Organic dairy farms see slower productivity growth than conventional operations

Organic dairy farms must follow a variety of USDA regulations to obtain certification and maintain their organic status. For example, they have to use organic grains and feed supplements, and they mostly rely on pasture-based feeding, which makes them more vulnerable to weather shocks such as drought or sudden and intense storms. These challenges mean productivity on organic dairy farms grows at a slower rate than on operations using conventional processes. Productivity is measured as total factor productivity (TFP), the ratio of the total amount of goods (in this case, milk) produced relative to all the inputs—such as labor, fertilizer, and other costs—used to produce those goods. USDA, Economic Research Service (ERS) researchers studied the difference in TFP growth between organic and conventional farms using data from organic dairy farms between 2005–16 and from conventional dairy farms between 2000–16. TFP grew at an annual rate of 0.66 percent for organic dairy farms compared with 2.51 percent among conventional dairy operations. Both organic and conventional farms saw productivity growth due to technological progress such as advanced equipment and improved genetics. While weather-related feed factors reduced productivity for organic farms, they contributed to a productivity growth for conventional dairy farms. Technical efficiency increased productivity slightly on organic farms, but reduced productivity on conventional farms, while scale-and-mix efficiency reduced productivity for both types of farms. This chart was included in the ERS report Sources, Trends, and Drivers of U.S. Dairy Productivity and Efficiency, published in February 2022.