Kassel-based livestock scientist: align competition between dairy farms with quality criteria

If politicians were to agree "that milk from cows that can be proven to have come from a diseased udder must be taken off the market, the current supply volume could be abruptly reduced," says Prof. Dr. Albert Sundrum, who holds a professorship in animal nutrition and animal health at the Department of Organic Agricultural Sciences at the University of Kassel. He thus contradicts a statement by agricultural economists at other universities who had recently advocated a market adjustment based solely on production costs.

The following is Prof. Sundrum's statement:

Not only German milk producers, but all those who supply the global milk market are currently in a very bad way. Milk prices have been at a low for months. As a result, a great many farms at home and abroad are facing ruin. Eight professors of agricultural economics from three German universities have recently taken a stand in a press release and rejected any regulation and quantity limitation. With vague slogans of perseverance they trust in the forces of the market and rely on the fact that primarily those enterprises will survive, which can produce most economically.

Farm closures due to market prices not covering costs are just as inevitable in agriculture as in other sectors. However, there is much to suggest that milk prices will not rise significantly in the long term either. Worldwide, production capacities have been expanded to such an extent that any price increase is likely to level off again quickly as soon as the increase in production in response to this is higher than the increase in demand. Consequently, holdout slogans are neither justified nor helpful. They prevent a fundamental analysis of the background and the urgently needed changes in the economic framework conditions that brought about this development in the first place.

Advocates of market-based adjustment ignore the fact that the market has not prevented many companies from remaining in production in the past, either for reasons of path dependency or because there is no alternative, even if they cannot do so as cost-effectively as their competitors. Above all, however, market believers ignore the fact that competition is being waged to an unacceptable extent at the expense of undesirable internal and external effects (animal, environmental and consumer protection). If farms have to give up, then it should be primarily those that practice their production at the expense of goods of the common good. Dairy farming already contributes significantly to environmental pollution. Already, more than one in two cows becomes ill more than once a year. We are already drinking milk from animals that have a high proportion of subclinical udder disease. Prices that do not cover costs and the forced structural change will further aggravate this trend. Even if structural change cannot be stopped overnight, it can be shaped. However, many agricultural economists must be denied the will to shape it. On the other hand, they must face the question of what sense it should make if farms that produce milk with poor product and process qualities can continue to produce while others that produce high-quality milk have to drop out. Promoting milk production under conditions that place undue stress on both farm animals and the environment cannot be a sensible or purposeful strategy.

Farms are not only businesses, but also living systems that depend on the functioning of living subsystems (including farm animals). They are also embedded in an overarching system in which they feed not only food, but also large quantities of waste and pollutants and organisms that can pollute the environment and climate and endanger consumer health. In other words, farms follow not only economic but also, and above all, biological laws.

From an economic point of view, milk (just like meat) is an arbitrarily interchangeable raw material, detached from the context in which it was produced. Biologically, milk is the product of very complex processes inside and outside the dairy cow. In terms of the internal and external effects of milk production, there are very large differences between farms. Not all milk is the same, neither in terms of original composition nor in terms of differences in udder and animal health. And there are also large differences in the amounts of pollutants released by farms.

Due to the status as raw material, the enormous differences in the production process are largely ignored. The same price is paid for a raw product that differs significantly in terms of public welfare concerns (animal, environmental and consumer protection). This is not only contrary to fair value for money. Faced with prices that do not cover costs, farms cannot afford to pay extra for animal, environmental and consumer protection. Worse still, there is a blatant distortion of competition and a systemic aberration when primary producers gain a competitive advantage at the expense of public goods. The current situation is therefore not only about the deplorable situation of dairy farms and dairy cows. Nor is it just about injustice; it is about market failure with respect to qualitative goods oriented toward the common good.

Yet the problem can be addressed comparatively simply. The public welfare-oriented performance of a farm for animal, environmental and consumer protection is a performance of the farm as a whole and can only be meaningfully assessed at this level. Consequently, farms should be classified in terms of these services. Both direct payments and market prices could be based on such a qualitative categorization. The example of organic livestock farming shows that regulation can be combined with market success. Here, high prices are currently achieved because the demand for organic dairy products is higher than the supply. However, this only succeeds because supply cannot be expanded at will.

One could immediately begin to classify dairy farms according to the percentage of animals in which inflammatory processes in the udder can be detected on the basis of milk cell counts. For many years now, the milk cell counts of more than 90% of all dairy cows in Germany have been recorded monthly, which could be used for qualitative differentiation. The only thing missing is the classification into categories, which cannot be left to the market, but would have to be normatively defined by politics, so that a procedure is established that is the same for all farms. It would still be left to the market to negotiate different prices for different qualitative services. If the majority of politicians were to agree that milk from cows with more than 400,000 cells/ml of milk in the daily milking, and which thus demonstrably comes from a diseased udder, should be taken off the market, the current supply volume could be abruptly reduced. With this limit, it is estimated that the milk of up to 10% of dairy cows would have to be withdrawn from the market. Instead of continuing to promote ruinous competition for the lowest production costs, it is time to introduce competition for the better product and process qualities. The quality initiatives that have been launched by policymakers so far (e.g. the "Animal Welfare Initiative") have come to nothing, among other things, because they explicitly exclude competition between farms for higher-quality services.

An agricultural policy that does not intervene in a regulatory way when goods of the common good are eroded, but hopes that conflicts of interest can be resolved at round tables or via dialogue platforms, misses its original purpose. It is high time that regulatory measures brought economic and biological laws into better harmony than they have been up to now. If not in a crisis situation, when else should the urgently needed debates be held and reforms tackled? A 'business as usual' as proposed by the eight German agricultural economists is not a solution. A debate on the future path of milk production in Germany is long overdue; however, it should not be left to agricultural economists alone.

A photo of Prof. Dr. Albert Sundrum is available to editorial offices on request from the press office of the University of Kassel: presse[at]uni-kassel[dot]de

Author/Contact:
Prof. Dr. Albert Sundrum
University of Kassel
Department of Animal Nutrition and Animal Health
Tel.: +49 5542 98-1710
Email: sekr.tiereg[at]uni-kassel[dot]de

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