Methods
PRO-DAIRY and Cornell Cooperative Extension farm business management educators work closely with dairy operators to complete the DFBS on an annual basis. Farms contribute detailed financial, production, and labor information. Farm revenues and expenses are adjusted for changes in inventory, prepaid expenses, accounts payable, and accounts receivable, and are reported on an accrual basis. Participating farms receive a set of financial statements and comparison reports useful for benchmarking their performance against other farms.
Fifteen certified organic dairies across nine counties in New York completed the DFBS for 2023. These farms managed a combined total of 2,395 cows and 10,615 crop acres and produced 39.8 million pounds of milk. None of the participating farms held a grass-fed certification. They all included grain in their lactating cow ration to varying degrees. DFBS data from these farms were aggregated to generate production and financial benchmarks for 2023. Additionally, the report divides the farms into two profitability groups based on their rate of return on all assets (ROA) before appreciation to compare characteristics of eight lower profit versus seven higher profit organic dairies.
As a voluntary sample, participating farms are not representative of all organic dairies in New York. USDA organic survey data suggest that New York organic dairies managed 69 cows and produced 11,610 pounds of milk per cow, on average, in 2021. DFBS collaborators tend to have larger herds and higher milk production than the state average.
Herd size and milk production
Herd size averaged 160 cows per farm, with 0.69 replacement heifers per cow. Average milk sold was 2.62 million pounds per farm, or 16,189 pounds per cow. Variation in milk per cow within the group was large. Half the farms produced more than 19,000 pounds per cow, and farms in the top 20 percent of per cow made more than twice as much milk per cow as farms in the bottom 20 percent. This variation reflects differences across farms in cattle breeds and management practices. Of the 2,395 total dairy cows managed across the 15 farms, most were Holstein (68.3 percent), with the remainder split between Jersey (15.3 percent), and crossbred cows (16.4 percent). Farms used a variety of milking systems, including pipelines, parlors, and robots. Most farms milked twice daily, although four farms milked more than twice a day, using automated milking systems or milking some groups three times per day in the parlor.
Higher profit farms had 33 percent more cows and made 16 percent more milk per cow, on average, compared to lower profit farms. As a result, higher profit farms shipped 1.08 million more milk pounds, on average, than lower profit farms in 2023.
Crop production
Organic dairies managed an average of 4.8 crop acres per cow, including tillable acres and permanent pasture. They grazed an average of 1.6 acres per cow, yet pasture use ranged from less than 0.9 to more than 2.3 acres per cow. Hay yields averaged 2.5 dry tons per acre, although this includes acres used for both hay and pasture without accounting for pasture production. Nine of the 15 farms grew corn silage in 2023, with an average yield of 14.7 tons per acre. Seven of the 15 farms grew corn for grain, with an average yield of 118 dry shelled bushels per acre. Most raised forages and grain crops were utilized on the farm, with 60% of farms reporting little or no cash crop sales. Yet 20 percent of farms reported modest cash crop sales of $99 to $161 per cow, and the remaining 20 percent reported higher cash crop sales of $750 or more per cow.
Higher profit farms used land and crop inputs more efficiently. Both profit groups harvested an average of 6.5 dry tons of forage per cow, excluding pasture, yet the higher profit group accomplished this with larger yields per acre and fewer acres per cow. The higher profit group averaged 4.3 acres per cow, compared to 5.2 acres per cow for the lower profit group. Hay yielded nine percent more per acre and corn silage yielded 56 percent more per acre, on average, for the higher profit farms. Despite achieving higher yields, higher profit farms spent 39 percent less on crop inputs, with an average cost of $69.44 per acre for fertilizer, seed, and other crop inputs, compared to $114.02 per acre for the lower profit group.
Milk price and income generation
Gross milk revenue averaged $37.73 per cwt in 2023. Gross milk revenue encompasses all income from the sale of milk, plus milk cooperative patronage payments and income from milk price risk management programs, including the Dairy Margin Coverage (DMC) program. Although DMC payments are determined by conventional milk prices and feed costs, organic dairies are eligible to enroll. Income from milk price risk management efforts averaged $2.78 per cwt among farms in our sample, comprised mostly if not entirely of the net DMC payments for 2023.
