Economics Of Milk Production In 2010-2016 €“ A Hungarian Case Study

The Hungarian dairy sector had to face quite a few challenges due to the main global and European events over the past years. Among other things, the Russian’s embargo and the abolition of the milk quota system were the key reasons why the milk sales prices drastically reduced both in the EU and in Hungary in 2015. As a result, many Hungarian dairy farmers – mainly smaller ones – have gone bankrupt and ceased farming. The aim of the study is to present – as a case study – how the economic situation of the Hungarian milk production has changed in the period 2010-2016 based on a dairy farm operating in Eastern Hungary. Data collection was based on data from 2010-2016 and primarily focused on the change in the animal stock, production and technological parameters, input and output prices, as well as average cost items. Based on the collected data, the cost and income situation of milk production in the analysed farm were determined using a deterministic model calculation. The main indicators of the farm were also compared to the Hungarian and international figures. During the analysed period, modernisation investments were implemented which improved production and financial parameters. The obtained results show that the specific milk yield increased by 7% and the efficiency of human resource use improved by more than 100% between 2010-2016. Production costs increased by 50% between 2010-2014, then declined by 15% by 2016. Sales price in the farm increased by nearly 40% between 2010-2014, followed by a 21% decrease. Net income was fluctuating during the given period but the production was profitable in the analysed farm. However, the milk production was unprofitable without subsidies in 5 years.