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Long Term Profitability of Northeast Organic Dairy Farms

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... feeding less grain per cow. Farmers feeding lower protein ... Cows per farm. 66. 66. Milk per cow. 13,152. 19,609. Revenue per cow $4571 $4708. Feed per cow ... – PowerPoint PPT presentation

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Title: Long Term Profitability of Northeast Organic Dairy Farms


1
Long Term Profitability of Northeast Organic
Dairy Farms
Presented at the 2009 National Extension Risk
Management Education Conference Reno, NV March
31-April 1, 2009
Bob Parsons , Glenn Rogers, Dennis Kauppila
University of Vermont Extension Lisa McCrory,
NOFA-Vermont Rick Kersbergen, University of
Maine
2
Organic Dairy in New England
  • Vermont and Maine Greatest concentration of
    organic dairy farms
  • Maine 65 organic dairy farms
  • -About 350 total
  • Vermont 210 organic dairy farms
  • About 1068 total

3
Study To Examine and Estimate the Profitability
of Organic Dairy Farms in Vermont Maine
  • 28 Farms for 2007 (no Maine farms yet)
  • 41 Farms for 2006
  • 44 farms for 2005
  • 30 farms in 2004
  • 7 farms in 1999

4
What Did We Find?
5
Key Points from 4 Years
  • Farms gradually getting bigger
  • Milk per cow holding steady
  • Milk price big jump for 2006
  • Net revenue up with milk price in 2006
  • Net revenue lower in 2007 despite higher price!!!

6
Expense Side of the Story?
7
What is this Showing?
  • Expenses catching up to milk prices
  • Net revenue declining in 2007
  • Jump in Expenses
  • Cash expenses up 12.9 from 2005
  • Accrual expenses up 42.4 since 2005
  • Need to look at major expenses

8
Major Expense Categories
  • Feed, Repairs and Supplies, Labor, Interest,
    Custom hire, utilities and fuel
  • Major jumps in feed and fuel
  • Purchased feed is 93 grain
  • Above account for 80 of expenses

9
Now the Expenses
10
Percent Change Since 2005
11
What are We Seeing?
  • Net farm Revenue down in 2007
  • Feed, Fuel up significantly
  • Other expenses up as well
  • Custom, Interest

12
On a Per Cows Basis
13
How about Feed Grain Prices?
Source Green Mt. Feeds
14
For 2008What about Feed?
  • If feed is up 70, but feed expenses up only 23
    from 2005, whats going on?
  • Farmers feeding less grain per cow
  • Farmers feeding lower protein mix
  • Making better use of forages
  • Very nervous about feed costs
  • Milk prices need to go up?

15
What More Can Farmers Do?
  • Avoiding purchased grains
  • Trying to harvest better forage?
  • Raising more own grain?
  • Costs must be kept in line if you want profits.
  • Commodity Survival Lowest Cost Producer

16
Compare to Conventional Dairy?
  • 2004 Conventional more profitable
  • 2005 about the same
  • 2006 Definitely organic!
  • Depends on the conventional milk price

17
2007 Comparison
18
Aspect of Fuel Expenses Conventional vs Organic
  • Same size organic dairy farms
  • Cropping instead of all Grazing
  • 2004 - 114 vs 92 per cow basis
  • 2005 - 155 vs 104
  • 2006 - 160 vs 122
  • 2007 - 188 vs 122
  • 24, 49, 31, 54 less fuel expenses per cow

19
Transition Costs Based on 2007
  • Assume a 16 net milk price
  • Same organic expenses and production
  • Net farm earnings of -29,985
  • -4.5 Return on Equity
  • Net cash income of -6,278 (no deprec)
  • Can be done but will be costly!

20
Organic Demographics
  • Organic farmers, younger, more educated
  • Greater use of grazing
  • All but 1 do not raise grain
  • New England Characterization
  • 93 Satisfied on organic decision
  • 89 plan on milking 10 yr or more
  • 85 organic more profitable in long run

21
Current Organic Dairy Market
  • Demand continues to grow (or did)
  • USDA reports organic sales up 19-23 in 08
  • Current crisis are people still buying
  • In 2009, Hood dropping some contracts
  • Possibly dropping amount from other farms
  • Bonus prices dropping
  • Challenge of seasonal imbalance

22
What is Future of Organic
  • Depends on economy?
  • Depends on profits?
  • Depends on organic milk price?
  • Not Sure???

23
Any Questions??????
Thank You for your Coming!!!!!
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