Swiss versus EU Dairy Farms: Who Can Cover their Costs?

Milk production is the most important production branch of Swiss agriculture. The liberalised cheese trade with the EU requires competitive dairy farms. Despite this, Swiss farms produce milk in a less economically viable way than comparable EU farms.

For climatic and topographical reasons Swiss dairy husbandry is adapted to local conditions, and should therefore possess the right conditions for good competitiveness. Although production exceeds domestic demand, imports have risen more strongly than exports over the past ten years, leading, among others, to market-share loss.

Cost recovery ratio of a typical Swiss dairy farm is under 60%

The study compares standardised Swiss farms with German, French, Austrian, Dutch, Irish and Finnish farm types from the International Farm Comparison Network (IFCN). It investigates the extent to which the production costs of the milk are recovered, and how this cost recovery ratio has changed over the last twelve years. Although higher requirements or natural difficulties are compensated by direct payments and Swiss milk prices are on average 67% higher than those of EU farms, a typical Swiss farm from the hilly region with 21 cows (CH-21) has a comparatively low cost recovery ratio of under 60% (Fig. 1). It is not just significantly higher structural costs but also low labour productivity that are responsible for this. Hence, an average Dutch farm achieves a more-than-fourteen-times-higher labour productivity.

How has the cost recovery ratio changed over the last 12 years?

Because of farm-size-dependent differences, farm types were divided into two size categories: farms with fewer than and farms with more than 50 cows.

The longstanding trend shows that the cost recovery ratio for the smaller farms is under 70% or 60% even with the milk price increases in 2022 and 2023, and that Swiss farms are increasingly losing competitiveness (Fig. 1).

The cost recovery ratio for the larger farms is usually above 80%. The different farm types have largely parallel trends, and fluctuations correlate with the milk price. A trend is scarcely discernible, except for Swiss plain farms with 70 cows (CH-70), which have a steadily growing cost recovery ratio owing to the continuous reduction of their initial growth costs (depreciations, interest on debt, debt clearance). Also striking in the case of both Swiss farm types (CH-21 and CH-70) are the low fluctuations, which can be attributed to more-intense agricultural policy interventions. Over the twelve years examined, the farms in Ireland, western France and northern Germany managed to turn a profit every second year on average (Fig. 2).

Labour-saving technologies increase productivity

To remain competitive in future, Swiss farms must be prepared to remunerate their own labour at a lower rate, or to invest in larger herds with labour-saving technologies, particularly in the plain region. Only in this way can labour productivity be significantly increased. Extended grazing and/or the use of robot technologies in larger herds are among the most promising strategies here.