Organic dairies fail to prosper, says new study

WEST SWANTON, Vt. – A new study by researchers at the universities of Vermont and Maine has concluded that making a profit from running an organic dairy operation can be difficult.

Of 30 organic dairy farms whose financial performances they studied in 2004, two-thirds have failed to make a profit.

“Overall, we find that the average organic dairy operation was not profitable in 2004. The average rate of return on farm assets was minus 2.9 percent,” the researchers reported.

Some were surprised by the findings because dozens of conventional dairy farms have switched to organic production. Many were enticed by the promise of higher and more stable prices.

West Swanton farmer Earl Fournier said he was not surprised, although his operation has been improving. The profit on his 75 milk cows tripled from $9,000 to about $30,000 in 2004-2005.

“The numbers don’t make you jump out of your chair, but I can say for certain I’m no worse off and the potential to be really better off is there,” he said.

“I didn’t think this farm was sustainable into my retirement. Now I think it can be,” Fournier said.

Demand among consumers for organic milk has been increasing 20 percent or more a year, although supply has not kept up.

Organic milk, he calculated, would pay him at least $1.85 a gallon. In 2006, he will be paid at least $2.24 a gallon.

But feed costs are higher on an organic operation and the production is lower, often wiping out the premium that farmers earn, the study said.

“You’ve got to know what you’re doing,” said Glenn Rogers, a UVM Extension agent and one of those who worked on the organic farm research.

Rogers said the study was just a one-year view of the industry and it may look different in the second year. The value, he said, is emphasizing the importance of careful, realistic financial planning, which Fournier said was valuable.

“This isn’t a business for everybody,” Fournier said. “You have to be able to manage your cows and your land differently.”