A study of 30 organic dairy farms in Vermont and Maine shows that organic dairies may not be as profitable as initially perceived.

The study, conducted by Bob Parsons, extension associate professor at the University of Vermont; Tim Dalton, associate professor and research associate at the University of Maine; and their colleagues at both universities, reports the average cost of production and returns for these 30 farms in 2004.

Average herd size of the farms in the study was 48 cows. Rolling herd average was 14,060 pounds of milk per cow. On average, the producers received a milk price of $22.97 per hundredweight. Average net farm income was $21,898.

Despite the cash profit, the farms had a net return on equity of -3.0 percent in 2004, after charges for owner labor and management.

“The results indicate that organic dairy farms are not as profitable as initially perceived and will need higher milk prices if they are to be economically sustainable,” say the authors. However, they also emphasize that the results seen in this study are indicative of economic conditions in 2004 and do not reflect current production conditions.

The research was funded by an Organic Initiative grant from the USDA’s Cooperative State Research, Education, and Extension Service. The research also received financial support from the University of Vermont Extension, the Vermont Agricultural Experiment Station and the John Merck Fund.

To read the entire research report entitled, “Cost and Returns to Organic Dairy Farming in Maine and Vermont for 2004,” follow this link.

Source: Bob Parsons, Universityof Vermont; Universityof MaineDepartment of Resource Economics and Policy Staff Paper #555