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© 2008 Plant Management Network. Grass-Based Dairy Production Provides a Viable Option for Producing Organic Milk in Pennsylvania C. Alan Rotz, Agricultural Engineer, USDA-ARS, Pasture Systems and Watershed Management Research Unit, University Park, PA 16802; and Heather D. Karsten, Associate Professor, Crop and Soil Science Department, and Robert D. Weaver, Professor, Agriculture Economics and Rural Sociology Department, The Pennsylvania State University, University Park 16802 Corresponding author: C. Alan Rotz. al.rotz@ars.usda.gov Rotz, C. A., Karsten, H. D., and Weaver, R. D. 2008. Grass-based dairy production provides a viable option for producing organic milk in Pennsylvania. Online. Forage and Grazinglands doi:10.1094/FG-2008-0212-01-RS. Abstract More intensive use of pasture and the transition to organic production are being used to reduce production costs and increase profitability of some small dairy farms in Pennsylvania. Farm simulation, supported by case study farm data, was used to compare the economic benefits and environmental impacts of two grazing-based production systems using either organic or conventional practices. Systems using all-grass production with managed rotational grazing and a spring calving herd maintained outdoors throughout the year had lower erosion and phosphorus losses, lower production costs, and up to $200/acre ($1.58 to 3.63/cwt of milk produced) greater net return compared to systems using crop production, supplemental grazing, random calving, and winter confinement. With either production approach, substantial economic benefit was found using organic practices, but this benefit was highly dependant upon the price difference between organic and conventional milk. Environmental concerns for organic production were (i) long-term accumulation of soil nutrients due to the use of imported poultry manure for crop fertilization, and (ii) greater soil erosion and runoff loss of phosphorus due to increased tillage for weed control in annual crops. The economic net benefit may encourage more grass-based dairy producers to transition to organic certification, so more attention must be given to identifing strategies that better utilize farm nutrients and reduce losses to the environment. Introduction Most dairy farms in Pennsylvania remain relatively small in size. The 2002 Census of Agriculture found that 86% of Pennsylvania dairy farms had 100 cows or less with 69% being 250 acres or less in land area (4). These farms, like those in many other parts of the USA, are having difficulty maintaining viability. The major issues faced are low profit and environmental concerns. Production costs remain high relative to the price of milk sold, compromising profitability at these smaller scales of operation. Environmental concerns primarily relate to N and P losses. Reducing these losses requires improved strategies for nutrient management, and these changes often increase production costs. The squeeze on profit has led many producers to reduce costs per unit of production by increasing herd size. In this region, expansion of land is often not possible or economical given high land prices. Thus, increasing animal numbers on the land often leads to greater difficulty in managing nutrients, which exacerbates the environmental issue. Within this setting, the possibility of improving economic viability while maintaining herd size is of interest to many producers. To reduce production costs and the demand on available labor, some are turning to greater use of pasture with managed rotational grazing. A survey in 1997 reported that about 18% of Pennsylvania dairy farmers graze their lactating cows with rotation to new pasture more than once per week (6) and this portion continues to grow. A number of studies using simulation and farm survey data have shown reduced annual production costs of up to $300/cow through the use of supplemental grazing along with confinement feeding and up to $700/cow with greater use of rotationally grazed pasture along with spring calving and out-wintering (year-around outside maintenance) of animals (1,2,3,9,10). Improvement in profit depends upon the extent to which milk production is reduced with grazing. Reported annual increases in farm profit have generally ranged between $100 and $300/cow. To offset the milk yield reduction with grazing, some have found that a shift to organic production provides both higher and more stable milk prices. Organic dairy market sales have grown by over 15% per year in recent years (5). The number of certified organic dairy farms in Pennsylvania has increased from around 50 to about 160 in 2003 through 2006 in response to this growing market (Pennsylvania Certified Organic, Centre Hall, PA, personal correspondence). Since organic dairy certification requires the use of grazing, these strategies work well together. A recent study