Abstract
AbstractUnited States certified organic and conventional dairy farms are compared on the basis of economic, financial, and technological measures using dairy data from the 2016 USDA Agricultural Resource Management Survey. A stochastic production frontier model using an input distance function framework is estimated for U.S. dairy farms to examine technical efficiency and returns to scale (RTS) of farms of both systems and by multiple size categories. Financial and economic measures such as net return on assets and input costs, as well as technological adoption measures are compared by system and size. For both systems, size is the major determinant of competitiveness based on selected measures of productivity and RTS.
Highlights
Over the past 20 years, USDA certified organic milk production has continued to expand so that it claims a consequential share of U.S milk production
Using Agricultural Resource Management Surveys (ARMS) data, we explore the extent of U.S organic milk production in 2016, estimate returns to scale (RTS) and technical efficiency (TE) associated with organic versus conventional production by size and system, and compare financial performance of organic with conventional farms in various size categories
This is due in part to the greater use of pasture on organic and smaller dairy farms, with pasture-based operations producing on average less milk per cow (Gillespie and Nehring, 2014)
Summary
Over the past 20 years, USDA certified organic milk production (referred to as “organic milk production” for purposes of this paper) has continued to expand so that it claims a consequential share of U.S milk production. Using ARMS data, we explore the extent of U.S organic milk production in 2016, estimate returns to scale (RTS) and technical efficiency (TE) associated with organic versus conventional production by size and system, and compare financial performance of organic with conventional farms in various size categories. Dalton et al (2005) examined net returns associated with Maine and Vermont organic dairies Both studies showed higher revenue per cow with organic relative to conventional production, but no economic profit. McBride and Greene (2009) showed higher production costs for organic dairies, the additional production costs were lower for pasturebased than non-pasture-based operations They did not estimate TE and RTS components of organic relative to conventional production
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