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The battle for success: Study reveals obstacles of organic dairying in Vermont

Jennifer Janak Published on 11 March 2014

Editor's note: Some of this information was presented in the March 12, 2014 InFocus department of Progressive Dairyman.

Organic dairy farms account for nearly 23 percent of all dairy-farming operations in Vermont.

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“We are seeing an increase in organic farming across the state,” said Dr. Robert Parsons, an agricultural economist from the University of Vermont.

Since the 1990s, Vermont has seen a steady increase in organic dairy farms. Currently, the state is home to some 900 dairy farms, 210 of which operate under USDA Organic protocols and regulations.

“Conventional farms that have transitioned to an organic operation have seen success,” said Parsons, “especially with an original pasture-based system.”

These farms contribute $76 million annually to the local economy, while supporting more than 1,000 jobs to the communities within Vermont to create a sustainable market.

Just how successful is this sustainable market?

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Traditionally, there are three aspects of sustainability: economical, social and environmental. Parsons conducted an eight-year economical analysis of organic dairy farms within Vermont to determine how strong the first leg of sustainability really is. It was the largest economical study of organic dairy farming across the U.S.

From 2004-2012, roughly 34 farms were evaluated on their financial data that could be obtained. The average farm consisted of 58 cows, each producing nearly 13,500 pounds of milk. However, due to the wide range of farm statistics, Dr. Parsons was able to further divide the farms into a low, mid and high group.

“Through the study, we found three distinct groups of organic dairy farms based on their economic standings,” said Parsons.

The high group consisted of 11 farms and about 67 cows at each site. They were able to create annual revenue of nearly $90,000. This is due, in particular, to the use of Jerseys on the farms and the elevated price for their components in the milk. Through this tactic of dairy farming, the high group was able to receive $2 per hundredweight more than the low group. A majority of the farms from all groups consisted of primarily Holsteins and Jerseys.

Both the low and mid group, which consisted of 11 and 12 farms, respectively, sat at a much lower income level than that of the high group. The low group collected a $36,000 annual income and $43,000 for the mid group.

Dr. Parsons determined that this financial difference was due to farm management protocols and procedures.

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“Profit is highly dependant on the business structure of the farm,” said Parsons. “The only way to increase profits is to increase the number of cows one milks, how much milk each cow gives and milk prices.”

While increasing numbers and production could solve the problem, Parsons warns that it’s not all about the numbers; as the cost of living continues to rise, it soon becomes a fight to keep afloat.

Organic dairy farming in Vermont is currently a successful market; however, with one-third of the dairy farms’ revenue hardly enough to cover the cost of living, will that group survive as organic dairy producers? And what will then happen to the market?

“If the economic leg of sustainability is not successful, it directly affects the social and environmental legs of sustainability,” said Parsons. “Eventually, creating a failed market.”

The question then becomes, is it really worth it to be an organic dairy producer in Vermont? To answer the question, Parsons compared organic farming practices to that of conventional farming within the state.

Similar to conventional, organic farming is still a treadmill. Both operations battle the same pressures of expenses with the need to increase production and revenue at a greater rate than that of inflation.

One benefit that organic dairy producers have over conventional dairy producers is that milk prices continue rise, rarely fluctuating.

“For organic producers, milk prices have been on a gradual increase. They also did not have to deal with the milk price collapse of 2006-2009 that all conventional producers experienced,” said Parsons.

Many producers have done really well with transitioning from conventional to organic farming. It has become a lifeline to remain a small herd and being able to continue operating.

“Organic farming fits in with the future of small dairy farms in the Northeastern states,” said Dr. Parsons. “It easily impacts the community’s economy with labor being redistributed within the community.”

Parsons continued with stressing the importance of an off farm income in order to afford the cost of living.

“The fact of life is that production costs will continue to rise, as will the cost of living,” said Parsons. “If anyone chooses to not believe that, I also have some ocean front property in Nevada.”

A producer should not be troubled by the fears of organic farming. After all, more than 75 percent of organic producers would not have the opportunity to get their foot in the door in this industry if they managed as a conventional farm. It takes producers that are determined and resourceful to find the triumph in the twists and turns that may arise.

“While organic farming is not the roads to riches for the typical farmer; the key to success is proper management skills and keeping the story as simple as possible,” said Parsons. PD

Jennifer Janak is a student freelancer at the University of Minneosta.

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