compared the environmental impacts and economics of simulated organic dairy production systems in central and eastern Pennsylvania to those using conventional production practices (8). In this analysis, the same land base and animal numbers were used for all production strategies. Although many farm parameters were held the same across systems, these production strategies were very different by design. During this analysis, we recognized the need to evaluate organic production against more similar conventional grass-based production systems. Therefore, the objective of this study was to use simulated farms to compare organic and conventional practices for two grazing-based production systems. The two farming systems were (i) a low-input approach where the entire farm was rotationally-grazed perennial grassland with a spring calving herd maintained outdoors throughout the year, and (ii) a more traditional random calving herd maintained in a free stall barn, fed total mixed rations, and rotationally-grazed during the growing season. Case Study Dairy Farms Four organic dairy farms throughout Pennsylvania were extensively surveyed to gather information to characterize our simulated production systems. This information included land and crop use, grazing strategy, equipment and facilities, animal numbers, amounts of purchased and sold feeds, and manure handling procedures. These farms were previously described in detail including their transition to organic production (8). Only a brief description of the more relevant characteristics for this study is included here. These farms were selected as representative of the organic production systems used in Pennsylvania. Although there were differences among the farms, they represented two distinct production strategies. Three of the four farms used what we defined as an all-grassland system with spring calving and out-wintering of animals. With this approach, farmland was seeded in perennial pasture for a stand with about 75% cool season grasses (principally orchard grass and perennial ryegrass) and 25% legumes (principally white clover). Pasture was intensively managed with animals rotated to fresh paddocks each day. Poultry manure, applied at a rate of 1.0 to 1.5 ton/acre, was often used as a fertilizer to supplement on-farm dairy manure and legume-fixed N (Fig. 1). Lime was used to increase soil pH, zinc, and sulfur were applied according to soil tests, and boron was applied annually on some farms.
Excess pasture forage produced during the late spring and summer months was harvested to provide feed during the winter months and other periods when adequate pasture was not available. This forage was typically harvested as bale silage. With suitable weather in the summer months, dry hay was also produced. Herd sizes for these three farms were 100, 140, and 60 cows with land areas of 120, 310, and 240 acres, respectively. Animals were maintained outdoors year around, minimizing the investment in animal facilities. Smaller-framed, mixed breed herds (predominately Holstein and Jersey genetics) were used where breeding was typically done by bulls. Bulls were purchased or raised on the farm and then sold after the breeding season to minimize breeding costs. Cows were bred for early spring calving to produce a herd with maximum nutrient needs in the spring and early summer and low needs with no lactation during mid- to late winter. Supplemental feeds were purchased, which primarily consisted of organically produced corn, oats, and minerals with very little protein supplementation. Relatively low amounts of supplemental feed were used with daily feeding of 7 to 10 lb DM/cow. With this feeding and management strategy, annual milk production was maintained around 12,500 lb/cow. With low milk production and outdoor maintenance of animals, incidences of herd health issues were relatively low. The culling rate for the herd was less than 25%, but a few animals that missed the calving window were sold to random calving dairy producers. Veterinary use was minimal. An occasional animal was treated with non-organic practices and sold to a non-organic producer. The fourth farm used another production strategy commonly found in Pennsylvania. This strategy was defined as a crop-based system with supplemental grazing, random calving, and winter confinement. This 185-acre farm included 33 acres of corn, 33 acres of soybean, 27 acres of spelt or oats, 25 acres of alfalfa, and 67 acres of rotationally grazed, grass-legume pasture. Corn was harvested as silage and grain for cattle feed. Spelt and oats were also harvested as feed grain, and about half of the soybean crop was fed as protein supplement with the remainder sold as organic grain. Poultry manure (averaging about 1.25 ton/acre) and an organic starter fertilizer for corn were used to supplement dairy manure and legume fixed N. Harvested forages were stored using tower silos, bagged