STRUCTURAL CHANGE IN THE EU DAIRY SECTOR

Transcription

1 STRUCTURAL CHANGE IN THE EU DAIRY SECTOR Jack Peerlings*, Nico Polman+, and Noorje Krol* *: Agriculural Economics and Rural Policy Analysis, Wageningen Universiy, he Neherlands +:LEI, Wageningen Universiy and Research Cenre, he Neherlands Conac: Jack Peerlings Agriculural Economics and Rural Policy Group Wageningen Universiy Hollandseweg KN Wageningen Tel.: E: jack.peerlings@wur.nl Paper prepared for presenaion a he 114 h EAAE Seminar Srucural Change in Agriculure, Berlin, Germany, April 15-16, 2010 Copyrigh 2010 by auhor(s). All righs reserved. Readers may make verbaim copies of his documen for non-commercial purposes by any means, provided ha his copyrigh noice appears on all such copies.

2 Srucural change in he EU dairy secor Jack Peerlings*, Nico Polman+, and Noorje Krol* 1 *: Agriculural Economics and Rural Policy Analysis, Wageningen Universiy, he Neherlands +:LEI, Wageningen Universiy and Research Cenre, he Neherlands Absrac The aim of his paper o deermine how srucure and governance in he dairy secor in four differen regions in he European Union aler as a resul of he change in EU s dairy policy. For his purpose wo models of srucural change are developed and inerviews are held. Resuls differ beween he regions depending on wheher or no hey are expor oriened, heir growh in farm size and farm exi raes. Keywords Srucural change, dairy policy, governance 1. Inroducion Fresh milk is a highly perishable produc and is herefore, because of high ranspor cos, processed in he region of producion. Processed producs can be divided ino wo groups. Firs, producs ha are produced and consumed locally. This is because of relaively high ranspor cos of fresh producs (e.g. drinking milk) and local ases. Second, processed producs as buer and skimmed milk powder and cerain ypes of cheeses ha are inernaionally raded because of relaively low ranspor cos. Looking a demand and supply, we can also observe wo ypes of producion regions. Firs, regions where supply is focussed on meeing local demand. Second, regions ha produce a surplus of processed producs ha is ranspored over longer disances or expored. These differences can creae a price wedge for milk beween regions (e.g. Parliamen of Ausralia, 2010). Trading cos including ranspor cos lead in a region ha is no exporing o a higher milk price han in a region ha is exporing. This price difference can be offse by differences in regional producion and processing cos. Wih he yearly increase in milk quoas and he abolishmen of he milk quoas in he European Union (EU) in 2015, he dairy secor (boh dairy farming and milk processing indusry) is approaching a new more liberalised marke siuaion. I is expeced ha milk prices will flucuae more and he average milk price level will be lower han in he las decade (Bouamra-Mechemache e al., 2008). Because of he lower price and he increased opporuniies for farmers o expand producion, a resrucuring of he EU s dairy secor is likely. The number of dairy farms will decrease relaively fas and farms will increase in size o exploi scale economies (Jongeneel and Tonini, 2007). However, regional differences can be expeced. In 1 The work in his paper is funded by he EU FP7 projec Assessing he muliple Impacs of he Common Agriculural Policies (CAP) on Rural Economies (CAP-IRE). 1

