Big Farms Might Play Larger Roles in Organic Milk Production
By Ron Johnson | AG Weekly
More and more of the nation’s organic milk might come from larger farms in the coming years. So says a new report from the USDA’s Economic Research Service (ERS).
The report, titled, “Characteristics, Costs, and Issues for Organic Dairy Farming,” says the forces of economics are nudging organic dairy farms to become more like so-called “conventional” dairies. Organic farms might become similar to conventional operations in their sizes, locations, and the kinds of technologies used.
“Most organic milk operations are small, with 45 percent milking fewer than 50 cows, and 87 percent fewer than 100. But the largest organic dairies (over 200 cows) account for more than a third of organic milk production and are far more likely to generate returns above their capital and labor costs, suggesting that organic milk production will migrate toward larger operations,” the report says.
Organic dairying has become more and more attractive as an agricultural business. The ERS calls organic farming in general “one of the fastest-growing segments of U.S. agriculture.” What’s more, organic dairying is one of the fastest growing subsegments of this century.
“Between 2000 and 2005, the number of certified organic milk cows on U.S. farms increased by 25 percent annually, on average,” says the report. The number of cows climbed from 38,000 to more than 86,000, pushed by increasing demand for organically produced milk.
This new report is based on the results of a study that was conducted in 2005. It used numbers collected in the Agricultural Resource Management Survey (ARMS). That survey included a target sample of farms that produce organic milk.
To meet the strengthening demand for organic milk, its production sector has evolved, very much like the one that produces conventional milk has, say the reports authors.
“Along with primarily small, pasture-based organic operations located in the Northeast and Upper Midwest, larger organic operations, often located in the West, that use more-conventional milk production technologies, have increased in number,” the report observes. “Economic incentives, driven largely by lower production costs, are behind much of this change.”
NOP rules a factor
However, the direction organic milk production will take is by no means certain. Proposed changes to the USDA’s National Organic Program (NOP) could play a large role.
The National Organic Program “develops, implements, and administers national production, handling, and labeling standards for organic agricultural products,” explains the ERS. Some proposed changes to NOP are aimed at clarifying and toughening the pasture requirements that certified organic dairy farms are supposed to follow.
Most farmers who produce milk organically start out with conventional dairy farms, notes the ERS. To become certified as organic, they must go through a “challenging and costly” transition.
They have to change the ways they do many things during this three-year transition period. Farmers must change the ways they care for their animals, change the ways they manage their land and grow their crops. They also have to buy inputs differently and keep detailed records for their organic certification.
Those are not the only challenges facing organic dairy farmers. They must now “contend with the impact of a weaker U.S. economy on the demand for organic food products,” points out the ERS.
What’s more, organic dairy farms face just about the same production costs that conventional dairy farms do. That holds true whether the organic farms are large or small, pasture their cattle or rely on stored feed, and whether they are in the East, West or Midwest.
Most organic dairy farms have smaller herds, the study found. Forty-five percent of them milk less than 50 cows, while 87 percent milk less than 100 cows.
However, the bigger farms produce a disproportional amount of milk. “Large organic dairies with 200 cows or more are a small portion of the organic dairy population, but account for more than a third of organic milk production,” the report points out.
The study also looked at operating costs. Those costs are highest on the biggest organic dairy farms, but the larger farms have total economic costs that are almost $14 per hundredweight lower.
“The smallest operations use much more unpaid labor, accounting for most of this cost difference,” says the ERS. “Large organic dairies are much more likely to generate returns above capital and labor costs, suggesting that organic milk production will migrate toward larger operations, as has conventional production. Additional costs to comply with organic pasture requirements and for securing organic inputs in large volume may limit the cost advantages for larger organic dairies.”
Larger in West
By far, most organic dairy farms are in the Upper Midwest. Some 80 percent of them are in those regions, but they are usually “small and less productive” compared to their counterparts in the West, says the ERS.
Organic dairies in the Northeast average 53 cows, while those in the Upper Midwest average 64 cows each. Contrast that to the West, where the average herd size is 381 cows.
Cows on western organic dairy farms produce an average of 2,700 pounds of milk more than cows on Upper Midwest farms. And those western cows average 4,000 pounds more than organic cows in the Northeast.
But Upper Midwest and Northeast organic dairy farms have an advantage when it comes to feed.
“Average feed costs per cow are significantly less on organic dairies in the Northeast and Upper Midwest, due to greater use of homegrown feed and pasture,” says the ERS. “Despite higher feed costs per cow and greater labor and capital use, organic dairies in the West have lower total economic costs per hundredweight of milk produced. This cost advantage is the result of economies of size and much higher productivity per cow that may be attributed to the technologies used on these operations.”
The report looks at several other aspects of organic dairy farms. To see the entire report n all 20,000 words of it n go to this website: http://www.ers.usda.gov/Publications/ERR82/.