Progress 10/01/04 to 09/30/07
Outputs
OUTPUTS: This project examined the comparable profitability of organic dairy farms in Vermont and Maine through the on-farm collection of financial and demographical data for 2004, 2005, and 2006. Data was collected in the months following the end of the calendar based business year. Vermont, with over 200 farms, and Maine, with over 60 farms, have the highest concentration of organic dairy farms in the US. This data is the first 3 year study of the profitability of organic dairy farms in the US. We found that profitability increased significantly from 2004-2006. In 2004, the farms in the study averaged 49 cows producing 14,060 lbs of milk per cow. The average farm showed a net loss of $6090. In 2005, the farms averaged 56 cows producing 12,619 lbs of milk per cow. The average farm showed a net loss of $1652. For 2006, the farms averaged 63 cows producing 13,455 lbs of milk per cow. In 2006, the farms average a net farm profit of $28,970 after seeing milk prices move from $22.97 to $28.84 per cwt. The results have been disseminated to farmers, lenders, and policymakers, through news releases, presentations, and an experiment station bulletin (in cooperation with the University of Maine). Presentations also include more than 10 international, national, and regional educational venues. Farmers can use the data to examine their farm and compare receipt and expenses to the group. Lenders use the data for budgets for farmers applying for credit and those thinking of going into organic dairy. Policymakers use the data to examine how policies can be put in place to assist farmers moving into organic dairy as this appears to be one of Vermont's fastest growing ag sectors. This data is the first in the US looking at 3 years of organic dairy financial data. This project continued to collect data in 2008 and will continue to collect 2008 data in early 2009 with funding from the following 2 projects: 1) CSREES/USDA Profitability and Transitional Analysis of Northeast Organic Dairy Farms [PARSONS 09/15/2004-02/28/2009] and 2) USDA/Hatch Profitability and Transitional Analysis of Vermont Organic Dairy Farms: Identifying Key Factors for Success [PARSONS 10/01/2006-09/30/2008] CRIS Project Number: VT-H01309. The continuation of the study will provide the only 5 year organic dairy profitability analysis in the US to date. PARTICIPANTS: Robert Parsons Extension Associate Professor University of Vermont Glenn Rogers Extension Professor University of Vermont Dennis Kauppila Extension Associate Professor University of Vermont Qingbin Wang Associate Professor University of Vermont Timothy Dalton Associate Professor Kansas State University Richard Kersbergen Extension Professor University of Maine Lisa McCrory Dairy Consultant Northeast Organic Farming Association- Vermont TARGET AUDIENCES: The target audience was dairy farmers, processors, lenders, policy makers and citizens interested in the profitability of the growing organic dairy sector. The information provided in this study allowed them to make critical business and policy decisions regarding the future of individual farmers, processors, lenders, and policymakers in forming government policies for organic dairy. PROJECT MODIFICATIONS: Not relevant to this project.
Impacts
The study found that organic dairy farms have gotten considerably more profitable from 2004 to 2006 and were more profitable than comparable size conventional dairy farms despite smaller herds and less milk per cow. The study also identified the largest expense categories of purchased feed, repairs and supplies, labor, interest, utilities, custom hire, and fuel. Feed prices are increasing significantly so future prices will threathen profitability. Organic dairy farms are getting slightly larger while milk production per cows remains fairly static despite lower use of purchased grain. From this study, organic appears to be a viable option for smaller size dairy farms. The future depends on any increase in the organic milk price vs. the rising feed and fuel prices. With feed prices up over 70% since 2005, northeast organic dairy farmers are showing interest in raising their own grains to reduce costs. The result of this project is an accurate assessment of the profitability of the organic dairy sector, an assessment that has not been available to date. The impact is the accurate information now available to farmers, processors, lenders, policymakers, and the public on the profitability of the rapidly growing organic dairy sector. This data assists those in business, those thinking of going into organic dairy, and policymakers on consideration of what is needed to promote further growth. On an individual basis, this data provided key information so the farmer can decide whether transitioning to organic will be a good business move. The stakeholders in this project need this information because there is no other available data on northeast organic dairy farms. Decisions by farmers, processors, policymakers, and the public on whether to embrace organic dairy as a viable alternative for Vermont depends on whether there is reliable information on its profitability, expense and profit levels, and the cost of farms transitioning to organic dairy. Without this multi-year organic dairy study, decision would be made blindly without any guidance on whether efforts should be enhanced or discontinued.
Publications
- Dalton, Tim, Robert Parsons, Richard Kersbergen, Glenn Rogers, Dennis Kauppila, Lisa McCrory, Lisa Bragg, and Qingbin Wang. A comparative Analysis of Organic Dairy Farms in Maine and Vermont: Farm Financial Information from 2004-2006. Maine Agricultural and Forest Experiment Station, The University of Maine, Orno, ME. Bulletin 851 July 2008.
