Switzerland: Dairy farming after the quota phase out

Dairy production in Switzerland is characterised by rather small structures: The average farm has 24 ha and 24 cows with a milk yield of 5,700 kg per cow and year. However, production structures in Switzerland are quite diverse: almost half of the grassland is alpine pasture where farms are smaller than in the valley regions.

The picture of grazing cows is characteristic for Switzerland and more than a cliché: Grazing accounts for almost half (46%) of the total feed ration of Swiss cows, and about 70 % of farms keep cows. Furthermore, Swiss farming is characterized by the fact that more than 75 % of feed is grass based (pasture, hay and silage feed). About one third of Swiss milk stems from cows that were fed without silage, which is necessary to produce raw milk cheese, such as Le Gruyère AOP, Tête de Moine AOP and other Swiss cheese specialties. Above that, the overall milk quality is high, somatic cell counts are amongst the lowest in Europe.

However, Swiss farmers faced significant changes especially during the last 15 years: Market support was transformed to direct payments, and the milk quota was phased out until its final abolishment in 2009. As a consequence, the number of farms and cows declined. Milk quantities rose and prices fell, especially after the quota abolishment.

The Swiss dairy market is now separated into two sub-segments: the liberalized cheese market with prices close to the EU-level and the dairy product market which is still protected from competition. Milk prices are segmented as well, depending on the intended purpose of the milk: inland (A-milk), EU-market (B-milk) or world market (C-milk). There are recommended prices for each milk level, with A-milk gaining highest prices, though in reality, those prices are hardly ever achieved, except for C-milk. The actual milk price structure is quite diverse, since different process are also paid depending on the type of product produced (Le Gruyère cheese, organic milk, “meadow milk” etc.)

The higher milk amounts challenge the Swiss dairy industry to enter competitive export markets since the Swiss market is saturated. Because land and labour costs are especially high in Switzerland, a price based competition is hardly possible. Entering foreign markets with innovative and highly processed dairy products can be one option.