The organic dairy sector provides
more economic opportunity and generates more jobs in rural communities
than conventional dairies, according to a report released today by the
Union of Concerned Scientists (UCS). The first-of-its-kind study, “Cream of the Crop: The Economic Benefits of Organic Dairy Farms,” calculated the economic value of organic milk production.
“Over the past 30 years, dairy farmers have had a choice: either get
big or get out. Dairy farmers either had to expand dramatically and
become large industrial operations or they went out of business,” said
Jeffrey O’Hara, agricultural economist for the Food and Environment
Program at UCS and author of the report. “However, organic dairy
production offers farmers another option – one that is better for the
environment, produces a healthier product, and leads to greater levels
of economic activity.”
Based on 2008 - 2011 financial data from two major milk-producing
states—Vermont and Minnesota— the report evaluated the economic impact
of organic dairy farms. Vermont’s 180 organic farms contribute $76
million annually to the state’s economy and support 1,009 jobs. In
Minnesota, 114 organic farms add $78 million to Minnesota’s economy
annually and have created 660 jobs.
The report also compared the economic value that would be generated
by conventional and organic farms in the two states if both experienced
the same hypothetical level of increased sales. In Vermont, organic
dairy farms under that scenario would be expected to contribute 33
percent more to the state’s economy than conventional farms, and employ
83 percent more workers. Similarly, in Minnesota, organic dairies would
increase the state’s economy by 11 percent more and employment by 14
percent more than conventional dairy farms.
Consumer demand for organic milk has jumped dramatically over the last decade, driven largely by ample evidence that it is more nutritious and less damaging to the environment
than milk produced in crowded, polluting CAFOs (confined animal feeding
operations). Organic dairy farming is now a $750 million industry, and
annual U.S. organic milk sales increased 12 percent in 2010, 13 percent
in 2011, and 5 percent in the first seven months of 2012. In some
regions, consumer demand is so significant that retail grocery chains
are having a hard time keeping organic milk in stock.
Despite organic dairy farms’ benefits and rising consumer demand, the
U.S. Department of Agriculture’s (UDSA) farm programs and taxpayer
subsidies favor big CAFOs. The Farm Bill, which reauthorizes USDA farm
programs every five years, currently provides relatively little support
for organic dairy farmers. Worse, Congress failed to act on the
now-overdue 2012 Farm Bill before the election, putting programs that
currently help dairy producers and organic farmers at risk. Now that the election is over, Congress has the opportunity to
address this glaring discrepancy in its lame duck session. O’Hara’s
report makes four primary policy recommendations for legislators:
- The USDA should revise the federal milk marketing orders, which establish the minimum prices dairy processors must pay to farmers. The antiquated minimum-pricing order policies were written in the 1930’s and fail to account for the ways that organic milk production differs from conventional dairy farming.
- Congress and the USDA should offer a subsidized insurance program that is customized to the needs of organic dairy farmers. Insurance programs proposed in Farm Bill deliberations are only designed to support conventional dairies.
- Congress should increase funding for organic agriculture programs.
- Congress should fund and the USDA should implement programs that support regional food system development, such as rural development grants.
This modest federal support would help organic dairy farmers who are
already contributing to and stabilizing regional economies, and support
farmers who want to transition to organic farming.
“More and more consumers across the country are choosing organic
milk, but Washington hasn’t gotten the message,” said O’Hara. “Investing
in organic dairy production would pay off in multiple ways by keeping
small farm businesses afloat, promoting local economic growth, reducing
farm pollution, and meeting growing consumer demand.”
...
Organic dairies are able to sell their milk at a premium, which for the time intervals studied was greater in Vermont than in Minnesota. In Vermont, organic dairies received $0.31 per pound and conventional dairies received $0.17/pound. In Minnesota, these prices were $0.25/pound and $0.16/pound, respectively. Even though organic cows produce less milk, Table 4 shows that Vermont’s organic dairies earn greater milk sales revenue per cow than its conventional dairies— a likely consequence of the state’s high organic price premium. In Minnesota, where the price premium is not as large, we see in Table 5 that the opposite condition holds true. Feed costs are the largest expense for dairies. Organic dairies spend less on feed than do conventional dairies even though feed is more expensive for organic dairies. In Minnesota, organic dairies spent $608 per cow per year, compared with $1,182 per cow per year for conventional dairies. At $1,190 per cow, organic dairies in Vermont spent more on feed than did organic dairies in Minnesota but still less than conventional dairies within the New England region.
Organic dairies were more profitable than conventional dairies of comparable size. On average, Vermont’s organic dairy farms were more profitable on a per-cow basis than both conventional and small conventional dairies. Table 4 shows that Vermont’s organic sector had net farm revenue of $822 per cow, compared with $120 per cow for the conventional sector and $154 per cow for the small conventional sector. Farm operators who own and run a dairy farm typically do not pay themselves, or (typically) other family members who work on the dairy, an hourly wage. However, they retain the revenue that remains after the rest of the expenses are met and use the income to support cost-of-living family expenses. While net farm revenue reported in Table 4 does not explicitly account for these latter expenses, the NDFS and Robert Parsons both compute an average cost-of-living expense for dairy farming systems, which we report in Table 4 as a “labor and management charge.” After these expenses are deducted, only organic dairies in Vermont were earning a positive profit during the period considered.
In Minnesota, organic dairies were more profitable on a per-cow basis than small conventional dairies, but not when compared with the larger conventional dairies. Table 5 shows that net farm revenue was $389 per cow for Minnesota’s organic sector, compared with $637 per cow for the conventional sector and $82 for the small conventional sector. A critical reason for this disparity between the states is that non-milk sources of revenue are relatively greater for Minnesota’s conventional dairies. Specifically, Table 5 shows that conventional dairies in Minnesota receive $483 per cow in crop sales relative to $93 per cow for organic dairies. This disparity is not as pronounced in Vermont. Also, in Minnesota “other” sources of income, which includes government payments, are greater for conventional dairies.
...
In Vermont, the 180-farm organic dairy farm sector contributes $76.3 million in output to the state’s economy with an output multiplier of 1.7. It also contributes $34.1 million in gross state product with a multiplier of 2.3, $26.3 million in labor income with a multiplier of 1.8, and 1,009 jobs with a multiplier of 1.5. In Minnesota, the 114-farm organic dairy farm sector contributes $77.7 million in output to the state’s economy with an output multiplier of 2.1, $32.1 million in gross state product with a multiplier of 3.9, $21 million in labor income with a multiplier of 2.7, and 660 jobs with a multiplier of 1.8. Minnesota’s organic dairy farm sector has greater multipliers than the corresponding ones of Vermont partly because a greater percentage of purchased grains are produced in Minnesota than in Vermont.
Union of Concerned Scientists (UCS) www.UCSUSA.com
Press Release dated November 14, 2012
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