Socioeconomic Analysis of Organic, Grass-Based & Conventional Dairy Farmers in Wisconsin with Case Study in Amish Stewardship Practices in the Kickapoo Valley

(Please note that there will be more results from this project as the expected date of completion the dissertation is May 2009. )

Overall Structural Change
Divergence in the Wisconsin dairy sector in the past 20 years can be seen through the decrease in the percent of herds under 100 cows (USDA National Agriculture Statistics Services (NASS) 2006) (USDA United States Department of Agriculture 1987) (USDA United States Department of Agriculture 1997) and the recent jump in average herd size from 64 cows in 2000 to 81 in 2005.  Yet in 2006, 80% of Wisconsin dairy farms were still under 100 cows and 94% were under 200 cows.  These Wisconsin moderate sized farms produced 64% of the state’s milk supply (USDA National Agriculture Statistics Services (NASS) 2006).  Divergence in the size and management structure in Wisconsin’s dairy sector can be explained by changes amongst existing farmers as well as the characteristics of entering and exiting farmers.  Many of the moderate-sized semi-confinement farms from the 1980's and 1990's have exited which explains the decrease in dairy farm numbers from 36,500 in 1987 to 14,900 in 2006. (USDA National Agriculture Statistics Services (NASS) 2006) (USDA United States Department of Agriculture 1987)  About 500 of those confinement operations converted to large scale confinement in the past couple of decades.  It is fair to say that an even larger number of the moderate-sized semi-confinement farms were converted to MIRG operations by existing operators or replaced by entering farmers utilizing MIRG or other alternative dairy farm systems including around 700 farms that have been bought by Amish farmers in the past several decades.

Management Structural Divergence: MIRG Farmers
The emergence of management intensive rotational grazing (MIRG) as a farm management strategy was a major trend in the 1990s in traditional dairy producing states (Dartt et al. 1999; Nott 2003; Parsons et al. 2004  ; Taylor and Foltz 2006) that has seemed to plateau in recent years in Wisconsin.  The percentage of MIRG farmers doubled from 7% to 14% in the four year period from 1993 to 1997.  It took another eight years for the percent of MIRG dairy farms to almost double again to 26% in 2005.  This indicates that MIRG strategy has become far more prevalent proportional to the conventional dairy farm strategy.  Historical accounts of the emergence of the MIRG farm strategy highlight the critical role that farmer to farmer information exchange played regarding how to manage pastures most efficiently in a localized area (Hassanein 1999).  This localized information exchange was especially needed given that University pasture research and support declined significantly after 1950 (Fales 1992).  Over 60% of MIRG farms are in the South West, West Central and North Central parts of the state (as of 2002).  Only 44% of the state’s total dairy farms are located in those regions.  This clustering matches the characteristics of the unglaciated landscape of the South West and West Central regions which makes these regions more suitable for MIRG grazing and less suitable for large scale confinement operations.

The MIRG farm strategy is a combination of a very old technique involving heavy reliance on pasture (Voisin 1959) with more recent pasture management knowledge (Hassanein 1999) aimed at making intensive use of the pastures.  Technically, we define a farmer as MIRG based on their reliance on pastures as a source of feed during the grazing season and by their movement of cows to a new paddock about once a week.  In that sense, we use a relatively liberal definition compared to other works (Taylor and Foltz 2006) (Lloyd et al. 2007 ) but we consider variations on the definition from less to more intensive MIRG operations.

Management Structural Divergence: Organic and Amish Farmers
In recent years, it has become clear that significant structural divergence is also occurring within the pasture based dairy farm strategies in the US with Wisconsin being a prime site example of this structural change.  The growth of MIRG farms overall may have reached a plateau at about 25% of the farms in Wisconsin, but the diversity within the MIRG farm strategy has increased.  Organic dairy farmers are a growing fraction of the MIRG farm numbers constituting 1.2% of the graziers in 1997, 7.5% of the graziers in 2005 (calculations supplemented with data from ERS-USDA), and could account for 10-12% of graziers by the end of 2007 (United States Department of Agriculture-Economic Research Service 2005).  The Amish were roughly 14% of Wisconsin MIRG graziers in 2002 (calculations supplemented with data from Cross, 2004) (Cross 2004).  The Amish and organic farm types combined constitute about 1/5-1/4 of MIRG farm numbers in the early 2000’s, and this percentage will probably expand as these two farm types seem likely to grow at rapid rates in the near future.  Both organic and Amish farmers are geographically clustered in similar areas where MIRG farmers overall are clustered.

