Seasonality in the Irish dairy processing industry

The dairy landscape in the Republic of Ireland is characterized by pastoral spring-calving systems and a bell-shaped milk production curve. This seasonality at producer level initiates various implications at processor level, such as poor utilization of plant capacity off-peak season, a requirement for seasonal labour management and limited product options in autumn and winter months due to the properties of late-lactation milk. An optimization model was developed to analyze the impact of production seasonality and quota removal on the Irish dairy processing industry in terms of maximum processor gross surplus, the optimum product mix and the marginal values of the milk solids fat, protein and lactose. Processor gross surplus was specified as a function of product sales revenue, less variable costs of collecting and processing raw milk and general overhead (fixed) costs. 5 scenarios with differing milk intake curves were examined whereby a flatter intake curve incurred less monthly variation in the marginal producer milk price, capacity utilization and product mix as well as a higher surplus as compared to more seasonal patterns. However, an isolated consideration of financial indicators at processor level disregards key characteristics of Irish grass-based seasonal milk production and producer-processor interdependencies. It was therefore concluded that a broader modelling approach integrating both the producer and the processor perspectives is desirable for more holistic analysis of sector-wide implications.Dairy processing, seasonality, milk quota abolition, processor profit, product mix, Farm Management, Livestock Production/Industries,

Index-based costs of livestock production (INCAP.l) in Austria – the suckler cow and beef calf production activity

Conference presentation PD

LIVING LABS – INNOVATE BUSINESS MODELS FOR RURAL REGIONS

Rural regions are confronted with several challenges, such as depopulation, overageing or a declining economic importance of the primary sector. Thus, innovative efforts are required to make such regions more attractive and to maintain and further develop social and physical infrastructure. HORIZON 2020 project LIVERUR aims at strengthening rural regions by expanding innovative business models set up as Living Labs, which are user-centred and open-innovation ecosystems. Living Labs establish a sustainable stakeholder partnership, where users, policy-makers, companies and researchers engage in a long-term collaboration. Within LIVERUR, suitable rural business models are identified and will be developed towards the Living Lab concept. Therefore, a framework with a criteria system with the most relevant LIVERUR topics was developed, following a literature review on important documents of the United Nations and EU as well as scientific publications. This criteria system focuses on four main criteria: 1. Living Lab approach, 2. Economic sustainability, 3. Social sustainability and 4. Ecological sustainability. Each criterion is supplemented with 3 to 6 concrete indicators, which help to create a comprehensive view on sustainable business models linked to the Living Lab approach. The results show 20 business models within 13 pilot regions, which are largely on a high level of development, but most of them still have potential for further development. The presented framework is easy in its application and helps to assess and illustrate business models regarding Living Lab and sustainability characteristics. It is also helpful to highlight a business model´s potential for development

Elements of an index-based margin insurance – an application to wheat production in Austria

Farmers may use financial market instruments to hedge price risks. Moreover, various types of insurance products are on the market to protect against production losses. An insurance that covers losses of both input and output prices was recently introduced in the US. We develop this concept further by proposing a prototype of an index-based margin insurance which accounts for both production risks and price risks (input and output prices). The prototype is based on standardised gross margin time series for specific activities. It accounts for revenues, variable costs by cost item, various insurance coverage levels, and gross margin. Indemnities are paid if the gross margin falls short of a determined level. We identify steps necessary to accomplish a market-ready insurance product (e.g. data validation, defining the details of the sub-indexes and the premium calculation, evaluating acceptance on the market prior to its launch). Using Austrian data, the innovative approach is exemplified with respect to different farm management practices, more specifically for the case of conventional and organic wheat production. Farmers could benefit from such a margin insurance since production and price risks would be covered in one scheme, thus reducing opportunity costs

Application of an optimisation model for analysing production seasonality in the Irish milk processing sector

Ireland’s dairy sector is characterised by pastoral spring-calving systems and seasonal milk production at national level. This production seasonality initiates various implications at processor level, such as poor plant capacity utilisation off-peak season or a requirement for seasonal labour, which impose extra costs on the processor and limit their options as to which markets can be serviced. An optimisation model was developed to analyse the impact of production seasonality on the Irish dairy processing industry regarding processor gross surplus (Surplus), costs of milk collection and handling, processing, product storage and labour as well as on product mix, plant and labour capacity utilisation and the marginal producer milk price (MPMP). Three scenarios with differing milk intake curves were examined whereby it was found that a flatter intake pattern incurred less variation in the MPMP and capacity utilisation in addition to a higher Surplus and a larger proportion of more profitable products in the product mix vis-à-vis seasonal patterns. As expected, these results suggest that a producer supplying milk in line with a nationally seasonal production pattern receives lower milk payments since the seasonality-related costs are fed back from the processor to the producer via a lower producer milk price

