EMB bemoans high milk production cost in Luxembourg

By Jim Cornall contact

- Last updated on GMT

According to the EMB, 35% of production costs in Luxembourg aren't being met by current prices. Pic: ©iStock/Jürgen François/pavlinec
According to the EMB, 35% of production costs in Luxembourg aren't being met by current prices. Pic: ©iStock/Jürgen François/pavlinec
The European Milk Board (EMB) says that 35% of milk production costs in Luxembourg are not covered, after the country was added to those nations analyzed by the Büro für Agrarsoziologie (BAL).

BAL has calculated a production cost of 44 cents (48 cents US) for 2015 for the Benelux country, however, the average milk price was only 28.73 cents (31.28 cents US) during the same timeframe.

The summary of the study states: "In just six years, the production cost for one kilogramme of milk has increased by almost six cents. On an average, up to 35% of production costs were not covered in 2015."

For Luxembourg's milk producer organisation LDB, who commissioned BAL to conduct the cost study, the country's inclusion in the cost analysis is an important step.

Precarious situation

The EMB says the study provides a realistic representation of the local situation of milk producers, backed by facts, and that the review clearly illustrates the precarious reality of the dairy sector in Luxembourg as well as the real need for a change in political direction.

The study shows that over the past six years, using a price-cost ratio, for four years overall, prices were at least 28% lower than production costs.

The study provides the following reasons for this situation: "On one hand, you had the after effects of the milk price crisis that began in 2008 and led to only a moderate increase in farm-gate prices by 2010.

“In 2012, there was another milk crisis because the very modest farm-gate prices were coupled with exponential rises in production costs due to increased equipment costs."

Dependent on EU policy

The EMB says that milk production can only be considered an economic driver if production costs are covered.

“A sufficiently high milk price can only be maintained if there is a balance between market demand and supply,”​ the EMB said.

“As one of the Member States, Luxembourg is also dependent on the EU's dairy policy. If the EU is unable to successfully hem overproduction very soon, milk producers in Luxembourg will have a very slim chance of survival.

“They will have to give up - like so many of their colleagues in the rest of Europe.”

Related topics: Markets, Pricing Pressures, Fresh Milk

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