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Title:

Profitability and Economics of Northeast Organic Dairy Farms for 2005

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Cows per farm. 19,494. 12,619. Milk per cow $15.91 $24.94. Milk price. Conventional. Organic ... 18,670 lbs milk per cow (47 cows) ... – PowerPoint PPT presentation

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Title: Profitability and Economics of Northeast Organic Dairy Farms for 2005


1
Profitability and Economics of Northeast Organic
Dairy Farms for 2005
  • Bob Parsons Rick Kersbergen
  • Vermont - Maine
  • In cooperation with Research Team from University
    of Vermont, NOFA-VT, and University of Maine

2
Study To Examine and Estimate the Profitability
of Organic Dairy Farms in Vermont Maine
  • 44 farms for 2005
  • Vermont 26 farms
  • Maine 18 farms
  • Up from 30 farms in 2004

3
Study Procedure
  • Study funded by USDA CSREES and UVM Experiment
    Station
  • Cooperate with NOFA and MOMP
  • Teams visit farms to gather financial data

4
Questions Addressed by Study
  • How profitable is organic dairy?
  • What is the trend in profitability?
  • Range of profitability and cost of production

5
What Did We Find?
6
What About the Income?
  • Milk Sales - 184,144
  • Dairy cattle sales - 3147
  • Cull cows and calves - 5648
  • Government payments - 6108
  • Value of farm production - 211,098
  • Up 18.5 from 2004

7
Now the Expenses
8
So Whats the Bottom Line?
  • Net cash income - 49,466
  • Net farm Revenue - 33,409
  • Farm Revenue up 18.8 from 2004!

9
How Much Income is Enough?
  • Families supplied 5641 hours for 5.92/hr
  • At family living expense of 35,000, net farm
    income without off-farm income was -1591

10
What is Profit
  • Economic profit is what is left over after all
    expenses, depreciation, and owner labor is paid.
  • So the Average farm did not earn a profit
  • 16 farms with positive profit
  • Wide variation between farms
  • -4.0 Return on Equity

11
Income per Cow Down from 1999
12
Organic Costs Up 607 Per Cow!
13
Results Organic Profits Up in 2005
  • Net farm revenue still not at 1999 levels
  • Milk price is up
  • Income still not meeting family living
  • 1999 positive return on equity
  • 2005 negative return on equity

14
How Does Organic Dairy Farm Profitability
Compare to Conventional?
  • Compare to Northeast Dairy Farm Summary 2005
    published by Northeast Farm Credit, farms under
    90 head
  • Caution Comparison is not apples to apples

15
Conventional farms higher production, lower milk
price for 2005
16
Comparing Profitability
17
Are Costs any Different?
18
Conventional vs. Organic - 2005
  • Organic more profitable
  • farm, cow, and cwt basis
  • Conventional milks more cows
  • Reality
  • Conventional farm milks 10 more cows
  • For 4,567 less revenue!

19
View of 2005
  • Average organic farm profitability improved over
    2004
  • Still large variability between farms
  • More profitable than Conventional
  • Still not as profitable as in 1999

20
Characteristics of One of The Best?
  • 1170 net/cowAfter Family Living!
  • 18,670 lbs milk per cow (47 cows)
  • Expenses More then 50 below average for vet,
    utilities, supplies, repairs, interest, fuel,
    custom hire, and labor!

21
So What is this Farms Secret?
  • High production per cow
  • Component premiums
  • Low debt
  • Low equipment investment
  • Darn Good Cost Management!

22
So Whats the Story?
  • More farms in study than in 2004
  • 2005 income up but still not quite enough
  • Farmers right they still need more for milk
  • Organic better than conventional in 2005
  • More income per cow and cwt
  • Smaller farms, fewer cows
  • Some farms would not be in business!

23
More to Learn
  • Study needs a bigger sample of organic farms
  • Small farms can survive as organic but still face
    profit squeeze
  • How high can organic milk price go?
  • Nearly 90 VT farms switching to organic

24
Any Questions??????
Thank You for your Coming!!!!!
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