Progress 10/01/06 to 09/30/08
Outputs
OUTPUTS: The purpose of this project is to continue the assessment of the profitability of Vermont organic dairy farms that has been going on since 2005. Organic dairy has proved to be a viable, profitable, and community supporting option for northeast dairy farms. Since 1994, the number of organic dairy farms in Vermont grew from 2 to 202, now accounting for 20% of dairy farms in Vermont. An ongoing 5 year study in Vermont and Maine examining the profitability of organic dairy farms has found that organic farms have been more profitable than similar sized conventional dairy farms. The study found that the organic dairy farms produced greater net farm revenue than conventional dairy farms in 4 out of the 5 years of the study. Results have been disseminated through dairy farmers, organic dairy organizations, presented at conferences, shared with farm lenders and policymakers. This is the longest organic dairy profitability study in the US. This research is in strong demand by regional ag lenders because there is no other source of data on profitability of organic dairy farms. This is the last year of planned research on Vermont organic dairy farms unless new funding is found. Analysis will be conducted to examine the change in profitability over the 6 years of the study. PARTICIPANTS: Parsons, R. Professor, University of Vermont. Kauppila, D. Associate Professor, University of Vermont Extension. Wang, Q. Professor, University of Vermont. Northeast Organic Farming Association of Vermont (NOFA-VT). Richmond, VT. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The study determined that Vermont organic dairy farms produced greater net farm revenue than neighboring conventional dairy farms in 4 out of the 5 years of the study. Net income was higher per cow and per hundredweight for the organic dairy farms despite tending to have smaller herds and producing less milk per cow. The study found typical organic dairy farm averaging 62 cows per farm and producing 13,660 pounds of milk per cow. In comparison, conventional dairy farms in Vermont average 124 cows per farm and 19,120 pounds of milk per cow. Production cost structure for organic dairy farms differ from conventional dairy farms through required grazing, feeding expensive certified organic feed, and forbidden use of chemical fertilizers and non-organic antibiotics. Research data indicates that organic dairy farm operators are younger and more educated than their conventional neighbors. The majority of the farms converted to organic for economic reasons or due to contract milk price. Major cost centers are purchased feed, repairs and supplies, labor, and utilities, the same as with conventional farms. Profitability is down in 2008 and 2009 due to increased feed costs. In 2009, organic dairy farms faced reduced revenue due to imposed marketing quotas by processors. However, conventional dairy farms faced even greater loss of revenue due to 30 year lows in milk prices and substantially higher feed prices. Results indicate that most organic dairy farms were able to cash flow while conventional dairy farms lost $700-$1000 cash costs per cow. Base organic milk prices are about $27 per cwt with some farms exceeding $30 with extra payments for quality, protein, and butterfat. Organic dairy has proved to be a financial success for many of Vermont's 200 organic dairy farms. Many Vermont organic dairy farms would not be in business without the option to go organic. More than 70% of the dairy farms believe that they would not be in business today if they did had not the option to switch to organic. Many did not have the land base, facilities, financial reserves, or dedication to stay with the 'get bigger' trend of conventional milk production. Rural Vermont has benefitted from organic dairy farms, through their contribution to rural economy, support farm service providers, support local tax revenue, and keep farmland open and productive instead of reverting back to forest, and contributing to Vermont's tourism attractions. Since 2008 the current economic downturn has stopped the 20% annual growth of organic dairy products. As a result, organic dairy farms have faced new market challenges including production quotas, lower prices, and increased marketing costs. However, in June 2010, organic milk sales began rebounding with marketing quotas removed by fall 2010. Organic dairy has proved to be financial success and will likely remain an economic force in Vermont's rural communities. The results of this study are important to farmers, policymakers, farm service businesses, and lenders because the data is not available through any other channel.
Publications
- Parsons, R. 2010. 'Organic Dairy Study Results.' NODPA (Northeast Organic Dairy Producers Association) News. 10-3. http://www.nodpa.com/research_ed_parsons_study_051610.shtml
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Progress 10/01/07 to 09/30/08
Outputs
OUTPUTS: This project is extending other projects (CSREES/USDA Profitability and Transitional Analysis of Northeast Organic Dairy Farms [Parsons 09/15/2004-02/28/2009] and USDA/Hatch Organic Dairy Farming in Vermont: Profitability Analysis and Educational Programs [PARSONS 10/01/2004-09/30/2007] CRIS Project Number: VT-H01110IR). The purpose is to continue analyzing the comparable profitability of organic dairy farms in Vermont and Maine through the on-farm collection of financial and demographical data. In addition, the study is examining the transitional process for 3 different size organic dairy farms. 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 4 year study of the profitability of organic dairy farms in the US. For 2007, the data from Vermont organic dairy farms finds that profitability dropped in 2007 16% from record high profits in 2006 (Maine data is incomplete at this time). Milk prices were static from 2006 but total farm expenses rose by 6.3% to dampen farm profits. Farmers have faced feed prices that have jumped nearly 70% and fuel prices that have gone up more than 200% since 2005. In adjustment to these price jumps, farmers have cut back on the use of purchased organic grains and fuel use. In fact, feed expenses have only gone up by 23%, indicating a significant cutback in grain use. The farms in the study for 2007 averaged 65.7 cows, sold 13,152 pounds of milk per cow, and received an average price of $ $29.35 per cwt. The major expense categories, accounting for 80% of farm expenses, were feed, repairs and supplies, labor, interest, custom work, utilities, and fuel. Results have been disseminated through release to farmers, lenders, and policymakers, through news releases, presentations, and an experiment station bulletin (in cooperation with the University of Maine). 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 project will collect data for a 5th year in 2009, providing a long term analysis of northeast organic dairy farms. Most economic studies examine just one year of data. In this case, we are conducting a long term study to provide key information on the profitability of the organic dairy sector over time. In addition, we will finish up developing 3 case studies on the transitional process for 3 different size organic dairy farms. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: The audience of this project are farmers, processors, lenders, and policymakers with key interest in the long term viability of organic dairy. With the financial information produced by this report, the audience can make informed business decisions and enact policies favorable to the public welfare on the impact of organic dairy farms. PROJECT MODIFICATIONS: Not relevant to this project.
Impacts
We found that while profitability for 2007 was down by 16%, the average Vermont organic dairy farm reported a positive net farm returns of $18,500 (accounting for unpaid family labor) for a positive Return on Assets of 3.0%. Profitability was down but organic dairy farms were still more profitable than comparable size conventional dairy farm. 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
- No publications reported this period
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