ECONOMIC SECURITY AND PROFITABILITY ASSESSMENT OF MILK PRODUCTION ON FRAGMENTED FARMS IN SOUTHEASTERN POLAND (2020–2024)

Abstract

This article assesses the profitability and economic security of milk production on fragmented, small-scale farms in southeastern Poland over 2020–2024. The analysis is motivated by two concurrent realities. First, fragmentation creates persistent structural constraints—small herds, dispersed plots, weaker bargaining position, and higher transaction costs—that shape the unit cost of production and the realised milk price. Second, the 2020–2024 period exposed farms to pronounced volatility in both output prices and key inputs, particularly feed and energy, which are dominant cost drivers in dairy production. The study adopts a transparency-oriented design that combines (i) authoritative market monitoring of raw milk prices at EU level, (ii) Polish sector evidence and cost-structure context, and (iii) a partial-budgeting stress test that translates plausible price–cost conditions into unit margins (PLN per litre) and evaluates margin fragility under moderate shocks. The results show that under plausible benchmark conditions, representative fragmented farms can operate with very thin buffers and may remain near or below break-even across multiple years when input costs rise faster than milk prices or when milk prices correct while costs remain elevated. Sensitivity scenarios indicate that even moderate adverse movements—such as a 10% decrease in the realised milk price or a 10% increase in feed costs—can deepen negative margins, weakening liquidity and delaying investment. The paper concludes that economic security for fragmented dairy farms depends on risk exposure in feed and energy costs, on productivity and forage strategies, and on organisational solutions such as cooperation that can reduce transaction costs and strengthen market position. Policy implications emphasise targeted modernisation and resilience-building instruments that are compatible with fragmented land structures rather than assuming rapid consolidation as the only pathway to viability.