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Agroscope

Better Milk Price and Low Basic Ration Costs Make Grass-Fed Milk Cost-Efficient

Grass-fed milk production meets a customer need, and is linked to specific feed and animal-welfare requirements. An Agroscope study sought to determine the circumstances in which grass-fed milk production is worthwhile.

Surveys confirm that animal welfare is an important requirement of Swiss consumers. Accordingly, the IP-Suisse grass-fed milk label is becoming more common in retail outlets. It is therefore important for dairy farms to understand whether grass-fed-milk production is economically worthwhile for them, and whether the higher milk price compensates for additional costs.

Study examines cost-efficiency of grass-fed dairies

This study evaluated the costs and performances of ten grass-fed-milk producers at the production-branch level. Using model calculations, the costs compared to those of dairy farms producing pasture-fed and silage-fed milk without a ‘grass-fed milk’ label were calculated and compared in terms of cost-efficiency, bearing in mind the surcharge for grass-fed milk.

Thanks to the label, the grass-fed dairy farms studied – which correspond more or less to the average grass-fed dairy farm in the plain zone in terms of size and milk yield – receive a surcharge of 5 rappen/kg milk, thereby obtaining a milk price of 64.9 rappen/kg. Further revenue is obtained through the sale of animals and the receipt of direct payments. Thus, payments of 107.9 rappen/kg partially offset full costs of 128.9 rappen/kg, corresponding to a cost recovery ratio of 84 %. Remuneration of labour is CHF 16.90 per hour with a milk yield of 7660 kg per cow and year.

Switch pays off in certain conditions

The data allows to calculate how high the surcharge for producers of grass-fed milk would need to be for them to achieve the same remuneration of labour as other forms of production with higher concentrate use and higher milk yields (Fig. 1).

Figure 1: Surcharge that would be required to enable producers of grass-fed milk to achieve the same remuneration of labour as other forms of production with higher concentrate use and higher milk yields.

It can be seen that, even without a surcharge, the average grass-fed dairy farm is better off than model farms with year-round silage and a milk yield below 10,000 kg (intersection between yellow line and zero line of the y-axis in Figure 1).  This is primarily due to the lower basic-ration costs thanks to summer grazing. With a surcharge of 5 rappen/kg, the grass-fed dairy farm achieves the same remuneration of labour as a silage-fed farm with a milk yield of 11,300 kg a year.

Without a surcharge, grass-fed farms would be less well-off than pasture-fed farms using higher amounts of concentrates (blue line always runs above zero line of the y-axis). Because of the surcharge of 5 rappen/kg, however, they are better off than pasture-fed farms with milk yields of under 9800 kg (blue line runs below the value of 5 rappen/kg up to a milk yield of 9800 kg).

This study was co-funded by Schweizer Tierschutz STS and IP-Suisse.

Conclusions

  • When only minor adaptations of the production system are necessary, the switch to grass-fed milk production is cost-efficient due to the surcharge of 5 rappen/kg.
  • If concentrate use must be reduced in order to meet requirements for the label, an economic analysis is necessary.
  • The switch to grass-fed milk production based on a high-performance strategy (possibly combined with year-round silage) is probably not profitable, and may also not be easily achievable. This is because the animal genetics may not be suitable, or because it may not be possible to sell or repurpose existing buildings, machinery and facilities for feed preservation, which thus continue to have a negative effect on the economic result.

Scientific article

Better Milk Price and Low Basic Ration Costs Make Grass-Fed Milk Cost-Efficient

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