Exploring the Impact of Input Costs on Farmgate Milk Prices in EU Countries: An Empirical Analysis

Milk prices in the European Union (EU) are increasingly aligned with global prices due to market integration, as feed and energy costs are tradable commodities sensitive to global market fluctuations. This study analyzes the impact of homegrown feed costs, purchased feed costs, energy costs, and non-specific costs on farmgate milk prices using panel data from 23 selected EU countries over the period from 2008 to 2021. The findings reveal disparities in the distribution of milk costs and prices among member states. Furthermore, the results confirm that purchased feed costs and energy costs have a positive impact on farmgate milk prices. The study supports the argument that tradable farm input costs are closely aligned with changes in farmgate milk prices. Additionally, this study suggests that incorporating feed and energy costs, or their associated indices, into the milk pricing formula is essential for maintaining the viability of dairy farmers.