What makes an organic dairy farm profitable in the united states? Evidence from 10 years of farm level data in Vermont

Abstract

Many U.S. dairy farms, especially small farms, are struggling to stay in business due to difficult economic conditions. While switching to organic milk production has been identified as one way to improve farm profitability, there are very limited economic data available on organic dairy profitability and the key factors contributing to its variation among organic dairy farms. This study analyzes a 10-year longitudinal dataset of Vermont organic dairy farms (2006–2016), collected by the University of Vermont Extension, to identify key factors influencing farm profitability and quantify their impact on farm return on assets (ROA) through a multivariate fixed-effects regression model. Results suggest that significant factors for organic farm profitability measured by ROA include feeding management, farm management, farm size, milk price and input costs. Such findings may help many organic dairy farms identify potential areas for improving their profitability and conventional farms evaluate the potential financial benefits of switching to organic operation.