silage, and baled silage. The herd of 45 Holstein cows plus their replacements was fed to maintain an annual milk production of 17,500 lb/cow. Lactating cows were fed up to 18 lb DM/day of grain mix during early lactation and about 12 lb DM/day during late lactation. This feed mix included ground corn grain, spelt or oats, roasted soybeans, and organic minerals. Cattle were rotationally-grazed during the growing season with supplemental forage and grain fed as needed. During the remainder of the year, they were housed in a tie stall barn and fed balanced rations including grass and corn silages to meet their nutritional needs. A random calving strategy was used with most of the breeding done by bulls. The annual replacement rate for the lactating cows was about 20%. Like the other three farms, good herd health was maintained with relatively low use of veterinary services. The Farm Simulation Model Dairy production systems were compared on computer-simulated farms. Simulations were implemented using the Integrated Farm System Model (USDA / Agricultural Research Service, University Park, PA). This whole-farm model integrates the major biological and physical processes of crop, beef, or dairy production (7). Crop production, feed use, and the return of manure nutrients back to the land are simulated for each of 25 years of recent historical weather. This includes tillage, planting, harvest, storage, and feeding operations, which predict the associated resource use, timeliness of operations, crop losses, and nutritive changes in feeds. Feed allocation and animal response are related to the nutritive content of feeds and the nutrient requirements of the animal groups making up the dairy herd. Nutrient flows through each modeled farm predict nutrient accumulation in the soil and loss to the environment (7). This includes N volatilization loss as ammonia, denitrification and nitrate leaching losses from the soil, erosion of sediment, and runoff loss of soil P. Whole-farm mass balances of N, P, and K are determined as the sum of nutrient imports in feed, fertilizer, deposition, and legume fixation minus the exports in milk, excess feed, animals, and losses leaving the farm. Simulated performance is used to determine production costs, incomes, and net return for each year of weather. A whole-farm budget is used, which includes depreciation and interest on all farm structures and equipment plus labor, energy, and other variable production costs (7,8). The total production cost is subtracted from the total income received for milk, animal, and excess feed sales to determine a net return to the herd and management. This economic analysis does not include tax implications or other government subsidies that may vary across production systems. By comparing simulation results for various production systems, the effects of production differences are determined including resource use, production efficiency, environmental impact, production costs, and net return. Simulating systems for 25 years of weather provides a distribution of performance indicators that describe possible outcomes as weather varies. Simulated Production Systems Four production systems were compared using the same medium loam soil and central Pennsylvania weather. The first two systems were the all-grass, spring calving, and out-wintering strategy using either organic or conventional practices. The second two used the crop-based, supplemental grazing, and winter confinement strategy with either organic or conventional practices. The organic production systems were characterized as found for the case study farms. In a previous study, the model was able to replicate the physical and biological performance of the actual farms at their locations (8). The two conventional systems were defined as similar to the organic systems without using organic practices. The all-grass production systems were described in the model using parameters that generally represented an average of the first three case study farms. A herd of 100 cows plus 75 replacement heifers was maintained on 250 acres of perennial grassland. Crop nutrient needs were supplemented using 250 tons of purchased poultry manure. A mixed breed herd was used where calving occurred in March with cows dry during January and February. For the organic systems, annual milk production was 12,500 lb/cow with grain fed at an average of 8.5 lb DM/day per cow during lactation. The replacement rate of the herd was set at 30% where 5 cows per year were sold at a dairy animal price due to failure to breed within the appropriate period. Within the farm, 5 acres were assumed to be in buffer zones, which are required to separate organic land use from surrounding land farmed using conventional practices (8) (Fig. 2). All other farm parameters were set as described above for the case study farms or as documented by Rotz et al. for an organic grass production system (8).
