Economic Aspects of Milk Production in Organic and Conventional Specialised Dairy Farms in Poland

• Main Author: Marcin Żekało
• Format: Article
• Language: English
• Published: Athens Institute for Education and Research 2015-01-01
• Series: Athens Journal of Business & Economics
• Online Access: http://www.atiner.gr/journals/business/2015-1-1-5-Zekalo.pdf

In the dairy sector in Poland, the processes of concentration lower the unit costs of production and increase profitability and competitiveness of milk production. A large part of market-oriented dairy farms still maintain a small herd of dairy cattle, which often leads farmers to more extensive milk production. This may result in lower milk yield, leads to the reduction of the direct costs of production. In such case, it may be justified to participate in the system of organic farming, and there is still the possibility to obtain additional financial support. The purpose of this article is to present the economic situation of organic milk production and its profitability. It is also an attempt to refer to results obtained in conventional dairy farms. Accounting data for ‘dairy cows’ activity were processed according to the rules of the Agricultural Products Data Collection System (AGROKOSZTY). The surveyed farms (organic and conventional ones) were selected from a representative sample of Polish FADN. Under the AGROKOSZTY system, the methodology used for calculating the gross margin was consistent with EU rules. Calculating the gross margin gives a full insight into actual direct costs and helps to compare the competitiveness of milk production in organic farms. The income from ‘dairy cows’ activity account is based on the Polish FADN information collected from the same farm. The income from milk production in the surveyed organic farms largely depended on lower total costs, but was also supported by higher subsidies than in conventional farms. The results indicate that the total costs of production were 42.3% lower than in conventional farms. However, the profitability of milk production in organic farms was lower due to the value of production being 39.8% lower.