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US Organic Dairy Farmers View Prices as Unfair

12 May 2015

Many US dairy farmers are taking advantage of greater economic opportunities by switching to organic production, but farmers still view the price environment as challenging, according to research by the University of New Hampshire (UNH).

More than 80 per cent of all US-certified organic dairies are in the Northeast and Upper Midwest (regions used by the US government for statistical purposes).

The USDA estimates there are about 875 certified organic dairy farms in the Northeast. However, most Northeast dairy farms, both organic and conventional, are considered small with fewer than 100 milking cows.

In order to improve the economic viability of their operations, some farmers have shifted their conventional operations to organic milk production where gross milk premiums are higher.

“If you are only milking 40 for 50 cows and you’ve got that small margin, it’s really tough to make a living.

"This is why so many dairy farmers in the Northeast do other things like make their own syrup, honey, and cheese. They can market those products and sell directly to the public, cutting out the middle man,” said Lisa Townson, assistant director of UNH Cooperative Extension and an author on the study. 

A lactating herd of cows walks to pasture at the UNH Organic Dairy Research Farm

Working with the Northeast Organic Dairy Producers Alliance, UNH researchers surveyed 183 Northeastern organic dairy farms.

They found that 85 per cent of those who responded to the survey ranked a steady, fair milk price as their top challenge and highest priority. Integrated pest management was identified as the top animal health priority.

While this finding won’t come as news to dairy farmers, it may surprise organic milk consumers who pay considerably more for organic milk than conventional milk at the grocery.

“When organic dairy farmers are talking about price, they are talking about the price that they get for their milk. That is a very different conversation than what the consumer is actually paying for the milk.

"The profit margin is still pretty small whether you are an organic or conventional dairy farmer.

"Consumers may not realise this because they may think that if they are paying more for organic milk, surely 75 per cent of that is going directly back to the farmer. That is not the case,” said co-author Professor David Townson.

Even though the market price for organic milk has been stable in recent years, at between $0.64 and $0.68 per kilogram of milk from 2006 to 2012, the costs of organic mixed grain feed for the cows have increased substantially, from $380 a ton in 2006 to $720 a ton in 2012, according to the USDA.

UNH researchers believe this decline in profit margins for organic dairy farmers is most likely the reason why they perceive the price they receive for their milk as not fair.

However, the consumer market for organic milk grew from two percent to three percent of total milk consumption between 2006 and 2008.

“Organic milk production has been one of the fastest-growing segments of organic agriculture in the nation in the past decade, and the Northeast produces approximately 25 percent of the organic milk in the United States.

"Organic represents a tremendous potential to maintain rural economies and preserve working landscapes through profitable organic dairy farms,” said co-author André Brito, an assistant professor at UNH Cooperative Extension.

Despite the challenges of organic dairy farming, the industry is attractive to small Northeastern dairy farmers, both existing and newcomers, who can potentially earn slightly higher profits while remaining a small dairy farm.

Further Reading

You can view the full report and author list by clicking here.

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