Non-milk revenue averaged $8.21 per cwt, resulting in total accrual operating receipts of $45.94 per cwt. Milk revenue comprising 82.1 percent of the total. Crop revenue, which includes cash crop sales and crop insurance payments plus changes in raised crop inventories, averaged $3.60 per cwt and made-up 7.8 percent of total sales. Revenue from dairy cattle, calves, and other livestock products averaged $2.51 per cwt or 5.5 percent of total farm income. Miscellaneous receipts, which include government receipts, custom hire income, and other sources of farm income, averaged $2.10 per cwt, accounting for the remaining 4.6 percent. Payments from the Organic Dairy Marketing Assistance Program (ODMAP) are entered as government receipts. In 2023, ODMAP paid organic dairies up to $1.10 per cwt based on their actual 2022 milk production or projected 2023 milk production.
Higher profit farms generated $5.50 per cwt more in total operating receipts, on average, driven by $3.09 per cwt more in milk revenue and $2.68 per cwt more in crop revenue. Variation in milk revenue reflects price differences across milk cooperatives, as well as farm-level differences in component production, milk quality, and milk price risk management efforts. Within a single crop season, differences in crop revenues across farms may reflect variation in crop management practices, crop marketing decisions, crop insurance coverage, growing conditions, or all four.
Labor efficiency and cost
Smaller dairies tend to use a greater percentage of family labor relative to hired labor, and organic dairies are no exception. Hired labor comprised 55 percent of total labor hours, on average, yet it ranged from less than 19 percent to more than 81 percent of the total labor hours. The average cost of hired labor was $18.66 per hour, or $51,495 per hired full-time worker equivalent (FTE), which the DFBS defines as 2,760 hours per year. Organic dairies managed 38 cows per FTE, on average, and shipped 604,938 pounds of milk per FTE. Older facilities and equipment constrain labor efficiency on some farms, as one-third of participating dairies used tiestall barns to house some or all lactating cows, and 20 percent used pipeline systems to harvest milk.
Despite the relatively high proportion of operator labor on organic dairies, hired labor was the second largest cost category. Farms spent $5.59 per cwt on hired labor, on average, equal to 14.4 percent of the total operating expense. Although the proportion of hired labor was similar for both profit groups, the higher profit farms used labor more efficiently, managing five percent more cows per FTE and shipping 26 percent more milk per FTE. Higher profit farms paid higher wages, spending $8,876 more per FTE, on average. Yet their labor efficiency advantage resulted in a 20 percent lower hired labor cost per cwt.
Production cost benchmarks
Purchased feed was the largest single cost on organic dairies, reaching $11.14 per cwt in 2023. Farms spent an average of $9.66 per cwt on grain and concentrates, and $1.48 per cwt on forages. Purchased feed comprised 28.7 percent of the total farm operating expense, yet spending on feed varied widely across farms, reflecting differences in feeding practices, feed efficiency, feed prices, and cropping strategies.
Organic milk producers benefited from relatively low milk marketing costs in 2023. The average cost of marketing organic milk was $0.52 per cwt, although it ranged from less than $0.18 to more than $1.08 per cwt. Milk marketing comprised 1.3 percent of their total operating expense, on average. In contrast, 30 conventional dairies with fewer than 500 cows completed the DFBS in 2023 and reported an average milk marketing expense of $2.21 per cwt, accounting for 9.5 percent of their total operating expense.
The total farm operating expense for organic dairies averaged $38.75 per cwt before depreciation. After accounting for depreciation costs averaging $4.86 per cwt and expansion livestock purchases averaging $0.15 per cwt, the total farm expense rose to $43.77 per cwt. This represents the total accrual cost to run the farm before any accounting of operator and family contributions of labor, management, and equity capital.
The average total operating expense on higher profit farms was $7.80 less per cwt than on lower profit farms. Higher profit farms spent $3.94 less per cwt on purchased feed and $1.23 less per cwt on hired labor. These two cost categories account for two-thirds of the difference in operating expenses between the profit groups. Higher profit farms also spent $1.57 less per cwt on crop inputs and $0.10 less per cwt on fuel, which may reflect their use of fewer acres per cow. Higher profit farms spent $1.20 more per cwt on custom hire and machinery rent, yet this difference was partially offset by their spending $0.36 less per cwt on machinery repairs and $0.45 less per cwt on machinery depreciation. Higher profit farms spent $0.49 more per cwt on real estate rent, yet they spent $0.36 less per cwt on real estate taxes and $0.93 less per cwt on real estate repairs. Higher profit farms also spent $0.52 more per cwt on interest, despite having 16 percent less debt per cow.
Breakeven costs of milk production
The DFBS calculates production cost measures that farms can use to evaluate three breakeven points compared to their gross milk revenue. The Operating Cost to Produce Milk is calculated by adding any expansion cattle purchases to the total farm operating expense, then subtracting non-milk revenues. This measure represents operating costs that must be covered by the sale of milk. In 2023, the Operating Cost to Produce Milk averaged $30.69 per cwt.
