2% and highest for the Meuse-Rhine-Yssel (4.64%) and Rotes Hohenvieh breeds (3.80%).ConclusionsWe provide the first detailed analysis of the genetic diversity and inbreeding levels of the European red dairy cattle breeds. Rotes Höhenvieh and Traditional Angler have high inbreeding levels and are either close to or below the minimal recommended effective population size, thus it is necessary to implement tools to monitor the selection process in order to control inbreeding in these breeds. Red Dairy Cattle, Vorderwälder, Swedish Polled and Hinterwälder hold more genetic diversity. Regarding the Meuse-Rhine-Yssel breed, given its decreased population size, increased inbreeding and low effective population size, we recommend implementation of a breeding program to prevent further loss in its genetic diversity.

Influence of climate stress on technical efficiency and economic downside risk exposure of EU dairy farms

AbstractThis paper assesses the influence of heat and drought stress on the economic performance of the European dairy sector. Climatic data from the Gridded Agro-Meteorological data in Europe were combined with dairy enterprise data from the Farm Accountancy Data Network, resulting in a data set of 4412 farms in 22 European Union (EU) countries over the period 2007–2013. Since the performance of dairy farms is influenced by the context in which they operate, farms were grouped into areas representing similar climatic conditions through the use of a latent class analysis. Technical efficiency (TE) and economic downside risk were used as performance indicators against which the effect of climatic stress factors was evaluated. TE was estimated using a ‘true-fixed’ effect stochastic frontier model. Economic downside risk was based on gross margin deviations. Regression analysis suggests a significant negative effect of drought and heat stress on both TE and the downside gross margin difference in most climatic classes, with few exceptions. Results imply that both drought and heat stress-related issues need to be considered when designing adaptation strategies to address threats to the economic performance of the EU dairy sector.

Stakeholders' involvement in establishing sustainable business models

PurposeCooperatives play a dominant role in the European dairy sector. The aim of the study is to define a sustainable business model of dairy cooperatives and explore how stakeholders can contribute to innovation processes generated in this ecosystem.Design/methodology/approachStarting from theoretical assumption and investigation of three major cooperatives located in an ecological agricultural Poland region, known also as “Green Lungs of Poland,” the authors propose a sustainable business model where the role stakeholders in the value co-creation is emphasized.FindingsThe findings of this paper show how the involvement of various stakeholders by the cooperatives contributes to the development of innovations that meet customer expectations, thereby concurring to the creation of social, environmental and economic value.Originality/valueThis paper formulates a business model integrating theoretical assumptions from the literature review with empirical evidence by exploring the roles of stakeholders that contribute and incorporate innovation, responsibility and sustainability into the core of activities of cooperatives.

Spatial Price Transmission and Trade in the European Dairy Sector

There exists a large literature on spatial price transmission in agro-food sectors, but research on milk sector is relatively limited. In addition, we cannot generalize the results of these studies due to their diversity in terms of methodology, periods and countries. The aim of the paper is precisely to generalize, or at least broaden the evidence on horizontal price transmission in European Union dairy market. We employ two stages approach. First, we test whether Law of One Price exists among European Union member states. Second, we try to explain our findings based on gravity model framework in a binary choice setting. Our results are in line with theoretical expectations: the volume of milk traded and Eurozone membership positively, the geographical distance negatively affects the probability of perfect price transmission. In addition, we show that horizontal price transmission is dependent on political group variables (New Member States versus Old Member States).

Spatial Price Transmission and Trade in the European Dairy Sector

There exists a large literature on spatial price transmission in agro-food sectors, but research on milk sector is relatively limited. In addition, we cannot generalize the results of these studies due to their diversity in terms of methodology, periods and countries. The aim of the paper is precisely to generalize, or at least broaden the evidence on horizontal price transmission in European Union dairy market. We employ two stages approach. First, we test whether Law of One Price exists among European Union member states. Second, we try to explain our findings based on gravity model framework in a binary choice setting. Our results are in line with theoretical expectations: the volume of milk traded and Eurozone membership positively, the geographical distance negatively affects the probability of perfect price transmission. In addition, we show that horizontal price transmission is dependent on political group variables (New Member States versus Old Member States).

