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Sustainable holdings - Dairy farming

Sustainable business operations linked to better economic results
09/05/2019

The 25% most sustainable dairy farms have been found to achieve better economic results than the remaining 75%. As well as having higher incomes per unpaid annual work unit, the most sustainable farms have lower production costs and a lower critical milk price. However, the labour input per 100 kg of milk is a little higher. These are the findings of a data analysis (averaged out over 2015-2017) of specialised dairy farms drawn from Wageningen Economic Research’s Farm Accountancy Data Network.

Most sustainable farms based on ecological sustainability and animal health 
The analysis ranked all specialised dairy farms with a total sustainability score based on a selection of sustainability parameters, available in the Farm Accountancy Data Network. Organic dairy farms were excluded. The dairy farms were classified according to their results against a number of indicators related to the themes of animal health and wellbeing, climate and energy, environment, and biodiversity and grazing. The total sustainability score was calculated by allocating a score of 0–100 for each parameter. These scores were then added up to produce a total score using a weighting system. The weighting factors were selected to ensure that all four of the themes were equally taken into account (25% each).

The set of parameters chosen are established ones used to assess the sustainability of dairy farms. They focus on ecological sustainability (planet indicators) and animal health. This set of parameters overlaps to a large extent (but not entirely) with the sustainability goals of the Sustainable Dairy Chain. Economics (profit) and labour (people) were deliberately excluded in this selection in order to find out whether improved results in terms of ecological sustainability and animal health leads to better or worse economic results. In the analysis, the 25% of the farms with the highest total sustainability score in terms of ecology and animal health were compared to the remaining 75% of farms.


Sustainable business operations are good for the bottom line
The analysis showed that compared to all the other businesses, the top 25% most sustainable ones have lower production costs, a significantly lower critical milk price, lower feed costs and a higher income per unpaid annual work unit. The most sustainable farms do produce slightly less milk per productive hour, but the difference is insignificant. The long-term liabilities per kg of milk are significantly lower for the most sustainable farms (see table below).

There are small differences in the structure and intensity of both groups of dairy farms. For example, the 25% most sustainable farms have nine fewer dairy cows and in terms of surface area they are three hectares larger and therefore 13% more extensive. The latter parameter varies significantly.

Better results under all sustainability themes
On average, the 25% most sustainable farms perform better in all of the selected sustainability themes (climate, animal health, environment, biodiversity and grazing) than the other farms. On the one hand, this is logical as the businesses were selected based on their total score for these indicators. On the other hand, it’s notable that these businesses manage to perform well across multiple themes at once. In this way, they show that good results under the climate theme can go hand-in-hand with good results under animal health or grazing. The 25% most sustainable farms also scored better on all the underlying indicators, and in at least half of them the differences are actually significant.

Follow-up research needed
The results of this initial analysis show that making business operations more sustainable can also bring economic rewards. Empirical data, such as that collected in the Farm Accountancy Data Network, can help reveal the underlying mechanisms at work. It would be easy to assume that the most sustainable dairy farmers are better at managing their businesses. In order to thoroughly test for the extent to which this is true, it would be useful to repeat the analysis with different selections and parameter weightings. Further analysis could also look at the relationship between individual sustainability parameters, economic results and technical parameters in order to identify the relevant underlying practices. Including social aspects such as attitudes to sustainability and innovation, learning styles and forms of knowledge exchange, could provide a better understanding of why the most sustainable farms deliver above-average results.

Comparison of financial performance and farm setup between the 25% most sustainable dairy farms and the remaining 75% of the dairy farms, 2014-2016
IndicatorUnitTop 25%Remaining 75%sig. a)
Financial performance
Incomeeuro per unpaid awu32,40020,500
Labour inputkg milk/hour207223
Cost priceeuro/100 kg38.939.76
Critical milk priceeuro/100 kg30.2732.01*
Milk priceeuro/100 kg35.4935.3
Costs purchased feedeuro per cow895971*
Veterinarian costseuro per cow8997
Solvency%7167
Long term debtseuro/kg milk11.15*
Farm setup
Dairy cowsnumber96105*
Utilised agricultural areaha5754
Share of grassland%8882**
Milk production per farmkg824,400893,100
Milk production per cowkg/cow8,6208,510
Milk production per hakg/ha14,80017,000*
a)  *= p<0.05, **= P<0.01
Source: Farm Accountancy Data Network.

Comparison of sustainability performance between the 25% most sustainable dairy farms and the remaining 75% of the dairy farms, 2015-2017
IndicatorUnitTop 25%Remaining 75%sig. a)
Animal health and welfare
Somatic cell count1,000 cells per millilitre170184*
Replacement rate dairy cows%2526.3
Use of antibioticsAverage daily dose per animal year1.51.6
Climate and energy
Energy useMJ per 100 kg milk5160
Greenhouse gas emissions (cradle-to-farm-gate)Kg CO2-eq per kg milk1.111.15*
Environment
Farm surpluskg N per ha97153**
Environmental load use of pesticidesPoints soil3969
Environmental load use of pesticidesPoints groundwater6889
Environmental load use of pesticidesPoints surface water80207
Phosphate excretionkg P2O5 per 1,000 kg of milk2.13.3**
Ammonia emissionkg N3 per 1,000 kg of milk2.84**
Biodiversity and grazing
Number of forms of nature managementFrequency (1 till max. 4)1.90.8**
Grazing (6 hours or more)Days per year164108**
a)  *= p<0.05, **= P<0.01
Source: Farm Accountancy Data Network.



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