Organic dairy production systems in Pennsylvania: a case study evaluation

Authors: Rotz, Clarence - Al; KAMPHUIS, G - WAGENINGEN UNIV; KARSTEN, H - PENN STATE UNIV; WEAVER, R - PENN STATE UNIV

Submitted to: Journal of Dairy Science
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 5/1/2007
Publication Date: 9/11/2007
Citation: Rotz, C.A., Kamphuis, G.H., Karsten, H.D., Weaver, R.D. 2007. Organic dairy production systems in Pennsylvania: a case study evaluation. Journal of Dairy Science. 90:3961-3979.

Interpretive Summary: Interpretive summary: The long-term sustainability of smaller dairy farms in the Northeast is uncertain. With increasing production costs and a stable or declining real price for milk, smaller farms are having greater difficulty remaining economically viable. To compete in the commodity market for milk, they must improve production efficiency, which is normally done by increasing farm size. Although larger farms can be more profitable, they also can have disadvantages. Larger farms can increase problems related to labor, financial, herd health, and nutrient management. Organic production may provide another option for sustaining smaller dairy farms. The organic dairy market has experienced dramatic growth in recent years with a current shortage in milk production. The price of organic milk is about double that of conventional milk, but organic production costs are also greater. A major deterrent to the adoption of organic production is a three year period required for transition from conventional practices. During this period, producers must use more costly organic practices in crop and animal management while selling their milk at conventional prices. Considering the growing demand for organic milk and the possible risk in transition, an analysis was done to compare the long-term economic and environmental sustainability of organic dairy farms to that of conventional dairy farms in this region. Whole-farm simulation was used based upon extensive information gathered from four actual farms in Pennsylvania. Considering the current organic milk price relative to other prices, organic production is a viable option for improving the economic sustainability of smaller dairy farms with only minor environmental concerns related to nutrient management. The long-term sustainability of this economic advantage is dependent though on the persistence of a substantial margin between conventional and organic milk prices.

Technical Abstract: The current market demand and price for organic milk is encouraging dairy producers, particularly those on smaller farms, to consider organic production as a means for improving long-term economic sustainability. Extensive production information was collected from four case-study organic farms throughout Pennsylvania. With this information, the Integrated Farm System Model was able to simulate the expected range in feed production and use on these farms over 25 yr of historical weather from their locations. Based upon these farms, representative farms of equal size using organic grass, organic crop, traditional crop with grazing, and traditional confinement production systems were simulated for 25 yr of central Pennsylvania weather. A comparison of the simulation results indicated that farm level accumulation of soil P and K may be a concern on organic farms that heavily utilize poultry manure as a crop nutrient source, and that runoff loss of P may be a concern on organic farms using annual crop production because of the greater number of tillage operations required for weed control. Given the current price difference between organic and conventional milk, whole-farm budgets showed a strong economic advantage for the use of organic production over traditional production on farms of the same size. This economic advantage of organic production was highly sensitive to the difference between organic and conventional milk prices and the difference in milk production maintained using organic and traditional production systems. Factors with little effect on the relative profitability of organic over traditional production included the differences in seed and chemical costs, forage prices, and animal prices between organic and traditional production and the costs or prices assumed for organic certification, machinery, pasture fence and watering equipment, fuel, and labor. Thus, at the current organic milk price relative to other prices, organic production appears to be a viable option for improving the economic sustainability of smaller dairy farms with only minor environmental concerns related to nutrient management. The long-term sustainability of this economic advantage appears to hinge on the persistence of a substantial margin between conventional and organic milk prices.