Objectives: The purpose of this study is to calculate the costs of production of Italian specialised dairy farms, located across flatland, mountainous, and hilly terrains. This analysis will factor in the scale of the dairy cattle herd (comprising less than 50, 50 to 150, or over 150 head) to comprehensively evaluate its influence on economic profitability.
Methods: The analysis relies on a simplified yet empirical model, applied to FADN data, which encompasses the various components inherent in the production costs specific to milk-specialized farms (Types of Farming 45 and 47), whit production over 50 t. The method (full costing) comprises three tiers of costs: the first level (direct costs); the second level (first level plus overhead costs); and the third level (second level plus opportunity costs). Overhead costs and opportunity costs are allocated to the milk product through an economic coefficients.
Results: In the examined sample, comprising over 2,300 observations spanning the years 2019-2021, the cost per liter of milk stands at 27 cents for the first level, 41 cents for the second level, and ultimately, 49 cents for the third level (total cost). Notably, more than 57% of the farms find their milk selling price insufficient to cover the production cost. However, leveraging other productive activities within the farm and accessing public subsidies mitigates this, resulting in a reduced percentage of farms, merely 6%, facing production costs surpassing the unit value of milk. It's worth highlighting that in mountain and hill farms, the total cost per liter of milk surpasses 60 cents.
Conclusions: A comparison between the total production cost and the average milk price, analyzed across individual farm groups, reveals a worrying scenario: in two-thirds of the farms, the per-unit cost exceeds the price received for milk, a disparity particularly pronounced in mountain and hill farms. In these areas, only about one in ten farms manages to maintain total costs below the milk price level. Despite the challenges posed by the drop in milk prices during 2020 and the subsequent rise in factor prices towards the end of 2021, the financial performance of farms specializing in cow's milk production remains, on average, positive from a balance sheet standpoint. Economic sustainability, while modest for many surveyed farms, is bolstered by additional revenue streams and public support. Notably, public support plays a decisive role for mountain farms, con...