When conventional practices were used, farm parameters were the same except for a few changes to better reflect non-organic procedures. Annual milk production was increased to 13,000 lb/cow, and this required a little more feed. Protein feed supplements were fed to meet animal requirements for degradable and non-degradable protein (7). The replacement rate for the herd was set at 25% with all animals sold at a cull cow price. Annual veterinary costs were increased by $35/cow and artificial insemination was used, which increased annual breeding cost by $37/cow. Buffer zones were removed allowing the full land base to be used for pasture and forage production. No poultry manure was used. Instead, inorganic fertilizers were used to meet crop nutrient requirements, which included annual applications of N fertilizer at 50 lb/acre. All other farm characteristics were set the same as those for the organic, all-grass farm. The last two production systems, which used crop production, supplemental grazing, and winter confinement, were modeled based upon information gathered from the fourth case study farm. Herd size was set at 50 cows plus 35 replacement heifers with a land base of 200 acres. A smaller farm size was used for the crop-based production systems to better represent the typical size found in this region when this production strategy is used. For the organic system, average annual crop production included 50 acres of corn, 25 acres of small grain, 35 acres of soybean, 25 acres of alfalfa, 60 acres of perennial grassland, and 5 acres in unused buffer zone. Crop fertilization was supplied through dairy manure produced on the farm, 250 ton of imported poultry manure, organic starter fertilizer applied to corn land, and legume fixation. Seedbed preparation included moldboard plow, disk, and soil conditioning operations. Following planting, row crops were tilled with a rotary hoe and mechanically cultivated twice for weed control. Forage crops were chopped and stored in silage bags. A Holstein herd was used with an annual milk production of 17,500 lb/cow. The conventional counter part was modeled with similar characteristics except for a few changes to better represent non-organic practices. Crop yields were assumed to be 10% higher on the conventional farms (8). The buffer zone was removed and replaced with 5 more acres of corn. Inorganic fertilizers were applied to meet crop nutrient needs rather than the use of poultry manure. A conservation tillage system was used for crop establishment using a chisel plow and fewer operations. Rotary hoe and mechanical cultivation operations were also removed and pesticides were used for weed and insect control. Animals were fed more balanced protein feed, and annual milk production was increased to 18,000 lb/cow. Random calving was used with a 25% annual replacement rate of the lactating cows. Veterinary and breeding costs were increased by $45/cow and $25/cow, respectively to represent more typical costs for conventional grazing herds using artificial insemination. All other farm characteristics were the same between the organic and conventional production systems. Important differences between organic and conventional practices were in the prices paid for feed and the price received for milk. Feed prices assumed for organically produced corn grain, forage, protein supplement, and minerals were $310, $275, $660, and $990/ton DM, respectively. These were 1.5 to 2.5 times the respective conventional feed prices of $132, $180, $330, and $400/ton DM. Milk price difference was most critical (8). For this analysis, the long-term average milk price for conventional raw milk was set at $16/cwt with a milk hauling and marketing charge of $0.90/cwt providing a "mailbox price" of $15.10/cwt. Based upon our survey of the case study farms, raw organic milk price was set at $27.50/cwt with a hauling charge of $0.18/cwt giving a mailbox price of $27.32/cwt. All other price or cost values were those reported by Rotz et al. (8). Organic and Conventional Production Systems Compared Total feed production in ton DM/acre was similar between the all-grass and crop-based farms (Table 1). Production systems using organic practices produced 6 to 10% less feed than their conventional counterparts, primarily due to the need for maintaining buffer zones. The assumed 10% greater yield with conventional crop production also contributed to more feed for the systems producing annual crops. Table 1. Farm size, annual feed production and use, and milk production for simulated organic and conventional grazing dairy production systems in Pennsylvania.
