I wanted to flag this online tidbit by Dairy Today writer Cathy Merlo about a new USDA report on the economics of organic dairy production. It pointed out that while organic dairy production has grown rapidly on a percentage basis – about 25% between 2000 and 2005 alone – it still represents a tiny sliver of the total number of cows in the U.S., just about 1 percent.
The really interesting thing in the USDA’s analysis is that the higher cost of production of organic milk, even with a heavier reliance on home-grown forage, negates much of the higher milk price that certified organic farms receive. This statistic was telling:
• Total economic costs of organic dairies in 2005 were $7.65 per cwt higher than for conventional dairies, nearly $1 per cwt higher than the average price premium for organic milk.
What the report illustrates is that there is no sure pathway to profitable dairy production that passes through organic certification. There may be some entirely valid reasons that farmers choose to go the organic route, but as the dairy crisis of 2009 has painfully illustrated, that route has not avoided the financial pressures afflicting all livestock producers, organic or not. The crunch this year with low milk prices, and high input costs, is an equal-opportunity scythe that cuts down everyone’s business model.
As milk prices continue to rebound at the end of 2009 (and as consumers reassess their shopping and food purchasing habits), it will be interesting to see whether the decline in demand for organic foods reverses itself next year, and whether that will provide enough incentive to see more farms make the conversion to organic.