Dairy Farm Profitability in the European Union Becomes Increasingly Volatile

Research from the Institute of Agriculture in Poland has found that dairy farm profitability in the European Union has become increasingly volatile following market deregulation. This instability complicates farm operations and undermines food security amid geopolitical tensions. A new simulation model developed by the Institute aims to address this issue by providing policymakers with a tool to adjust interventions and support milk producers effectively.

Key Takeaways:

• The research found that dairy farm profitability in the European Union has become increasingly volatile due to market deregulation, with prices and feed costs playing a significant role in profitability.
• The simulation model developed by the Institute of Agriculture defines a profitability coefficient as the ratio of sector-level milk revenues to feed costs and decomposes it into three dynamic components: production efficiency, price spread between milk and feed, and the net effect of policy interventions on revenues and costs.
• The model provides policymakers with a tool to adjust interventions so that support instruments are effective but do not lead to excessive reliance on public assistance.
• Simulation results for 2023-2027 indicate that profitability trajectories hinge primarily on price spreads, with policy measures playing a stabilizing but secondary role.
• Optimistic scenarios yield significant increases in profitability, whereas pessimistic assumptions lead to significant declines, highlighting the need to balance key market drivers.

Statistics:

• Dairy farm profitability in the European Union has become increasingly volatile following market deregulation.
• The simulation model developed by the Institute of Agriculture projects sector-level milk revenues to feed costs under baseline, optimistic, and pessimistic scenarios.
• The model estimates a profitability coefficient as the ratio of sector-level milk revenues to feed costs.
• The net effect of policy interventions on revenues and costs is decomposed into three dynamic components: production efficiency, price spread between milk and feed, and the net effect of policy interventions.

Sources:

• "Modeling the Profitability of Milk Production-A Simulation Approach.", Agriculture, 2025,15(13):1409. http://www.mdpi.com/journal/agriculture
• Institute of Agriculture and Food Economics, Warsaw, Poland
• Polish Ministry of Agriculture And Rural Development
• MDPI AG
• https://doi-org.sdpl.idm.oclc.org/10.3390/agriculture15131409