3 exporing regions an increase in milk producion migh ake place. In less producive regions milk producion migh decrease and in some more isolaed regions where producion ends o fall below local demand i is likely ha milk processors or supermarkes will give exra suppor o dairy farms o guaranee supply of fresh processed producs or preven a complee producion sop. The laer can be for insance seen in a liberalised marke as he Ausralian (e.g. Parliamen of Ausralia, 2010) bu also in Easern Europe where milk processors provide echnical services o dairy farms o secure supply and improve milk qualiy (Dries, e al., 2009). This also shows ha he governance srucure beween farmers and processors is influenced by he demand and supply siuaion in a region (van Bekkum and Nilsen, 2002; Tacken, e al., 2009). So srucure and governance in he dairy secor are expeced o aler as a resul of changes in EU s dairy policy where srucure is defined as he number and size of dairy farms. Unil now he causes of regional heerogeneiy in srucural developmen have been largely ignored. The aim of his paper o deermine how he srucure and governance in he dairy secor in four differen regions in he European Union: Norh-Holland (he Neherlands), Cenre (France), Bulgaria and Scoland aler as a resul of he change in EU s dairy policy. To answer he research quesion we develop and apply a model of srucural change and make use of inerviews wih sakeholders o see wheher or no hey confirm he model resuls. Taken ino accoun regional differences will increase insigh in he facors ha shape he fuure srucure of he dairy secor in he EU. In secion 2 we provide a descripion of he sudy regions. Secion 3 presens he model. Secion 4 discusses he followed mehodology wih respec o he inerviews. Secion 5 presens he model resuls and he inerviews. Secion 6 provides some conclusions and discussion. 2. Descripion regions To ge insigh in regional differences wihin he EU, a lieraure research is conduced on he srucure of he dairy secor in four case sudy regions aken up by he CAP- IRE projec, namely: namely: he Neherlands (more specific he province Norh- Holland, Norh Eas Scoland (UK), Souh Eas Planning Region (Bulgaria) and Cenre (France). Table 1 provides some informaion of he case sudy regions. Table 2 gives an overview of he producion and expor of dairy producs per counry. The counries were seleced because of characerisics of he dairy secor. In he Neherlands, he dairy farms are capial inensive, land inensive, and relaively large (FADN, 2009). The Neherlands is expor oriened. Cheese is he main produc. There is a limied number of processors. More han 90% of all milk is processed by cooperaives (PZ, 2009). Dairy farmers are clearly consrained by he milk quoas. I is expeced ha for he Neherlands farmers will expand heir milk producion afer quoa aboliion. French farms mainly are diversified and exensive. The French dairy secor had a relaively low resrucuring rae (Perro e al., 2009). The milk processing indusry is characerized by he producion of diversified producs by many processors. 2

4 Approximaely 45% of all milk is colleced by cooperaives while 34% is processed by cooperaives (Orlai, 2005). Jus as in he Neherlands French farmers in Cenre are consrained by he milk quoas. Bulgaria has more han 150,000 small farmers wih in general 1-2 dairy cows (MAF, 2007). Only 20% of he produced milk is delivered o processors. This milk mainly is produced by larger farms. The remaining 80% is produced for self consumpion or for he local marke. There are many small scale local processors presen and a few inernaional large scale processors (Dries e al., 2008). There are no Bulgarian cooperaives processing milk. Milk quoas do no form a resricion. Producion is much more resriced by he low milk qualiy. In 2007, Norh Eas Scoland as NUTS 3 region build up from he NUTS 2 regions Aberdeen, Aberdeenshire and Norh Eas Murrey only had 70 farms specialised in dairy producion (Scoish governmen, 2008). In Scoland in oal here were 1,429 dairy farms. The number of dairy farms and dairy cows has declined rapidly in he las years. This is probably he resul of he inroducion of new alernaives o dairy farming such as he producion of biofuel crops and he low profiabiliy of he secor (Scoish governmen, 2008). The number of dairy farms in he whole of Scoland decreased by 8.9% in he period while during ha period, he number of dairy farms in he Norh Eas Scoland decreased by 17.6% (Scoish Governmen, 2007). Producion is processed and consumed locally. In Scoland milk quoas are no filled. [Table 1 here] Table 2 shows producion and expors of processed producs (no per region). For Scoland we do no have reliable daa. In some cases expors are higher han producion which can be explained by a reducion in socks and re-expors. Daa show ha he Neherlands is very expor oriened bu also France and Bulgaria are exporers. [Table 2 here] 3. Theoreical model From he previous secion i follows ha he regions differ wih respec o he srucure of dairy farming and marke siuaion. In his secion we develop a model o analyse he srucure in he dairy secor in hese regions. Srucure is defined as he number and size of farms. Srucure is by definiion changing if he number of farms changes hrough exi and farms growing in size. Srucure is assumed o be deermined by: Personal characerisics of he farmers. In his group of explanaory variables we have age, educaion and presence of a successor. Wih more alernaive opporuniies o dairy farming farmers are expeced o sop earlier jus as i is he case wih older and more educaed farmers and farmers wih a successor. Relaive profiabiliy of dairy farming. Facors ha deermine his relaive profiabiliy are milk price, prices of oher oupus and variable inpus and supply 3

