– This is always of interest for the milk producers

When meeting farmers and their advisors one of the questions you are always asked is ”what is your milk price?” This question may be rather easy to answer, but it does not necessarily tell where is it best to produce milk. A number of parameters must be investigated before this question can be answered!
I am not going to answer this question, but the minutes from IFCN’s (dairy research center in Kiel Germany) annual Supporter Conference offer information about the largest dairies at present and some economic estimates for each of them. This triggered some thoughts!
It also made me curious about the answer to another question, which was raised again when I recently guided a group of French consultants studying milk production in Denmark: Is it better to sell your milk to a cooperative or to a private dairy. Are the cooperatives, – after all, able to run an efficient business? Or the alternative question; Will the private companies pay the highest price, – even if they have the results to do so, – or will the owners keep the money for themselves, – and for reinvestment?
Below figures, which originates from IFCN, rank dairies according to milk intake and also estimate the turnover per kg milk.
Who pay the best price for the milk_graph1
It can be seen that DFA, by far the largest dairy worldwide has the lowest turnover pr kg, – and Danone, ranked 8th has the highest turnover! Of course, the turnover does not reflect the price/kg milk to the farmer. It tells more about to which extent a dairy is processing and adding value to the milk before it is sold. But it might tell something about the potential for paying a good price?
To dig more into the prices paid to the farmers I found another statistics published on the homepage www.milkprices.nl . Here the average milk price for the last 12 months is seen (by Sept 1st2014) and most of the dairies in IFCN’s tables are seen here too. According to information on www.milkprices.nl the prices are standardized and including various adjustments and supplementary payments.
In below table the average price in USD/kg milk to the farmer is seen. For some reason Nestle is not included and I presume US 3 shows an average for the 3 largest dairies in the US?
Who pay the best price for the milk_Graph2
It can be seen that a part from 2-3 dairies the average annual price almost worldwide (no dairies from Asia and South America) is very similar, – 0.48 – 0.49 USD/kg.The largest daries from US, New Zealand and Europe are all represented!
Only 3 dairies are paying 0.50 cents or more per kg. All European dairies, – and all cooperatives.
So even though the highest turnover/kg milk was seen among the private dairies, most probably due to being more specialized, processing the milk more, this did not result in a higher milk price to the farmer during the 12 month period from August 2013 to August 2014.The picture may change for the next 12 months where there will be a surplus of milk, – but for the time being it does seem that the large cooperatives are competitive, – even though they have to receive milk from all their members and usually have a wider product range.
In addition there are other advantages for the members in a cooperative. They do have some influence on the business, (though limited in the very large cooperatives) they do get involved in the strategies and can participate in discussing the future, – and when business is good they will profit from it!

Blog post written by:

Tove Asmussen

Master of Sci. Milk Production
Dipl. Business Innovation
Consultant & Business Owner, Raw Milk Connect

email: tove.asmussen@rawmilkconnect.dk