The cost of depreciation and any extraordinary expenses are added to the Operating Cost to Produce Milk to calculate the Purchased Input Cost to Produce Milk. This measure represents operating costs that must be covered by the milk check plus capital replacement costs. The Purchased Input Cost to Produce Milk averaged $35.56 per cwt in 2023.
The third measure, the Total Cost to Produce Milk, incorporates the opportunity costs associated with operator and family contributions of labor, management, and equity capital to the business. In 2023, the total value of operator and family contributions averaged $10.68 per cwt, and the Total Cost to Produce Milk averaged $46.24 per cwt.
Average milk revenue of $37.73 per cwt exceeded the average Operating Cost to Produce Milk by $7.04, and it surpassed the Purchased Input Cost to Produce milk by $2.17, yet it was $8.51 less than the Total Cost to Produce Milk. This suggests that earnings from the sale of organic milk were sufficient to cover annual operating expenses and capital replacement costs, on average, but they did not cover all opportunity costs associated with operator labor, management, and capital.
Notably, organic diaries would not have achieved this level of performance in 2023 without income from the DMC and ODMAP programs. Income from the DMC program is classified as milk revenue in the DFBS, while income from ODMAP is classified as non-milk revenue. If organic dairies had received no milk price risk management payments in 2023, milk revenue would have been reduced by $2.78 per cwt, on average, and it would have fallen short of the Purchased Input Cost to Produce Milk by $0.61 per cwt. Furthermore, without ODMAP payments in 2023, non-milk revenue would have been lower, and all three production cost measures would have increased by that amount. In future years, organic dairies may receive considerably less or no revenue from the DMC program, depending on conventional milk income over feed cost margins. In 2024, the ODMAP payment rate will increase to $1.68 per cwt. However, funding for ODMAP has come from Commodity Credit Corporation funds left over from earlier pandemic assistance programs. Once those funds are exhausted, the future of ODMAP is unclear.
Investment levels and returns
Total capital investment on organic dairies averaged $21,652 per cow, while debt averaged $6,114 per cow. Most farms held a strong solvency position, with the debt to asset ratio averaging 0.29. Yet investment per cow was high compared to conventional dairies in the DFBS. A group of 30 smaller conventional dairies with an average herd size of 253 cows reported the same average debt to asset ratio of 0.29 in 2023, yet their total capital investment was 29 percent lower at just $15,411 per cow. These 30 conventional dairies averaged 2.5 tillable acres per cow and owned 51 percent of those acres. Higher land utilization per cow by organic dairies may explain some of this difference in capital investment. With profitability being a measure of farm profit divided by the total investment, dairies with greater capital investment must achieve higher earnings to generate the same rate of return.
Farm profit, measured by net farm income, is the return to the family for working, managing, and investing in the business. Net farm income for the 15 organic dairies in our sample averaged $306 per cow or $2.16 per cwt before appreciation. After accounting for changes in market values of farm assets, net farm income with appreciation averaged $1,911 per cow or $13.46 per cwt. The large difference between net farm income with and without appreciation reflects modest to substantial increases in cattle, equipment, and real estate values recorded by some farms on their year-end market value balance sheet.
Rate of return on equity (ROE) and rate of return on assets (ROA) are measures of profitability that indicate how efficiently a business uses capital investment to generate profits. Without appreciation, ROE averaged -4.6 percent and ROA averaged -0.3 percent. More than half of organic dairies showed negative rates of return to equity capital and all capital before appreciation, signaling that they did not generate positive returns on their investment through farm operations in 2023. However, most farms did show a positive return after accounting for appreciation of farm assets. With appreciation, ROE averaged 5.2 percent and ROA averaged 6.7 percent.
Conclusions
While some organic dairies in New York generated positive returns on their investment through farm operations in 2023, more than half of DFBS participants did not. Higher profit farms tended to have larger herds and higher milk production per cow, and to use land and labor more efficiently. Yet most of the participating farms were profitable only after accounting for asset appreciation. Although appreciation represents a true source of earnings, it cannot be converted into cash without liquidating farm assets. To maintain a viable business over time, a farm must achieve adequate earnings from operations. Payments from the DMC and ODMAP programs significantly boosted earnings for organic dairies in 2023, yet farms cannot rely on consistent income from these programs in future years. These data raise concerns about the economic viability of organic dairies in New York, especially those in the lower profit group, yet it would be misguided to draw conclusions about long-term business viability from a single year of financial data. Ultimately, ongoing participation by organic dairies in the DFBS will help to provide better insights into the health and sustainability of New York’s organic dairy sector.