5 Growh in farm size. In his group of explanaory variables we have produciviy growh bu also invesmen coss. An increase in produciviy implies ha wih he same producion facors more milk can be produced. This leads o an increase in milk producion. Marke size. Supply quoas and local consumer demand are expeced o influence srucure. Wih supply quoas an increase in producion per farm auomaically will lead o less farms. If producion becomes less han local consumer demand processors can simulae producion o avoid excess capaciy. Finally, new governmen policy could be aimed a mainaining producion a cerain level in a region, e.g. o secure join producion of dairy and wildlife and landscape. Below we presen wo simple models of srucural change. For simpliciy we assume ha farms are of he same size. Moreover, he models are recursive dynamic, so no opimisaion over ime akes place. Model I: Toal producion is variable The producion of a farm is given by equaion (1). We assume ha producion per farm grows per year wih a fixed growh rae r e.g. as a resul of produciviy growh. Moreover, we assume ha producion is deermined by relaive profiabiliy. Profi equals revenues minus variables coss. If profi of dairy farming increases relaive o he profi of is alernaives producion will increase. The model assumes ha a 1% change in relaive profiabiliy leads o a 1% change in producion per farm. We assume producion per farm o be equal for all farms. The number of farms in a year changes compared o he previous year wih a (negaive) growh rae (equaion 2). This growh rae reflecs he personal characerisics leading o an auonomous reducion in he number of farms. We assume a fixed yearly percenage reducion. Toal producion equals he producion per farm imes he number of farms (equaion 3). d d d y = y 1 (1 + r) o (1) N = N 1 (1 + i) (2) Y d = y N (3) Where d y : average farm producion wih exogenous profi in year d : profi in dairy farming in year o : profi of alernaive producion in year r : produciviy growh rae N : acual number of farms in year 4

6 Y : i : oal producion in year auonomic growh rae in number of farms. In his model producion and he number of farms do no influence each oher. Toal producion can grow or shrink wihou any resricion. If for example profiabiliy falls, producion falls (also in fuure years) bu he number of farms is no affeced. Model II: oal producion is fixed In comparison o model I we now assume ha oal producion is fixed, e.g. because of he size of he local consumer marke or because of supply quoas. In he model he fixed oal producion or marke size will influence boh producion per farm and he number of farms. Producion is given by equaion (4) or (5). Jus as in model I we assume ha producion per farm grows yearly wih a fixed percenage. Moreover, we assume ha producion is deermined by relaive profiabiliy. If profi of dairy farming increases relaive o he profi of alernaives producion will increase. The number of farms is by definiion equal o he oal producion or marke size divided by he producion per farm (equaions 8). If oal producion in a region is fixed he number of farms and producion per farm are variable. There are wo possibiliies. Firs, i could be ha he number of farms deermines producion. The number of farms is on an auonomic rend (equaion 10) and is deermined by he number of farms in he previous year imes he (negaive) growh rae. Producion in his case is given by equaion (5). Second, if relaive profi is exogenous producion is deermined by equaion (4). This producion deermines he opimal number of farms. The firs possibiliy is relevan if he number of farms as deermined by he auonomic rend is lower han he number of farms in opion 2 (equaion 9). This is because he number canno be larger han he auonomic rend (we assume here is no enry). In case he number of farms is deermined by he auonomic rend he producion is larger han if i is no. In he model his is possible if profi of dairy farming goes up. This exra profi could be he premium processors pay o farmers o simulae producion o fill heir producion capaciy. Given ha his exra profi is posiive i e also implies ha y y d so equaion (6) applies. d d y = y 1 (1 + r) (4) o e e y = y 1 (1 + r) (5) o d e y = max( y, y ) (6) N d e e = + (7) Y Y d = rend N d = e y y d rend min(, ) rend N 1 (1 i) N = N N (9) N = + (10) (8) 5