x Herd of 100 cows plus 75 replacement heifers on 250 acres of rotationally grazed perennial grassland with animals maintained outdoors throughout the year. y Herd of 50 cows plus 35 replacement heifers on 140 acres of cropland and 60 acres of perennial grassland that is rotationally grazed during the growing season. With less feed produced on farms using organic practices, less excess feed was sold (Table 1). Because conventional production systems were assumed to feed purchased protein feeds to better meet animal protein requirements, the model predicted annual purchases of 6 to 7 ton DM of these feeds for conventional systems. The all-grass production systems produced all of the forage required with excess during most years, but substantial amounts of grain were purchased. For the crop-based systems, enough feed was produced to meet the needs of the herd with some sold during most years. Feed use efficiency was similar between organic and conventional systems. The herds managed for higher production in the crop-based systems though, produced about 20% more milk per unit of feed DM consumed when compared to the all-grass systems (Table 1). There were notable differences between predicted environmental impacts of organic and conventional practices. Use of inorganic fertilizer with conventional practices gave 11 to 19% less loss of ammonia N to the atmosphere (Table 2). For the all-grass system, this change in fertilization also increased nitrate leaching and denitrification loss of N by more than 50%. Predicted P loss by runoff was greater for the crop-based production systems due to greater use of tillage for crop establishment. For organic crop production, moldboard plowing and more tillage operations for weed control resulted in twice the P loss predicted using conservation tillage with conventional production and three times the erosion sediment loss (Table 2). On farms that heavily use imported poultry manure, e.g. our simulated organic farms, the accumulation of soil nutrients is a concern. On both organic farms, soil P accumulated at rates of over 20 lb/acre/year while with conventional production long-term nutrient balances were maintained using appropriate amounts of inorganic fertilizers (Table 2). Table 2. Simulated nutrient inputs and annual environmental impacts for organic and conventional grazing dairy production systems in Pennsylvania.
x Herd of 100 cows plus 75 replacement heifers on 250 acres of rotationally grazed perennial grassland with animals maintained outdoors throughout the year. y Herd of 50 cows plus 35 replacement heifers on 140 acres of cropland and 60 acres of perennial grassland that is rotationally grazed during the growing season. z Includes dairy manure, poultry manure in organic systems, and inorganic fertilizer in conventional systems. Additional N input through legume fixation was 52, 62, 117, and 139 lb of N per acre for organic grass, conventional grass, organic crop, and conventional crop systems, respectively. Poultry manure was 60% DM containing 4.5% N, 2.1% P, and 2.5% K. An economic comparison of the all-grass and crop-based systems showed a 12% lower cost of production per unit of land using the all-grass system with spring calving and out-wintering of animals (Table 3). Total production costs were not greatly different between the organic and conventional production systems. For the all-grass systems, purchased feed costs for organic production were double those of conventional production, but this added cost was largely offset by lower milk hauling and marketing costs and lower livestock expenses. For the crop-based production systems, organic practices increased machinery and labor costs along with the cost of organic certification, but these were more than offset by lower milk marketing and livestock expenses. Table 3. Annual production costs and net returns for simulated organic and conventional grazing dairy production systems in Pennsylvania.
