The economics of organic milk production in California: A comparison with conventional costs

Abstract

Interest in organic dairying is increasing at a rapid pace in California, and the demand for organic milk and dairy products is growing even faster. The intent of this study was to determine the cost of organic milk production, and in particular, to determine the differences in cost of production of organic and conventional milk. Primarily we are interested in whether the differences are due to government-mandated requirements or whether they are the result of optional procedures or personal preferences. Previous studies have indicated that under organic production, the higher net returns observed on organic farming enterprises are due mainly to the lower cost of production. This conclusion is not sustained here. Our results show that the total cost of production on a per cow and a per hundredweight basis is 10-20% higher for organic producers than for conventional producers. While not strongly statistically significant, the differences appear to be due to higher feed costs, higher average labor costs, significantly higher herd replacement costs, and significant transition costs.