Production Costs of Grass-Fed Organic Milk in the Northeastern United States: Empirical Results from Survey Data and Implications for Sustainable Development

While there is very limited information on the cost of production (COP) for the emerging 100% grass-fed organic dairy sector, this study (1) estimates the COP using primary data collected from on-farm surveys, (2) assesses the correlation between COP and key production and management factors, (3) examines how land, feed and labor efficiency, and production scale affect the COP, and (4) derives recommendations for enhancing the economic efficiency of grass-fed organic dairy farms. Data collected via annual surveys in the Northeastern United States from 2019 to 2022 were analyzed through descriptive statistics, correlation analysis, hypothesis tests, and regression analysis. At an average cost of USD 45.91 per hundredweight equivalent of milk, the marginal impacts of the cows managed per full time equivalent labor and milk sold per cow on the COP were −USD 0.166 and −USD 0.003, respectively. Conversely, the COP increased by USD 1.44 when the crop acres per cow increased by one unit, and the COP of small farms with less than 45 cows was USD 6.20 higher than other farms. As farms are significantly different in resource endowment and other factors, the strategies for reducing the COP and improving the economic returns should be identified for individual farms. However, our analyses highlight the importance of enhancing labor efficiency in forage production, land management, milking and feeding, improving herd management and optimizing nutrition and dry matter intake to support high milk productivity. This study may help existing grass-fed dairy farms improve their farm management and reduce COP and help prospective farms assess their suitability for transitioning to grass-fed operation.