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Pricing Milk

How many mature cows did you have as of January 1, 2020? Did you buy or sell any equipment in 2019? How much milk did you produce that year? How much did you spend on repairs and maintenance? Can I see your Schedule F tax return?

I pepper the farmer sitting opposite me (whether on Zoom or across the table) with these questions and so many more, inputting the answers into my spreadsheet. There are frequent pauses not only to shuffle through papers or click through QuickBooks categories but also to talk about how a new production technique is working or how their neighbors’ kids have started helping out on their farm.

Twenty-four organic dairy farmers scattered across Vermont experienced a similar visit in 2021. They had all agreed to participate in NOFA-VT’s Organic Dairy Cost of Production (COP) Project. In short, a farmer’s cost of production is how much it costs them to produce a hundredweight (cwt) of milk (1 cwt is approximately 11.6 gallons of milk). This includes not only expenses you would automatically think of, such as the cost of grain and labor, but also needs to take into account their family living allocations and debt payments. In an ideal world, all farmers would be selling their products for at least their full cost of production, plus a bit more for farm improvements and a rainy day fund.

NOFA-VT’s Farmer Services Program has been conducting this Organic Dairy COP work since 2018; carrying on the legacy of late UVM Extension Professor Bob Parsons who started collecting the data in 2007. Each year we collect financial and production information from a subset of organic dairy farms in Vermont, input the data into a spreadsheet, and analyze their cost of production and other key financial and production metrics. The analysis happens at both the individual and aggregated levels, enabling farmers to compare their performance to both statewide benchmarks and also to their own business’s historical results. The information assists farmers with identifying opportunities to increase revenue and decrease expenses in order to maximize their profit margins and improve their long-term viability. Results are also disseminated to and used by Vermont’s network of agricultural service providers, lenders, milk buyers, industry stakeholders, and the Agency of Agriculture, with the same long-term goal of supporting the profitability and sustainability of these businesses.

My takeaways from our 2021 COP effort fall into three different categories: farmers, NOFA-VT staff, and industry stakeholders.

Farmers: We have amazing organic dairy farmers in this state, caring for their land, herds, and families while upholding the highest of standards. Results are variable from farm to farm but two things are certain. First, the cost of producing milk in the Northeast is higher than in other areas of the country, primarily due to our geographic location and climate. And second, labor efficiency (think of milking in some of the older, historical barns in this state) and sourcing (finding reliable and skilled employees) is a challenge on many farms that needs to be addressed.

NOFA-VT Staff: 2021 marked the first year that Bill Cavanaugh, Farm Business Advisor, joined me in the COP quest. When asked about his overarching thoughts about this project Bill had this to say; “It was an educational and enlightening chance to connect with farmers on their numbers. It also was a good opportunity for me to build relationships with more dairy farmers.”

Industry Stakeholders: This project catalyzes the deepening of working relationships between NOFA-VT and key stakeholders of the organic dairy industry such as milk buyers (Organic Valley and Stonyfield), lenders, grain dealers, UVM Extension, and the Vermont Agency of Agriculture, Food and Market’s Dairy Section. This year I have felt especially aware and appreciative of these collaborative relationships. Bill and I will be off to the COP races again beginning in January of 2022, continuing to document the development and challenges of the organic dairy industry and support Vermont’s organic dairy farmers.

For more on the project and to see past results, visit nofavt.org/DairyCOP.

Jen Miller is the Farmer Services Director at NOFA-VT.