7 Where e y : average farm producion wih exogenous profi in year e : exogenous profi in dairy farming in year e : exra profi in dairy farming in year o : profi in alernaive producion in year Y : fixed oal producion in year rend N : number of farms according o rend in year. To illusrae he model suppose profiabiliy falls in dairy farming, e.g. because of he dairy policy reform. In ha case producion per farm goes down and he number of farms increases or falls less given he oal fixed producion. There are wo possibiliies. Firs, he number of farms is (sill) below he auonomic rend. Profi is sill exogenous and oal producion equals he markes size. Second, he number of farms is above he auonomic rend. This is however no possible and herefore he acual number of farms is se equal o he number given by he auonomic rend. To increase producion per farm, and herefore lower he number of farms, farmers need an incenive e. This could be an exra paymen made by milk processers o ensure milk supply. Governance Boh models do no describe he coordinaion mechanisms or governance in he dairy secor. Governmen policy can influence he relaive profiabiliy of dairy farming. Model I assumes ha producion can grow or shrink wihou any resricions. Moreover, i is implicily assumed ha he milk processors process he exra milk produced or process less milk if needed. Model II assumes ha relaive profiabiliy has o increase if producion ends o fall below he fixed oal producion level. There are wo possible cases. Firs, in case fixed producion is deermined by he size of he local consumer marke i will be milk processors or supermarkes ha pay a higher price or provide marke and echnical services o dairy farms ha also increase relaive profiabiliy of dairy farming. This is wha acually happens already in many markes, e.g. in Easern and Cenral Europe (Dries e al., 2009) and some regions in Ausralia (e.g. Parliamen of Ausralia, 2010). Second, in case fixed producion is a governmen arge he governmen has an incenive o ake acion. This could be hrough direcly or indirecly subsidising dairy farming in a region. Noice ha in case of a supply quoa and producion falling below he quoa level here is no marke mechanism available ha o preven his. In case supply ends o be higher han he quoa level here has o be an exra reducion in he number of farms. In pracice in counries wih radable milk quoas (e.g. he Neherlands) his akes place by selling quoa righs by less efficien producers o more efficien producers. 4. Inerviews Inerviews wih expers and sakeholders of he dairy secor in he case sudies were used o ge insigh in heir expecaions abou he srucure and governance in he dairy secor as a resul of he EU s dairy policy reform. 20 semi-srucured inerviews were held in France and he Neherlands. In Bulgaria, 1 semi srucured inerview and 6

