Dairy farm management issues & Moldovan dairy sector consolidation 2018-30

1. Dairy farm management issues &Moldovan dairy sector consolidation 2018-30 V. Roshca XXXXXXXXXX Dr. M. Struck & Pavel Covali EU ENPARD TA; sector competitiveness advisors March 2018 Disclaimer The content of this draft is the sole responsibility of the authors and can in no way be taken to reflect the views of the MARDE as long not authorised by a further decision

2. Introduction Our targets today is • to remind you – the milk production people how important it is to keep different business records and what are they good for • to get your opinion what needs to be done in Moldova for the further milk production development

3. Different business records Purposes of record keeping (– even no farmer in the world likes it!) • Marketing • To prove food safety of my product and guarantee traceability • Management operational and future • On farm processing yes / no • Tax • Option to legally optimise • Credits • To get cheaper money at lower risks • Subsidies • To qualify for

4. Basics of record keeping Behind every form is a bureaucrat (“who has no idea of real life!”) • Marketing • the buyer’s form is always right • Tax • the inspector’s form is always right • Credits • the banker’s form is always right • Subsidies • the AIPA form is always right

5. Record keeping for (self) management Only about what is written down one can argue about ! Only what is measured in figures and units one can compare ! To compare I need to know basic – e. g. differences of variable and fix costs ! • variable costs decisive for profitability • fix costs decisive for effectiveness

6. Dairy fodder costs Most important in milk production because this makes normally about 50 % of all costs per kg of milk or beef • What you know about the fodder costs at your farm? • In case of buying the cost known of a ton • Alfalfa hey = MDL • Extracted soybean meal = MDL • Feed wheat meal = MDL Pavel can you find prices But the efficiency of the utilisation is decided by the ration!

7. Dairy farm management – what one need to know Gross margin calculation - simple formula: turnover - minus – variable costs = gross margin • turnover = product multiplied with the price e. g. 15 l milk per day x 5 lei / l equals to a turnover of 45 Lei / day • variable costs e. g. • fodder costs / kg (dry matter) multiplied with kg per day and cow = equals to fodder cost per day and cow; e. g. 21 Lei / cow & day • Water costs e. g. 1 Lei / cow & day • Etc. e. g. 12 Lei / cow & day • Total variable 34 Lei / cow & day • E. g. 45 lei per cow and day – minus – 34 lei per cow and day = equals to Gross margin = 11 lei per cow and day; from this 11 lei all fix costs have to be paid ! ! ! !

8. Farm management program (s) • There are many e-farm management programs and tools • Your associations should decide, which one to select • Same soft-ware makes at easier to compare between different farmers – and in the dairy production business you are not competitors Let’s switch to excel

9. Dairy sector development programming Where the Moldovan milk production should go next 5 to 10 years? This is where we are ! & where we need to be ?

10. The Moldovan milk consumers 2020 -2030

11. Dairy processing tendencies in the world Program for milk production may be international financing could be mobilised ! ! . . . see example Moldova fruit garden project E 120 million, 50 % grants Program for milk processing? . . . why pumping money in an “economically suicidal business ” . . . Business classification:

12. Milk processing development scenarios for Moldova

13. Milk production

14. Moldovan milk producers / production – development scenarios - I . . . is it realistic taking modernisation / investments costs in production of about € 4.000 per cow into consideration . . . total investment demand € 220 to 250 million

15. Moldovan milk producers / production – development scenarios - II . . . is it more realistic looking at international tendencies . . .

16. What we need to agree including with the processing ! The dairy sector target: The strategic objective for the Moldovan dairy sector is to regain full food security for milk within the import - export balance of milk and milk products and to become a net-exporter (in the medium run).

17. What we need to do – also to get the money for investments - a you need a lot – about MDL 3.800.000.000 • A dairy sector development board is established • The dairy sector consolidation program is fine-tuned and implementation has started. • Detailed sector information is available. • A dairy sector investment strategy is developed & implemented. • Food safety and traceability requirement in Moldovan dairy production met. • A farmers' lab is operational in Moldova. • A comprehensive dairy sector consolidation subsidy system is in place. • A comprehensive legal dairy sector environment is in place is in harmony with EU. • An agriculture advisory service is in place in Moldova. • Curricula for dairy sector specific professions are up-to-date for both operational & management staff training. • The Moldovan agri-food sector is prepared for the generation change. • Export barriers for Moldovan animal products are eliminated.

18. What we / you need to do – some comments • A dairy sector development board is established • You need a common voice of producers & processors to talk with the donors • For a very few on-farm processing is a temporary solution • The dairy sector consolidation program is fine-tuned and implementation has started • To be able to talk to the donors in their language • Detailed sector information is available • . . . . the forms of the bank have to be filled-out • . . . .

19. What we / you need to do – some comments • . . . • A farmers' lab is operational in Moldova • An independent dairy lab operates • . . . • A comprehensive dairy sector consolidation subsidy system is in place • We are doing good for the state and appreciate state support • A comprehensive legal dairy sector environment is in place is in harmony with EU • . . . • An agriculture advisory service is in place in Moldova • With a strong division for milk • Curricula for dairy sector specific professions are up-to-date for both operational & management staff training • The Moldovan agri-food sector is prepared for the generation change • Export barriers for Moldovan animal products are eliminated.

20. We need to continue / strengthening collaboration Discussion welcomed