Milk production related to price of raw cow’s milk in selected european countries

Dairy industry and its production contributes to the economies of many regions and countries worldwide. Except the milk production there is also number of other impacts such as the human nutrition, landscape creation and environment among the others. The European dairy sector undergoes numerous changes a period of crises and regulations in last few decades. After abolition of milk quota system, the European milk producing countries started to be exposed to the milk prices of the world market. In the submitted article, the impact of five explanatory variables, which cow's milk, butter, milk powder, cheese, and farm milk production belong among, is analysed to the explained variable the price of raw cow's milk coming from the countries whose data is available in the Eurostat database; that is, Austria, Belgium, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Regression analysis of panel data with territorial and time dimensions is applied using three techniques, which the pooling, the random, and the between approach belong to. Supplementary analytical approach represented by the cluster analysis resulted into triplet of clusters, selected for the further modelling process. Results of the regression analysis showed no influence of butter production to the level of raw cow's milk. The visualised outcome signifies the distribution of the individual countries among the examined clusters. It underlines the fact that the cheaper raw cow's milk price causes a concentration on the specific part of the production that is easier to produce. It is important to realise that the coefficient of determination of the regression models reveal their statistical significance as a whole. Obtained results can serve as the background for further analysis of impact of other milk products as the factors influencing the raw cow's milk prices.

The structural effect of cooperatives on price volatility in the European dairy sector

ABSTRACTTheoretical models and empirical evidence suggest that high market shares of cooperatives can force investor-oriented firms to pay higher producer prices within a region. In the same vein, cooperatives may force investor-oriented firms to reduce price volatility. We use panel data from 27 European Union member states over the period 2001–2015 to investigate how the market share of cooperatives in a country affects milk price volatility. Our key finding is that a higher market share of cooperatives reduces price volatility at the national level. Volatility is influenced by a number of other variables, such as fluctuation in raw milk production, oil price volatility spillover and the number of dairy processors. Policymakers should consider that the promotion of cooperatives might positively affect price stability in the dairy sector.

Investigating Dairy Farmers′ Resilience under a Transforming Policy and a Market Regime: The Case of North Karelia, Finland

Abstract The European dairy sector is currently facing unprecedented challenges under a transforming policy and a market regime. The expected changes will have relevant consequences for land use, the landscape, and the environment in rural areas dominated by dairy farming. Within this context, the aim of this paper is twofold. First, key characteristics of milk production in the region of North Karelia will be illustrated. Secondly, some light will be shed on dairy farmers′ challenges and adaptations to the dairy sector’s structural changes, and to what extent they contribute to the resilience of agricultural systems. In the light of an evident milk crisis, the findings suggest that farmers′ key challenge is the profitability of running a dairy enterprise. One of the consequences of the poor economic situation is the pressure to make investments in the conditions of a constantly changing policy. Flexibility and the ability to understand future trends are fundamental in adapting to socio-economic changes and unpredictability. Adaptation to unpredictability would not be possible without a key characteristic of farming activity: agriculture is not only a source of an income, but also a way of life, a sense of belonging to the land that significantly affects farmers′ decision-making.

Will recent improvements in estuarine water quality in Ireland be compromised by plans for increased agricultural production? A case study of the Blackwater estuary in southern Ireland

The environmental status of many European estuaries has improved in recent years as a result of the implementation of a range of different legislative measures. Better municipal waste water treatment and a reduction in the application of inorganic and organic fertiliser to agricultural lands are the main reasons for these improvements. It is anticipated, however, that the ending of the EU milk quota in 2015, and the proposed enlargement of the European dairy sector will lead to a market-driven increase in milk production through an increase in animal numbers and higher productivity. This new production is likely to lead to an increase in pressures with the potential to impact on the quality of surface waters, including estuarine waters. In this paper we focus on the Blackwater estuary in southern Ireland which has seen a marked improvement in water quality due to a reduction in riverine nutrient inputs of phosphorus and nitrogen. A bio-physical model is used to test nutrient-input scenarios likely to represent the range of nutrient loadings that may arise as a result of increased agricultural production. The outputs from these different scenarios are used to assess if recent improvements in estuarine water quality will be undermined or even negated by the proposed expansion of the Irish dairy sector. Appropriate management options to address these potential impacts are discussed.