- Parsons, Robert. Profitability for Organic Dairy Farms for 2006. Northeastern Organic Dairy Producers Alliance Newsletter. March 28, 2008. http://www.nodpa.com/dairy_profitability_032808.html
- Robert Parsons, Rick Kersbergen, and Lisa McCrory. Is Organic Dairying a Cash Cow Hoard's Dairyman. 152-8:309. April 25, 2007.
- Parsons, Robert, Lisa McCrory, Glenn Rogers, and Dennis Kauppila. Profitability of Organic Dairy Farms - The Rest of the Story. Agriview. 70-4:10-11. February 24, 2006.
- Parsons, Robert, Glenn Rogers, and Dennis Kauppila. How Profitable ARE Northeast Dairy Farms Agriview. 69-24:10-11. December 16, 2005.
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Progress 10/01/05 to 09/30/06
Outputs
he first study in the US to examine the profitability of a large number of organic dairy farms was conducted by the Universities of Vermont and Maine and the Northeast Organic Farming Association-Vermont (NOFA-VT). Organic dairy farms now account for 8.5% (105) and 18% (63) of dairy farms in Vermont and Maine, respectively. This study consisted of 30 organic dairy farmers who averaged 48 cows, sold 14,060 lbs of milk per cow at $22.97 per cwt while production cost was $22.58 per cwt. The farms averaged $41,355 in accrual operational income. Deducting depreciation of $19,487 left net cash revenue of $21,898. The amount reported as family cost of living by Farm Credit for farms in Vermont under 90 cows was $37,178. At this level, the average organic farm shows a loss of -$15,280, a -3.0% return on farm equity (ROE) . The study also found that one-third of the farms earned an economic profit with a few of these farms being very profitable. However, the study also revealed
that two-thirds of the farms were not profitable enough to meet family living expenses. The study revealed that organic milk prices remained practically unchanged from 1999. However, expenses jumped from $18.20 to $22.58 per cwt. The bottom line is that net farm revenue for organic dairy farms dropped 42% from $38,364 in 1999 to $ 21,898 in 2004! We then compared the organic dairy farms to conventional dairy farms with fewer than 90 cows as published in Farm Credit's Northeast Dairy Farm Summary. In 2004, conventional dairy farms averaged 67 cows, sold 18,819 lb of milk per cow, and earned net farm revenue of $41,741 for a ROE of 1.6%. The average conventional dairy farm had higher net farm revenue, higher net revenue per cow, and higher net revenue per cwt. But 2004 was unusual because of record high milk prices while organic profitability was declining. In 2003, according to the Northeast Dairy Farm Summary, the average conventional dairy farm with fewer than 90 cows averaged 65
cows producing 18,898 pounds of milk per cow for a net farm revenue of $22,035 and a -1.6% ROE. The reality is that the average conventional dairy farm in 2003 had to milk an additional 17 cows more than their organic herd counterparts to earn $137! Conclusions: First, this study found that the average organic dairy farm did have a taxable income but was not profitable enough to provide an adequate return for the owner's labor and no return on the farm's investment in cows, land, and equipment. Second, the study confirmed that profits for organic dairy farms declined 42% since 1999! This finding supports farmers' claims that profits were down and a higher milk price was needed. Third, this study found that with record high milk prices, conventional farms did better than the average organic dairy farm in 2004. But when we examined 2003, we found that organic dairy farms had nearly identical net farm revenue as conventional dairy farms.
Impacts
This project benefits organic dairy farmers, transitioning dairy farmers, and dairy farmers thinking about moving to organic production. This being the first economic study of a growing ag sector provides vital economic information that farmers can incorporate into their budgeting and planning. The conclusions are: First, this study found that the average organic dairy farm did have a taxable income but was not profitable enough to provide an adequate return for the owner's labor and no return on the farm's investment in cows, land, and equipment. Second, the study confirmed that profits for organic dairy farms declined 42% since 1999! This finding supports farmers' claims that profits were down and a higher milk price was needed. Third, this study found that with record high milk prices, conventional farms did better than the average organic dairy farm in 2004. But when we examined 2003, we found that organic dairy farms had nearly identical net farm revenue as
conventional dairy farms.
Publications
- No publications reported this period
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Progress 10/01/04 to 09/30/05
Outputs
Linked closely to the study, Assessing the comparable profitability of Northease organic dairy farms, this study is making progress in conducting a study of organic dairy farms in Vermont. The emphasis is developing educational material that will be of use to organic dairy farmers, aspiring organic dairy farmers, conventional dairy farmers, lenders, and policymakers. At this time we are conducting a detailed study of one farm with a production based on grazing that has recently made the transition from conventional to organic. Another farm participating in the study is a farm that was a high producing confinement conventional dairy herd. This farm is making a total managment transition from confinement to grazing for organic production. The coming year will identify additional dairy farms making the transition to organic for which detailed analysis will examine trends in profitability, profitability over the transition period, and major obstacles to organic
transition.
Impacts
The publications produced by this study will provide budgets, information on profitability, and transition issues and strategies used by farms making the switch to organic dairy production.
Publications
- No publications reported this period
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