8 14 surveys wih open quesions were hold. The explanaion on he survey quesions ook place during a shor presenaion given o he respondens. Table 3 gives an overview of he inerviewed persons, in his paper furher referred as respondens. The inerviews were analysed by coding he findings from he inerviews sysemaically ino he core caegories ha ogeher hold a coheren framework using he grounded heory as described in Neergaard and Ulhøi (2007). In he firs phase, open coding, caegories were named and heir properies and dimensions deermined. In he second phase, axial coding, caegories were linked a he level of dimensions and properies. In he hird phase, selecive coding, he core caegories were refined o inegrae hem ino a coheren framework. No disinc differences were found in percepion of specific inerviewed subgroups on he core caegories. [Table 3 here] 5. Resuls 5.1 Model Before he models can be used he growh raes of farm producion and farm exi have o be deermined. Moreover, he producion per farm, he number of farms in a region and oal producion in a region have o be known. We use he daa for 2003 and 2007 given in Table 1 and choose he growh raes of farm producion and farm exi such ha he model exacly reproduces he acual change in producion per farm, oal producion and farm numbers from 2003 o We have here o make he assumpion ha relaive profiabiliy of dairy farming does no change in his period. Nex we use 2007 as he base year and simulae he model over a 10 year period assuming ha he values of he growh rae of farm producion and farm exi remain consan and are equal o heir average values in he period Because in he EU s dairy policy reform supply quoas are gradually increased jus as inervenion prices and expor subsidies will be decreased we assume ha as from 2008 on relaive profiabiliy of dairy farming drops by 10% in all four regions (Bouamra- Mechemache e al., 2008). So we have wo scenarios: Base scenario: relaive profiabiliy of dairy farming does no change. Scenario I: relaive profiabiliy of dairy farming decreases by 10% in In he Neherlands model I is relevan because we expec oal producion o increase as a resul of quoa aboliion. In France i is o be expeced ha he governmen wans o mainain regional milk producion a he presen quoa level in regions less suiable for milk producion. Cenre is such a region. This makes ha model II is relevan for France. In Bulgaria quoas are no binding so quoa aboliion is no expeced o lead a consrain on oal producion, so model I seems relevan. In Scoland we expec ha a furher reducion in profiabiliy would lead o a decrease in producion. However, we assume ha his will no happen because milk processors and reailers wan o mainain milk producion a he presen level. This makes model II relevan. Table 4 summarises he model inpus and also shows he effec on he number of farms and producion in case of boh scenarios. As menioned before we perform he simulaions for a en year period saring in

9 [Table 4 here] 8

10 The resuls for he Neherlands (model I) show ha wih a 10% drop in relaive profiabiliy compared o he base scenario he producion per farm and oal producion sill increase bu less. Compared o he base scenario he producion per farm and oal producion are 10% lower. This is because in model I a 1% reducion in relaive profiabiliy leads o a 1% reducion in producion per farm. The number of farms is in boh scenarios he same because i is, as menioned in he model descripion, independen of relaive profiabiliy. For France (model II) we see only a small difference beween boh scenarios. Toal producion is for boh scenarios consan and he oal number of farms is largely deermined by he auonomic rend. Acually he reducion in farm numbers is a bi less in scenario I because o compensae for he fall in producion per farm more farms have o be acive. Resuls no presened here show ha wihou he condiion ha oal producion should remain consan oal producion would increase 0.29% in he base scenario and decrease by 9.74% in scenario I. Producion per farm would go up by 90.13% in he base scenario and 71.11% in scenario I. The number of farms would go down wih 47.25% in boh scenarios. This shows ha o keep oal producion a he fixed level relaive profiabiliy of dairy farming has o be increased in scenario I o preven a reducion in oal producion. This increase is 11.08%. This has o come from milk processors or governmen. For Bulgaria (model I) we see a large decrease in he number of farms and a srong increase in producion per farm. As a resul oal producion falls wih 5.03% in he base scenario and wih 14.53% in scenario I. Jus as in he Neherlands he reducion in he number of farms is independen from he scenario. Toal producion and producion per farm are in scenario I 10% lower han in he base scenario. Given his oucome i is likely ha he processors in Bulgaria will ry o preven he reducion in producion. So insead of model I model II is relevan. If his is he case he number of farms falls wih he same percenage (75.58%) as in model I and he producion per farm increases more (309.55%). These changes are he same in boh scenarios wih model II. To make i possible ha oal producion remains consan relaive profiabiliy has o be increased. For he base scenario his is 5.30% and for scenario I 17.0%. This suppor has o come form milk processors direcly via higher prices or indirecly hrough echnical suppor as is already now he case. For Scoland (model II) we see ha he differences beween boh scenarios are small. The number of farms is largely deermined by he auonomic growh in farm numbers, and given he fixed oal producion his resuls in he producion per farm. In he alernaive scenario he number of farms falls a bi less, his is because of he larger reducion in producion per farm in ha scenario. Resuls no presened here show ha if oal producion would no be fixed (model I) i would grow wih 10.71% in he base scenario and would decrease wih 0.36% in scenario I. Farm numbers would go down wih 31.33% in boh scenarios as hey are in model I no dependen on he relaive profiabiliy. This resul shows ha only in scenario I some exra suppor is needed o fix oal producion a he iniial level. From his i follows ha probably model I is more relevan for Scoland han model II. 9

