Lenght : around 40 minutes
This activity follows the previous activity (Abolition of quotas and decrease in milk prices”. You can use your own model or download this one :modelEco_dairyFarm_2.gms.
« Following the second price decrease, the situation has become disastrous for farmers. In order to overcome this situation, an emergency plan for milk has been put forward at European level. Brussels has proposed to put a halt to the fall of milk prices by trying to limit production, not through the use of compulsory quotas, but by suggesting that the farmers who are willing to participate reduce their production in exchange for compensation. This measure, called “voluntary market withdrawals” is as follows : every non-produced litre of milk in comparison with the reference situation (scenario without quotas, price of 0,3€/L) is “paid for” by the European Commission at the price of 0,1€/L.
With this measure, the EC hopes to reduce milk production (and therefore to increase milk prices in the long-term) without penalizing the farmer and fundamentally changing the organisation and size of the herd. The objective is for the payment of non-produced milk to encourage farmers to extensify production by reducing food rations (for example by switching from the “intens” diet to the “grass-based” diet), which reduces costs. The point is obviously not to pay farmers who would completely and drastically stop milk production. This measure therefore only covers 20% of the production reference scenario : in other words, the farmer who commits to voluntary market withdrawals must maintain at least 80% of his production reference scenario.
This proposal has generated a lot of debate, initially concerning the capacity of this measure to : (1) recruit voluntary farmers (2) increase prices.
We will only deal with the first point. The European Commission seeks to define the compensation payment appropriately. It also seeks to measure the impact on the income of the farmer, and the possible impacts on wheat production. »
Answer the following questions :
What is the minimum price to pay for this non-produced milk for our farmer, M. Fourhooves, to agree to the measure ?
What will his production be if he does ?
What consequences will it have on his income ?
What consequences will it have on the cropping patterns of the farm and therefore on wheat production ?
NB : if you are using a LOOP or if you ask GAMS to solve the same model several times in a row during the same session (several uses of SOLVE), your variables must be reset (reset to zero).
Reminder of the problem statement :
« M. Fourhooves has a dairy farm in the west of France. It is a 50 ha farm, 30 ha of which is arable land and 20 ha is permanent grassland. The farmer can grow wheat and/or maize (for selling purposes) on the arable land. Maize is exclusively used as silage to feed the dairy cows. The permanent grassland cannot be tilled (CAP greening regulations). Every grassland hectare is grazed then mowed to produce hay and wrapped bales.
The cows graze for 6 months (beginning of April – end of September). During the winter period, they are fed maize silage (produced on the farm) and a supplement of soya-bean cakes (bought). The heifers are fed by grazing, hay and wrapped bales.
The average production per dairy cow is 7000 litres (L) of milk per year.
Plant production
| Yields (t /ha) | Operational costs (€ /ha) | ||||
| Wheat | 6 | 600 | |||
| Fodder | Fodder yields (t /ha) | Operational costs (€ /ha) | |||
| Maize | Silage maize | 11.0 | 620 | ||
| Grassland | Grazing | 5 | 300 |
||
| Hay | 4.5 | ||||
| Wrapped bales | 2.2 | ||||
Maize is only used for the animals, wheat is sold. Every hectare is grazed then mowed in order to produce hay and wrapped bales.
Animal activities
Certain technico-economic indicators concerning the organization of the herd are available : herd management parameters and herd food needs.
Herd management, breeding, culling
Every cow gives birth to 0,9 calves per year which are either sold (CALF), or kept for herd renewal (HEIFER). Every year, 0,3 cows are sold as cull cows and replaced by selected heifers. The culling rate is equal to the renewal rate.
Food needs
The animals are fed using both food produced on the farm and purchased food. Food needs were estimated for cows and heifers.
“intens” intensive feeding diet
| Fodder products | Cows | Heifers (what heifers need until they give birth) |
| Hay | 2 t /year | |
| Wrapped bales | 2,6 t /year | |
| Grazing | 1 t/year | 2.5 t/year |
| Maize | 2 t / year | |
| Supplements bought | Cows | Heifers |
| Soya | 0,57 t /year |
“Grass-based” feeding diet
| Fodder products | Cows | Heifers (what heifers need until they give birth) |
| Hay | 2 t /year | |
| Wrapped bales | 2,6 t /year | |
| Grazing | 1.5 t/year | 2.5 t/year |
| Maize | 1 t / year | |
| Supplements bought | Cows | Heifers |
| Soya | 0,45 t /year |
Technico-economic data
The price of milk is 0,35 €/L. The price of wheat is 150€ per ton (T). The livestock farmer is subject to milk quotas which limit annual milk production to 300 00 L.
The price of purchased soya is 360 €/t
Price of meat products :
Cows : 800€/cow
Calf : 170 €/ calf
Other expenses including structural costs (depreciation of buildings, …) are estimated at 1300 € per cow and per year regardless of the diet.
The objective of the farmer is to maximize his income.
Then check the solution : 