Catching Up or Falling Behind in European Agriculture: The Case of Milk Production

AbstractThe paper explores and analyses the catching up and falling behind processes in the European dairy sector over the period 2004–2011, using a stochastic metafrontier multiple output distance function for 24 EU Member States. The metafrontier estimates reveal considerable productivity differences in milk production across the EU at the regional (NUTS‐2) level. Milk yield per cow is the highest in the old Member States, especially in those regions located in the northwest of the EU, while the lowest productivity is observed in Eastern Europe. The same structure was found for both the TFP (Total Factor Productivity) levels and TFP growth. Moreover, the results for technical change suggest that farm sizes are not optimal in many regions in Central and Eastern Europe from a dynamic perspective. The comparative analysis suggests that in the new compared to the old Member States, fewer farms could benefit from the movement of the frontier. Moreover, there are no signs that poorly performing farms are catching up with the best performing farms in the EU regions/countries.

Economic Growth and Biological Innovation: The Development of the European Dairy Sector, 1865–1940

Abstract:In this article we discuss an aspect of economic growth that has not been the subject of much consideration in economic and agrarian history to date: the effect of biological innovations on farming development between the mid nineteenth century and the 1930s. We have focused on dairy farming for two reasons. Firstly, dairy farming played a relevant economic role in a number of European regions during this period. Secondly, one of its products, liquid milk, was probably the most significant food during the early stages of the European nutrition transition. We present new statistical data for the evolution of dairy farming in different Northern European countries as well as Spain, and evaluate the impact of cattle population and milk yields in each case. We also link milk yields and the availability of fodder, but special attention is paid to the breeds kept and techniques for their improvement. The article shows that cattle improvement played a significant role in Central and Northern Europe from the mid nineteenth century, but that this was not the case in Spain. Improvement through inbreeding was soon discarded in Spain, absorbent crossbreeding failed, and the sector became dependent on foreign imports of bulls and cows, first from Switzerland and later from Holland. By taking these factors into consideration we can better understand why the dairy sector in Mediterranean Europe did not really begin until the late nineteenth century and why it stagnated in the wake of the First World War.

Explaining production expansion decisions of Dutch dairy farmers

The abolition of dairy quotas in Europe in 2015 has been accompanied by uncertainty on expansion of the European dairy sector. Whereas the total amount of quotas was limited and the value of quotas was falling before 2015, a significant part of active Dutch dairy farmers followed an expansion strategy in the recent past. Therefore, it was expected that the overall milk production in the Netherlands will substantially increase after abolishment of the quota. The objective of this study is to analyse which factors determine milk production expansion by Dutch dairy farmers. A conceptual model is developed that shows how policies, market conditions, and farmers’ values and goals affect their expansion decisions. This conceptual model shows that not only economic, but also social and environmental variables are important factors in expansion decisions of Dutch dairy farmers. Zooming in on the dynamic decision making process itself, we combine three investment theories to explain investment decisions. This framework is the basis for a dynamic random effects probit model that is used to estimate the effects of various economic, environmental and farm structural factors on farmers’ expansion behaviour. Data is obtained from the Dutch Farm Accountancy Data Network (FADN) covering the period 2001 through 2010, with 1390 observations on 354 dairy farms included in the sample. The results show that production intensity matters when analysing production expansion behaviour of Dutch dairy farms. Compared to extensive farms, intensive farms have a higher probability for milk production expansion. The availability of land however is an important precondition. Production diversification, which is usually found at extensive farms, decreases the probability for milk production expansion. Although the findings do not directly show an increase in milk production during the sample period (farmers still respected their quota limits), the results indicate that Dutch dairy farms can potentially increase milk production in the future. In 2010 farms underutilized their stable space, as the occupancy of stable space was 71%. After milk quota abolishment farms can therefore increase livestock herd and milk production with limited investments.

Competitiveness Makes a Difference in the European Dairy Sector

SummaryIn the post‐quota era, competitiveness has become the key determinant of success of dairy sectors within the EU. To understand the evolution of the sector, we identify key determinants of the competitiveness of national dairy chains by combining an analysis of competitiveness indicators with case‐studies in selected EU countries. Around the Baltic Sea region, we find steady productivity growth on dairy farms in the old Member States, and no evidence that the newer Member States are managing to reduce their productivity gap. In contrast, growth accounting for the dairy processing sector indicates that newer Member States are catching up in terms of productivity. Competitiveness is heavily influenced by the efficiency with which economic units operate within their national dairy supply chains, in particular with respect to cost management, sales and marketing. Although there exist numerous quantitative competitiveness indicators, we stress the importance of several qualitative factors that strongly influence competitiveness, for example, the relationships of dairy chain actors with other economic sectors, the chain's weight in the national economy, national policy decisions, the availability of supporting services and the nature of public perceptions of the sector. Although often overlooked in competitiveness analyses, those factors should be given due consideration.

