The economic value of organic dairy farms in Vermont and Minnesota

Abstract

This study quantifies the overall economic values of organic dairy farms in Vermont and Minnesota and estimates the economic impacts of organic dairy farm sales relative to an equivalent level of sales from conventional dairy farms in those states. This question is of interest because the development of the organic dairy sector has allowed some farms that likely would not have remained in the conventional dairy business to continue being economically viable as organic dairy farms. Thus, these sales provide an economic impact in regions when this milk is exported to nonproducing regions. Organic and conventional dairy farm financial data in Vermont and Minnesota were collected and assembled to develop dairy farm production functions by region and dairy type. These production functions were then used in state-level input-output models to calculate economic impacts. The opportunity costs of organic dairy farm production were also estimated by comparing the relative statewide economic impacts of organic and conventional dairy farms if both experience a hypothetical 5-million-dollar increase in sales. Between 2008 and 2010, Vermont’s 180 organic dairy farms annually contributed $76.3 million in output (the value of an industry’s production within the state), 808 jobs, $34.1 million in gross state product, and $26.3 million in labor income to Vermont’s economy. Between 2009 and 2011, Minnesota’s 114 organic dairy farms annually contributed $77.7 million in output, 552 jobs, $32.1 million in gross state product, and $21 million in labor income to Minnesota’s economy. In Vermont, organic dairy farm sales revenue would result in greater state-wide impacts of 3% in output, 39% in labor income, 33% in gross state product, and 46% in employment relative to the impacts from an equivalent level of sales revenue to conventional dairy farms. In Minnesota, these economic impacts are 4, 9, 11, and 12% greater, respectively, for organic dairy farms relative to conventional dairy farms. This study concludes that organic dairy farms may contribute more to the local economy than average and similar-size conventional dairy farms in the Northeast and Upper Midwest and that organic dairy farm milk production supports economic development in rural communities.