11 5.2 Inerviews In he Neherlands respondens srongly indicae ha he cooperaives feel he obligaion o collec all milk supplied by heir members. Many Duch dairy farmers currenly feel limied by he producion consrains from he quoa. They are expeced o increase scale, unil oher facors affecing heir producion will become limiing. They indicae his would be environmenal and labour consrains. The dairy cooperaives in he Neherlands (>90% of all milk is supplied o cooperaives) are expeced o process he milk and expor largely he processed producs. Many French sakeholders consider he poenial concenraion of milk producion in cerain pars of France and he disappearance in oher pars as an undesirable developmen and hey indicae he governmen shares his opinion. To preven milk processors from erminaing milk collecion in less efficien regions as Cenre, here currenly are ideas o impose naional guidelines for milk supply conracs and o inroduce a collecive ha manages he milk supply in France on a naional level. Long erm conracs are already frequenly used in Bulgaria. The Bulgarian respondens indicae o expec ha producion sandards for physical milk qualiy will increase. From some of he Bulgarian respondens and from he lieraure (see e.g. Dries e al., 2008: 23) follows, ha many Bulgarian milk processors experience shorage of high qualiy milk. Processors in Bulgaria focus on assuring he qualiy sandards of he EU and are expeced o ry o decrease he coss accompanied wih his. From he lieraure follows ha some milk processors have se up heir own dairy farms (see Dries e al., 2008). Also from he inerviews follows ha some sakeholders expec a furher chain inegraion, drop in farm numbers and an increase in producion per farm. In Scoland i is expeced ha conracs beween reailers and farmers, guaraneeing a minimum price for all he supplied milk based on he producion cos of he farmer, will become sandard. The moivaion for he Scoish reail lies in he benefis of a secured supply of high qualiy fresh milk as Scoland is a ne imporer of dairy producs and he Scoish milk producion is expeced o decline furher. Table 5 summarises he resuls. [Table 5 here] 6. Discussion and conclusions The CAP reform implies for some counries and regions no a large change as milk quoas have no been binding in he pas. The only remaining effec is ha prices become more volaile. For hese counries and regions he rend in he srucural change coninues. This could imply ha producion falls below a hreshold a which milk processors or reailers ake acion o mainain oal milk producion a a cerain level (e.g. Bulgaria). For oher counries and regions here is a large effec as milk quoas are binding and quoa aboliion implies a shock. This is especially rue if naional governmens or milk processors no underake acion as i is he case in he Neherlands. The change will be smaller if naional governmens ry o regulae 10

12 producion as in France. For Scoland resuls are mixed. The model suggess ha no much exra suppor is needed o mainain oal producion a he same level while he inerviews sugges differen. The model developed is raher simple bu i does illusrae well he effecs o be expeced. Key variables in he model are growh in farm size, auonomous decrease in he number of farms (exi) and marke size. The model could be exended in many direcions, e.g. disinguishing beween differen groups of farms, making farm growh and exi endogenous, aking ino accoun price volailiy and esimaion of he effec of relaive profiabiliy on producion. Despie his he model gives insigh in he fuure developmen of he srucure in he dairy secor in he EU. 11