MARGIN INSURANCE IN AGRICULTURE – A MICRO SIMULATION APPROACH OF WHEAT AND HOG PRODUCTION IN AUSTRIA

To stabilise agricultural markets is one of the central objectives of the Common Agricultural Policies (CAP). After two decades of agricultural policy reforms markets are now only minimally influenced by direct policy interventions. However, prices of many farm commodities have become more volatile. A consequence is that farm incomes have become more volatile, as well. Direct payments are an effective instrument to stabilise incomes by offering a certain minimum level of liquidity. However, such premiums are low for many farmers and therefore a set of income stabilisation instruments was introduced during the Health Check Reform on an optional basis for Member States and certain groups of producers. In order to overcome some of the shortcomings of such approaches, we propose a margin insurance. We present such an insurance programme for EU agriculture and exemplify it using Austrian wheat and hog production as case studies. By referring to existing income insurance systems we identify necessary conditions for such a scheme to work. In order to address adverse selection, a micro simulation approach is proposed that makes granular premium discrimination feasible. Such an approach seems to be better suited for the heterogeneous structural conditions in the EU than a similar scheme for milk producers in the US that is based on a composite index

Index-based Costs of Agricultural Production (INCAP) – A new cost and risk analysis tool

Producers of agricultural commodities are exposed to numerous uncertainties regarding output and input prices, crop yields, yield responses to inputs and the like. In agricultural risk analyses, relevant developments or events are usually measured in economic terms resulting in a positive or negative impact on farm incomes. We develop a novel data set: the ‘Index-based Costs of Agricultural Production’ (INCAP) that can be used to quantify risk-related statistics associated with standardised production systems. Activity-specific gross margins and their stochasticity can be measured at an arbitrary level of aggregation. The aims of this article are to present the structure and scope of INCAP and to demonstrate its potential use in agribusiness, farm extension programmes and policy analyses. Wheat production in Austria is presented as an example

Seasonality in the Irish dairy processing industry

The dairy landscape in the Republic of Ireland is characterized by pastoral spring-calving systems and a bell-shaped milk production curve. This seasonality at producer level initiates various implications at processor level, such as poor utilization of plant capacity off-peak season, a requirement for seasonal labour management and limited product options in autumn and winter months due to the properties of late-lactation milk. An optimization model was developed to analyze the impact of production seasonality and quota removal on the Irish dairy processing industry in terms of maximum processor gross surplus, the optimum product mix and the marginal values of the milk solids fat, protein and lactose. Processor gross surplus was specified as a function of product sales revenue, less variable costs of collecting and processing raw milk and general overhead (fixed) costs. 5 scenarios with differing milk intake curves were examined whereby a flatter intake curve incurred less monthly variation in the marginal producer milk price, capacity utilization and product mix as well as a higher surplus as compared to more seasonal patterns. However, an isolated consideration of financial indicators at processor level disregards key characteristics of Irish grass-based seasonal milk production and producer-processor interdependencies. It was therefore concluded that a broader modelling approach integrating both the producer and the processor perspectives is desirable for more holistic analysis of sector-wide implications

Living Labs – innovate business models for rural regions

Rural regions are confronted with several challenges, such as depopulation, overageing or a declining economic importance of the primary sector. Thus, innovative efforts are required to make such regions more attractive and to maintain and further develop social and physical infrastructure. HORIZON 2020 project LIVERUR aims at strengthening rural regions by expanding innovative business models set up as Living Labs, which are user-centred and open-innovation ecosystems. Living Labs establish a sustainable stakeholder partnership, where users, policy-makers, companies and researchers engage in a long-term collaboration. Within LIVERUR, suitable rural business models are identified and will be developed towards the Living Lab concept. Therefore, a framework with a criteria system with the most relevant LIVERUR topics was developed, following a literature review on important documents of the United Nations and EU as well as scientific publications. This criteria system focuses on four main criteria: 1. Living Lab approach, 2. Economic sustainability, 3. Social sustainability and 4. Ecological sustainability. Each criterion is supplemented with 3 to 6 concrete indicators, which help to create a comprehensive view on sustainable business models linked to the Living Lab approach. The results show 20 business models within 13 pilot regions, which are largely on a high level of development, but most of them still have potential for further development. The presented framework is easy in its application and helps to assess and illustrate business models regarding Living Lab and sustainability characteristics. It is also helpful to highlight a business model´s potential for development