FEATURES
How to Profitably Go Organic

by Marcia Passos Duffy
Lessons from a nonprofit dairy farm

While Stonewall Farm is not a commercial dairy farm—it is a nonprofit educational farm in Keene, N.H.—it does face the challenges every for-profit dairy farm (or any business, for that matter) faces: how can it successfully make enough money to sustain itself?

When Stonewall Farm found it was losing upwards of $70,000 a year in its dairy operations alone, board members and staff had to take a good look at what to do. In addition to being a working farm, Stonewall Farm runs various programs throughout the year including a children’s summer camp, which has been always been funded by individual and corporate donations, membership fees, grants, program fees, facility rentals, gift shop sales and farm products (it sells raw milk retail and wholesale, vegetables, flowers, maple syrup, honey, ground beef and eggs). However, one of its major donors began to taper off making large contributions in recent years to encourage the farm to find ways to become more economically sustainable. Plus, the farm had huge overhead costs in salaries, workers’ compensation and liability insurance. The dairy operation was a huge drain on the budget.

The solution? The farm decided that its dairy operation would go organic.

“This was not just a philosophical decision,” says Kathy Harrington, Stonewall Farm’s executive director. “Economics drove the decision,” she said.

So far, the reasons for changing over to organic have proved fruitful for the small 30-head, 1,800 pounds of milk a day dairy farm, which began the changeover in 2004 and was completely organic in June 2007. Harrington expects that in the first time in its nonprofit history, Stonewall Farm’s dairy program will end its fiscal year (which ends June 2008) in the black—by about $20,000.

Cows are outside more on the pasture, so a rotation program must be followed.

Challenges to becoming organic

Switching over a conventional dairy farm to organic is a huge undertaking, particularly for a small farm with limited resources. It takes three full years to switch pastures to organic, and one year to establish the herd as organic.

There are several steps to becoming a certified organic dairy:

1. Pastures must be managed using sustainable, environmental and natural methods. That means no fertilizers, pesticides or herbicides.

2. Cows are outside more on the pasture, so a rotation program must be followed.

3. Hay and grain (essentially anything that goes into the cow) must also be certified organic.

4. No antibiotics can be used in treating the cows for any problem, including mastitis. Homeopathic and/ or natural methods (such as garlic or garlic tincture) can be used.

While most of these steps were not problematic for Stonewall Farm, certified organic hay and grain are hard to get, and very expensive. Typically, costs for organic feed for cows is upwards of 30 percent more in the Northeast than conventional hay and grain (however, studies have shown that Midwest organic feed is less expensive than in the Northeast).

There is also an awkward—and financially draining—period of time when the farmer is using more expensive and time-consuming organic methods, yet only getting conventional prices for the milk produced.

“Transitioning from conventional to organic can be a financially trying time, since while you are spending more labor and money, you are not reaping the rewards yet of the higher price of milk,” said Harrington. But, if farms can get over this hurdle, it is well worth it, she said.

The average pay price for conventional milk is $20 for 100 pounds, according to the N.H. Department of Agriculture and Markets (as of this writing). Organic milk gets $30 per hundredweight. (Price for organic milk is based on supply and demand and the quality of the milk).

Although milk production declines in an organic system, the average net return is higher because of the price differential: an average of $477 per cow per year in the organic system vs. $255 per cow per year in a conventional dairy system (data from a statewide study conducted in Vermont by the Northeast Organic Dairy Producers Alliance).

The next biggest challenge to going organic, noted Stonewall Farm Manager Glenn Yardley, was the mountains of paperwork involved in applying for organic status, and for the required tracking systems. “This is a tightly regulated industry,” he said. Going through a summer dry spell also proved to be difficult and expensive, since they could not treat the pastures with fertilizers or growth-promoting chemicals, and had to truck in baylage for the cows. While the farm could get a few bales of organic hay locally, it was not enough. “Canada had the best quality and availability,” said Yardley. “But, including trucking it cost us close to $100 a large square bale.”

Since June of 2007, the dairy operation has run a bit more smoothly. A truck picks up the milk every other day, but instead of Agrimark sending Stonewall Farm the payment, Organic Valley now sends them a check. Most of the Stonewall Farm milk ends up as yogurt and other dairy products at Stonyfield Farms; the remainder of the milk is sold to other organic milk and dairy distributors.

“If we didn’t go organic, the dairy operation would have gone under unless it was propped up by donations... it would certainly have gone under if it was a for-profit farm,” said Laurie Donohue, Stonewall Farm’s marketing and development coordinator.

The farm also sells raw milk to about 85 local customers, at $4 for a half-gallon (up from $2 for the half-gallon for its conventional milk). “We have seen an increase in our customer base since we have gone organic,” said Donohue, (up from 50 to 85 customers in three months);

Advice for commercial dairy farmers going organic

While Stonewall Farm is a nonprofit entity, there are many lessons and advice to be gleaned for commercial dairies looking to go organic.

"If we didn't go organic, the dairy operation would have gone under unless it was propped up by donations," said Laurie Donohue, Stonewall Farm’s marketing and development coordinator.

First, look into any loans or USDA programs (grants or loans) that are available to farms making the transition to organic. This information can be obtained by asking your local cooperative extension.

The next thing is to get as much advice as you can.

“The smartest thing we did was to sit down with UNH [University of New Hampshire] Cooperative Extension people who brought in organic milk production experts,” said Harrington. These experts helped the farm run through the numbers and provided templates and spreadsheets based on our individual and current operation.

After garnering the necessary numbers to make the vision a reality, the farm contacted Organic Valley and asked that it host a breakfast and invite its co-op member farmers and other farms who made the transition from conventional to organic. “Forty farmers dropped what they were doing to drive—some a couple of hours—to give or get advice. Not all were for it; some were dead-set against it. Even an executive from Stonyfield Farm showed up with interest in this dialogue,” said Harrington.

While economic reasons were the driving force for Stonewall Farm becoming organic, Harrington notes that this should not be the only reason. “If a farm is just doing it solely for the money, it’s setting itself up for failure... because organic needs to be part of your philosophy. There are good years, there are also bad years. A lot has to do with Mother Nature... and the nature of farming,” said Harrington.

It is all still a learning process for the farm. There are so many unknowns: Will organic milk prices stay this appealing? Will feed prices go up? Can the farm maintain herd health through homeopathic methods? Still, for a nonprofit running a once faltering dairy operation, $20,000 in the black is cause for optimism. “We actually had planned for a slight loss,” said Harrington.

Marcia Passos Duffy is a freelance writer based in Keene, N.H. Write to her at marciaduffy@cheshire.net