v Herd of 100 cows plus 75 replacement heifers on 250 acres of rotationally grazed perennial grassland with animals maintained outdoors throughout the year. w Herd of 50 cows plus 35 replacement heifers on 140 acres of cropland and 60 acres of perennial grassland that is rotationally grazed during the growing season. x Fixed cost including the initial cost times a capital recovery factor and annual costs for repair and maintenance. y Includes veterinary, breeding, supplies, utilities, and other costs associated with maintaining the herd. z Total income for milk, feed, and animal sales minus all fixed and variable production costs listed. Fixed costs of animals are not included. Overall, the all-grass production systems showed economic advantage over the crop-based systems with a $160 to 200 greater net return per acre or $1.58 to 3.63 greater return per hundred weight of milk produced (Table 3). A major economic advantage for using organic practices in these simulated systems was from the substantially greater milk price. The income from milk sales was 65% greater for organic compared to conventional production (Table 3). For the all-grass systems, this difference in milk income along with some minor differences in feed and animal sales provided an annual net return of $194,800 for organic production versus $66,300 for conventional production ($15.73 vs $5.10/cwt of milk produced). For the crop-based systems, organic production provided a profitable operation with an annual net return of $123,800 ($14.15/cwt) while its conventional counterpart was marginally profitable with an annual net return of $13,200 ($1.47/cwt). The variation in net return across years of weather was less with conventional practices, but when expressed as a portion of the average annual net return, organic production provided a more consistent net return (Table 3). The all-grass systems also reflected less variation in annual net returns compared to the crop-based systems, particularly when using organic practices. The economic advantage of organic systems is largely dependent upon the greater price received by the producer for organic milk. The sensitivity to milk price and other production costs such as purchased feed was previously reported for similar production systems (8). A 10% decrease in the difference between organic and conventional milk prices was found to reduce the difference in annual net returns between organic and conventional strategies by 12%. The long-term persistence of the price advantage for organic milk is uncertain. Following the introduction of national certification standards, organic milk has been commoditized and both domestic supply and imports have expanded. As this continues, the difference between organic and conventional milk prices will likely decrease. This decrease may leave organic producers with the challenge of reducing production costs similar to that currently experienced by conventional producers. Conclusions An all-grass production system with spring caving and out-wintering of animals gave a lower production cost per acre and up to $200/acre greater net return compared to a crop-based system with random calving and winter confinement. Other benefits of the all-grass system included considerably less erosion and associated P loss in surface runoff. The current market for organic milk and the associated price difference between organic and conventional milk create an opportunity for improving the economic viability of small, grazing dairy farms in Pennsylvania through the adoption of organic production practices. Organic farms in this region rely heavily upon the use of poultry manure as a nutrient source for plant production, and this can lead to a nutrient imbalance and a long-term accumulation of soil nutrients. Greater use of tillage operations for weed control in producing organic annual crops may also substantially increase erosion of sediment and runoff loss of soil P. Literature Cited 1. Elbehri, A., and Ford, S. A. 1995. Economic analysis of major dairy forage systems in Pennsylvania: The role of intensive grazing. J. Prod. Agric. 8:501-507. 2. Johnson, D. M., Schwartz, D. M., Fultz, S. W., and Bell, M. R. Intensive grazing versus conventional confinement on small dairy farms in Maryland. Maryland Coop. Ext., College Park, MD. 3. Kriegl, T. 2005. Dairy grazing farms financial summary: regional/multi-state interpretation of small farm data. Center for Dairy Profitability, Univ. of Wisconsin Coop. Ext., Madison, WI. 4. National Agricultural Statistics Service. 2006. Summary by size of farm. 2002 Census of Agriculture-State Data. USDA-NASS, Washington, DC. 5. Organic Trade Association. 2006. OTA’s 2006 Manufacturer Survey. Organic Trade Assoc., Greenfield, MA. 6. Parsons, R. L., Hanson, G. D., and Muller, L. D. 1998. Summary of the 1997 Pennsylvania dairy farm practices survey. Coll. of Agric. Sci., Coop. Ext., The Pennsylvania State Univer., University Park, PA. 7. Rotz, C. A., Corson, M. S., and Coiner, C. U. 2007. Integrated Farm System Model, Reference Manual. Pasture Syst. and Watershed Manag. Res. Unit, USDA-ARS, University Park, PA. 8. Rotz, C. A., Kamphuis, G. H., Karsten, H. D., and Weaver, R. D. 2007. Organic dairy production systems in Pennsylvania: A case study evaluation. J. Dairy Sci. 90:3961-3979. 9. Soder, K. J., and Rotz, C. A. 2001. Economic and environmental impact of four levels of concentrate supplementation in grazing dairy herds. J. Dairy Sci. 84:2560-2572. 10. Soder, K. J., and Rotz, C. A. 2003. Economic and environmental impact of utilizing a total mixed ration in Pennsylvania grazing dairy herds. Prof. Animal Scient. 19:304-311. |
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