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This is a huge contrast to 2014, when dairy farmers in Denmark made an average profit of €103,000.
This is according to the first accounts of three agricultural consulting companies in Denmark – LMO, LandboSyd and LandboNord – which were released in February.
So far, 100 dairy farmers with an average of 215 cows have shown an average loss of €23,250 (175,000kr). According to senior development consultant at LMO Torben Wiborg, this trend is only set to continue.
The milk price needed for the average dairy farm to make a profit is 36c/kg (2.70kr). The price is forecast for about 31c/kg (2.30kr) for 2016
Speaking to the Irish Farmers Journal, Wiborg said there was a huge crisis among dairy farmers in Denmark.
“The milk price needed for the average dairy farm to make a profit is 36c/kg (2.70kr). The price is forecast for about 31c/kg (2.30kr) for 2016.
“There’s quite a big margin between those prices. The farmer is not being paid this year. It’s a huge loss,” he said.
According to Wiborg, dairy in Denmark gained a lot of momentum from the abolishment of quotas, with milk yields increasing by almost 400kg/cow/year.
2014 prices were “really good”, he said, and so for that reason farmers tried to expand production. Altogether, milk production in Denmark increased by 10% to 15% in 2015.
Cost of milk production
The average cost of milk production was 33.2c/kg in 2015, down 3.4c from 2014, while the best 25% of farms managed to cut costs to 29.2c last year.
Despite these efforts, banks in Denmark are closing down farms “on a daily basis”.
Some will come back into production and some won’t. So will this have much effect on supply and demand?
“I don’t think so. The farmers who are left are producing as much milk as possible now on lesser margins. They’re doing everything to try to optimise their business.
“They are producing higher yields with fewer cows. It just goes to show that it’s possible to do so without increasing costs.
“Despite these efforts, the falling milk prices are making it extremely challenging,” Wiborg told the Irish Farmers Journal.
At the mercy of the banks
Wiborg said that the only way these farmers are surviving is “at the mercy of the banks”, which can either supply the farmer with money or tell him or her to sell the farm.
“Banks are facing tough choices too at the moment.
“Too many farms are now for sale in Denmark. The market is very heavy, so to force a farmer to sell might not be the best thing for them either, economically.
“The level of vulnerability in the dairy sector is very high at the moment. We can only hope that milk prices increase in the summer, but nobody knows,” he said.
LMO is Denmark’s largest consulting company in the agricultural sector.
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