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Profitability of New England Organic Dairy Farms: A 6 Year Analysis

Robert Parsons

Summary

In one of the few long term studies available, researchers have gathered farm level economic data from New England organic dairy farms since 2004. Over the period of the study, farms profitability has improved as milk prices increased rapidly from 2004 to 2006 and then leveled off through a period of surplus to now expand to meet current demand. As compared to conventional dairy, organic dairy has proved to be more profitable in 4 of the 6 years and avoided the volatility facing the conventional sector. While 2004 and 2007 were very good years for conventional, other years, particularly 2009 were financial disasters. The analysis shows that organic farms are smaller in size, farm less tilled crops, and produce less milk per cow. Yet profit per cow tends to be greater than conventional herds that produce 150% more milk per cow. Many of the organic farmers went into organic due to economic reasons. A second major reason was price stability, where a contract price eliminated the volatility faced by conventional dairy farmers. Today, organic markets are expanding following the 2008 recession, with farmers beginning to transition to organic for the first time since 2007. Organic dairy has allowed many farms to remain in dairy as the study estimates that 75% of organic dairy farms would have gone out of business if they had not gone organic. Organic has proved to be a economic winner and has developed a separate viable supply sector.

Details

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