13 References Bouamra-Mechemache, Z. Réquillar, V. and Jongeneel, R. (2008). Impac of a gradual increase in milk quoas on he EU dairy secor. European Review of Agriculural Economics 35(4), pp Bekkum, v. O.F. and Nilsen, J. (2002). Liberalizaion of Inernaional Dairy Markes and he Srucural Reform of European Dairy Cooperaives. Neherlands Insiue for Cooperaive Enrepreneurship (NICE) Universiei Nyenrode. Dries, L., Germenji, E., Noev, N. and Swinnen, J.F.M. (2009). Farmers, verical coordinaion, and he resrucuring of dairy supply chains in Cenral and Easern Europe. World Developmen 37(11): Jongeneel, R. and Tonini, A. (2007). Dairy Quoa and Farm Srucural Change: A Case Sudy on he Neherlands, Presened a he EAAE Seminar "Modelling of Agriculural and Rural Developmen Policies". Sevilla. Neergaard, H. and Ulhøi, J.P. (eds.) (2007). Handbook of qualiaive research mehods in enrepreneurship. Edward Elgar Publishing, Chelenham. Parliamen of Ausralia (2010). Ausralian dairy indusry. hp:// 3/c01.hm Tacken, G.M.L., Banse, M., Baowska, A., Gardebroek, C., Nesha Turi, K., Wijnands, J.H.M., Poppe, K.J. (2009). The compeiveness of he EU dairy Indusry. Agriculural Economics Research Insiue (LEI), The Hague. 12

14 Table 1. Toal milk producion (in 1,000 ons), number of farms wih milk producion, average milk producion per farm (in ons) and milk producion per cow (in kg) in he seleced case sudy regions in 2003 and Norh-Holland (Neherlands) Cenre (France) Norh Eas Scoland Souh-Eas Planning region (Bulgaria) Toal milk producion Number of farms Average milk producion per farm Milk producion per cow Source: FADN, 2009 Table 2. Producion of dairy producs in 2007 in 1,000 ons and expors in ons per seleced counry. The Neherlands France Bulgaria Cheese produced , Cheese expored Fresh milk produced , Fresh milk expored n.a. n.a. n.a. Buer and oil produced Buer and oil expored Condensaed milk produced Condensaed milk expored Milk powder produced Milk powder expored n.a. Source: PZ, 2009 Table 3. Overview of inerviews; divided in subcaegories Farmers Chain Policy makers, public Toal advice, research France Bulgaria Neherlands Toal Skimmed and non skimmed milk powder ogeher 13

15 Table 4. Model inpu and effec (percenage change) in 2017 compared o 2007 in base scenario and wih a 10% drop in relaive profiabiliy in The Neherlands France Bulgaria Scoland Inpus: Farm growh % Exi rae % Toal producion consan No Yes No Yes Resuls (% change): Base scenario: Number of farms Average producion per farm Toal producion Scenario I: Number of farms Average producion per farm Toal producion

16 Table 5. France Expecaions of sakeholders and expers on srucure in dairy farming. Relaion processorfarm Srucure dairy farming Sraegy milk processors Governmen Long erm Decrease conracs o number of guaranee local farms and supply. increase in farm size. Producion in some regions for local markes, in some regions also expor oriened. Possibly naional guidelines for supply conracs o regulae regional milk marke (in favour of less efficien producion areas). The Neherlands - Milk price deermined in free marke. - No quaniy conrol. Decrease number of farms and increase in farm size. Expor oriened. No naional quaniy regulaion. Bulgaria -Coninuaion of long-erm conracs -Increase of milk processed by processors - Increase in requiremens on physical milk qualiy -Increase of chain inegraion. Decrease number of farms and increase in farm size. -Increase efficien use capaciy of processing plans. -Increase qualiy of processed dairy producs -Increase producion of value added producs. No quaniy regulaion on naional scale. Scoland Conracs o guaranee milk supply. Decrease number of farms and increase in farm size. Local producion for fresh marke. No quaniy regulaion on naional scale. Source: inerviews 15