Swiss Dairy Farms – Economic Performance Potential and Limits

In order to increase the competitiveness of Swiss milk production, the performance of the farms must be improved. Agroscope shows that the majority of producers work efficiently, but that the differences in productivity are great.

In order to increase the competitiveness of Swiss milk production, the performance at farm level must be improved. The question therefore arises as to what measures can be taken to enhance the productivity, efficiency, and ultimately the income of the farms.

Agroscope analysed the performance of specialised Swiss dairy farms and their development over time, investigating whether the farms could be grouped according to the production technologies they used, and whether productivity varied between the different technology categories. Another focal point was whether the farms were able to increase their yields by enhancing efficiency, i.e. through improved management practices. Finally, Agroscope studied the extent to which Swiss dairy farms have succeeded in improving their performance over time, and what measures were taken to achieve this. The information base consists of the accountancy data of specialised dairy farms in the Farm Accountancy Data Network over the period 2003 to 2013.

Swiss dairy farms can be grouped into three technology categories

Compared to the rest of the dairy farms, farms in the most productive technology category, Class 1, are larger, produce more intensively, keep more dairy cows (both total number and number per hectare) and have higher milk yields as well as higher economic yields from the sale of milk and other products. They are mainly situated in the plain or hill region, tend to use freestall-housing systems entitling them to participate in the voluntary state-subsidised animal welfare programme, and usually produce silage-free milk used for raw-milk cheese production. 

By contrast, farms in the least productive technology category, Class 3, are more often located in the mountain regions. These dairy farms are comparatively small, produce extensively, tend to used tied housing, and usually produce drinking milk.

The ‘average’ Class 2 lies between these two extreme technology categories in terms of the indicators studied.

The majority of Swiss dairy farms operate efficiently

When analysing performance it is important to bear in mind the natural production conditions, since these determine how productive a farm can be and how efficiently it uses inputs.

The analyses show that the majority of Swiss dairy farms operate very efficiently. Thus, the potential for increasing the efficiency of the farms in Technology Class 1 stands at 2%, in Technology Class 2 at 4%, and in Technology Class 3 at 12%. In other words, without a substantial change in production technology, no major improvements in efficiency can be achieved or expected.

Improved performance only possible with a change in technology

The analysis shows that an improvement in productivity can be achieved by a change in technology. If a Class 2 farm were now to begin working efficiently with Class 1 technology, it could increase its output by 20%. If farms from the least productive Class 3 were to use Class 2 technology, they could increase the output by 27%. With Class 1 technology their output could actually be increased by 39%. However, the analyses also show that the majority of farms have not substantially adapted their production technology over time.

Improvements in performance and intensification are essential for a stable or better income

Farms remaining in the most productive category, Class 1, were able to significantly increase their production, work productivity and income over time. By contrast, farms in the second and third class were not in a position to increase their production and productivity level to the extent that income was increased (or at least maintained) over the entire period under consideration.

The few farms that switched over to a more productive technology in the period observed produced in an increasingly intensive manner, and the share of direct payments out of agricultural income fell accordingly. The share of off-farm income out of household income fell, whilst agricultural income increased as a whole.

For the few farms that switched to a less-productive technology class, labour productivity and production intensity fell, and the share of direct payments and off-farm income increased.