A New Cash Cow

Rick Letourneau lost so much money as a conventional dairy farmer that he had to sell all his cattle and burn furniture to heat his house. Today, though, he proudly shows off his three dozen lowing, impatient cows as they wait their turn to give it up to a mechanical milker. He nods toward the new mudroom and double-hung windows and pale yellow siding on his home and talks about building two more winter shelters for the livestock. And he plans to keep improving his 85-acre spread near North Troy, Vt., with financing from his local bank. "The vice president told me that if I wasn't organic," Letourneau says, "we wouldn't be talking."

Organic farming used to be about saving the planet; now it's about saving the family farm. To be certified organic, a dairy farmer can't treat his cows with antibiotics or hormones and he must feed them grain and hay grown without herbicides, pesticides or chemical fertilizers. By meeting these tests, Letourneau gets $22 for every 100 lbs. of milk about twice the price of conventional milk. That adds up to about $120,000 a year, which he supplements with $70,000 in contract work spreading manure, baling hay for nine other farms, allowing him to net $25,000 last year. While conventional-milk prices fluctuate wildly, the price of organic milk has held steady. The premium has been so steep for the past few years that more and more farmers, even some who once dismissed organic farming as a bunch of New Age nonsense, are changing their tune.

"Going organic used to be about philosophy," says Gary Hirshberg, CEO of Stonyfield Farm, an organic-yogurt maker based in Londonderry, N.H. "Now it's about the cash. It's about survival."

Family farmers, whose herds average around 100 cows, suffer the most when conventional-milk prices are low; they lack the economies of scale of the large factory-style producers. But organic farming levels the playing field, because certain land-use requirements can be more difficult or even logistically impossible for larger farms to meet.

Vermont had 2,000 dairy farms in 1990; today there are 1,400. Over the same period, the number of organic farms jumped from three to 60. Fifteen more are expected to be certified by the end of this year, and a similar number in each of the next two years. Nationally, the number of organic dairy cows has jumped from about 13,000 in 1997 to nearly 49,000 in 2001 (the latest year for which figures are available).

Driving this trend is consumer demand. Retail sales of organic dairy products are growing about 20% a year, even though a gallon of organic milk typically costs more than twice as much as regular milk. Its fans believe that organic milk is healthier because it comes from cows that aren't treated with antibiotics (which some researchers warn can be passed on in the milk and can increase the incidence of antibiotic-resistant bacteria) and synthetic growth hormones (which are believed to accelerate development in children). Studies are not conclusive, and nonorganic milk producers insist that their products are safe. But consumers surveyed by the Hartman Group, a market-research firm, cite anecdotal evidence a neighbor complaining about her milk-chugging 9-year-old daughter's developing breasts to explain their preferences. And early puberty has been associated with an increase in a number of hormone-related cancers, such as breast cancer. The second most oft-cited reason consumers buy organic milk: its taste.

For a dairy farmer, the switch to organic can be difficult and expensive. Without synthetic growth hormones, cows produce less milk. Without antibiotics, some infections are tougher to treat. Organic grain costs twice as much as the regular kind, because managing crops without chemicals is more labor-intensive, and organic farmers must have more pastureland to support daily grazing. "We're not living high off the hog," says Lyle Edwards, a dairy farmer in Westfield, Vt., who has been certified organic since last summer. The advantage, he says, is that the higher price of organic milk allows him to earn more while producing less: "It's like getting off a treadmill."

Letourneau took the biggest hit in 2000, during the 90-day transition period then required by the Northeast Organic Farming Association of Vermont. His cows had to eat the pricier organic food while their milk still fetched conventional prices. If he made the switch today, federal regulations that took effect last fall would require him to phase in the organic feed over a full year before he was certified.

Letourneau had already been growing his hay without chemical fertilizers or sprays, so his land qualified immediately. Otherwise he would have faced a three-year transition. Ken Preston, a conventional dairy farmer in Randolph Center, Vt., who does use chemicals to grow hay and corn for his herd, believes he would go bankrupt before he ever made his first organic sale. "I've been really tempted to go organic, but I'd have to change my entire method of farming and have the expense for three years before I could ship my milk at the higher price," he says. "At my profit margin, it would put me out of business."