Relating the carbon footprint of milk from Irish dairy farms to economic performance

Mitigating greenhouse gas (GHG) emissions per unit of milk or the carbon footprint (CF) of milk is a key issue for the European dairy sector given rising concerns over the potential adverse effects of climate change. Several strategies are available to mitigate GHG emissions, but producing milk with a low CF does not necessarily imply that a dairy farm is economically viable. Therefore, to understand the relationship between the CF of milk and dairy farm economic performance, the farm accountancy network database of a European Union nation (Ireland) was applied to a GHG emission model. The method used to quantify GHG emissions was life cycle assessment (LCA), which was independently certified to comply with the British standard for LCA. The model calculated annual on- and off-farm GHG emissions from imported inputs (e.g., electricity) up to the point milk was sold from the farm in CO2-equivalent (CO2-eq). Annual GHG emissions computed using LCA were allocated to milk based on the economic value of dairy farm products and expressed per kilogram of fat- and protein-corrected milk (FPCM). The results showed for a nationally representative sample of 221 grass-based Irish dairy farms in 2012 that gross profit averaged €0.18/L of milk and €1,758/ha and gross income was €40,899/labor unit. Net profit averaged €0.08/L of milk and €750/ha and net income averaged €18,125/labor unit. However, significant variability was noted in farm performance across each financial output measure. For instance, net margin per hectare of the top one-third of farms was 6.5 times higher than the bottom third. Financial performance measures were inversely correlated with the CF of milk, which averaged 1.20kg of CO2-eq/kg of FPCM but ranged from 0.60 to 2.13kg of CO2-eq/kg of FPCM. Partial least squares regression analysis of correlations between financial and environmental performance indicated that extending the length of the grazing season and increasing milk production per hectare or per cow reduced the CF of milk and increased farm profit. However, where higher milk production per hectare was associated with greater concentrate feeding, this adversely affected the CF of milk and economic performance by increasing both costs and off-farm emissions. Therefore, to mitigate the CF of milk and improve economic performance, grass-based dairy farms should not aim to only increase milk output, but instead target increasing milk production per hectare from grazed grass.

Agricultural Trade Liberalization and Greenhouse Gas Emissions: Modeling the Linkages Using a Partial Equilibrium Trade Model

Global attempts to limit greenhouse gas (GHG) emissions may impact on agricultural trade and producer returns, particularly in countries such as New Zealand, where a relatively large proportion of GHG emissions originate from the agricultural sector. This study uses an extended partial equilibrium agricultural trade model to analyze the effects of trade policy liberalization on agricultural production and trade, as well as on GHG emissions. Further analysis combines trade liberalization with GHG mitigation policy in the New Zealand and European dairy sectors, and the effects on producer returns and GHG emissions are predicted. As expected, full trade liberalization in the OECD (Organization for Economic Cooperation and Development) countries enhances producer returns in New Zealand's dairy sector, but reduces returns in the European Union's dairy sector.

Consequences of changing conditions of the European dairy sector for the strategies of dairy companies

This contribution deals with the consequences of changing conditions of the European dairy sector. Important influences discussed are the decisions of the Mid-Term-Review of the Common Agricultural Policy, the enlargement of the European Union to include the countries of Central and Eastern Europe and the concentration and globalisation of the food trade. Based on these changes, the dairy industry has to adjust their strategies. Of great importance for future competitiveness is the size of dairy companies and plants, as large enterprises and plants have several economic advantages, if an optimal size corresponds with a good job performed by the management of the company. Important alternative strategies like the cost leadership strategy, the differentiation strategy, the focus strategy and internationalisation are discussed and assessed with respect to their possible contribution to retain respectively to improve competitiveness of dairy enterprises. It is concluded that within a period of ten years the face of the European dairy sector will change quite extensively. Only those enterprises will survive which in time actively implement strategies, which are a suitable answer to the changing conditions.

Partial Market Liberalization and the Efficiency of Policy Reform: The Case of the European Dairy Sector

AbstractThis article analyzes the efficiency of partial market liberalization and policy reform with an application to the European dairy sector. In a second best world, partial moves toward market liberalization are not always efficiency improving. We develop a general equilibrium model to investigate the efficiency implications of discrete changes in government policy. The analysis covers price and quantity instruments used in both domestic and trade policy. We derive simple cnditions under which partial market liberalization is efficiency improving. We apply the approach to agricultural policy reform in the European dairy sector and identify market liberalization scenarios that are “not” efficiency improving.