Organic dairy cow numbers in the US have grown from about 2,000 in 1992 to 86,000 in 2005 (United States Department of Agriculture-Economic Research Service 2005) to well over 100,000 by the end of 2007.  Organic farming is also seen as a promising alternative towards the goal of keeping smaller scale farms operating particularly in the Midwest and in the Northeast (i.e. traditional dairy producing states) (Barham et al. 2006; Guptill 2006).  Organic dairy farm numbers in Wisconsin have grown from approximately 54 farms in 1997 to over 350 farms in 2005 (calculated from USDA-ERS data)(United States Department of Agriculture-Economic Research Service 2005) and probably well over 400 by the end of 2007.

Amish dairy farms comprise roughly 1/8th of all dairy farms in the US as estimated by US Farm Service Agency officials in 2005 (Cross 2007).  For the Amish, “living in a redemptive community, separated from the world, is essential to salvation” (Hostetler 1993.).  A Wisconsin Amish farmer exemplifies this when he stated during a farm interview that “confess[ing] Christ with our farm” was the primary motive for farming.  The geographic areas that have the highest concentration of farms with the smallest dairy herds correspond well to maps where there are dense concentrations of Amish dairy farms in states like Wisconsin, Iowa, Indiana, Ohio and Pennsylvania and Missouri and Kentucky.  Some of the states with really high percentages of Amish dairy farms include Indiana with 3/5 of dairy farms being Amish owned, and with over ¼ of the Pennsylvania and Ohio farms being Amish owned (Cross 2007).

Many Amish who have a desire to farm as a way to maintain religious and family values have migrated from eastern urbanizing states to other states like Wisconsin with more available farm land.  Amish owned dairy farms constitute roughly 5% of the dairy sector in 2004 and are predicted to be around 10% of the state’s dairy numbers by 2010. (Cross 2004).  Wisconsin has the 2nd largest concentration of Amish church settlements in the US (Luthy 2003).  While only 22% of Wisconsin farms have dairy herds, the majority of Amish farmers in Wisconsin (80 percent) have dairy herds (Cross 2004).  The Amish dairy farmers in this report also have some distinctive demographic characteristics.  These dairy farmers have fewer years of farm operating experience than other dairy farmers which may reflect their younger age (average age of Amish is 41 years old versus an average of 48 years old in the other types of farmers) and do not attend school beyond the 8th grade.  A relatively small proportion of the Amish obtained their farm from their parents as many emigrated from other states.  Amish farm acquisition stands in contrast to the majority of dairy farmers in the other farming strategies examined here where farm transfers from parents is common.  Because the elevated price of agricultural land (reflecting residential and recreational demand) serves as a significant constraint to other new entrants in farming (Foltz  and Turnquist 2006), the number of “new” Amish farms is notable given that so few have the advantage of inheriting the farm from their parents.

Alternative Dairy Farm Herd Sizes
The Amish farmers as well as the other pasture based dairy farm types have average herd sizes which are much lower than the Wisconsin dairy sector overall.  The average herd size on the PATS sample of Amish owned farms is 15 cows (median around 14) whereas the overall state Amish herd average is 19 cows (Cross 2004).  MIRG farmers in this study have a mean average herd size of 48 (median 42), and organic dairy farms have an average herd size of 65 cows (median 47).  At the other end of the spectrum, confinement operators have a mean herd size of 97 cows (median 62 cows).   In contrast to the rapid growth in average herd size seen in the Wisconsin dairy sector overall in recent years, the alternative farms did not change dramatically in herd size from 1997 to 2002/2003.

Sector Divergence in Patterns of Modernization
The divergence in farm structure and strategy laid out thus far has implications for patterns of technology use and management practices on Wisconsin dairy farms.  With some technologies such as housing and milking facilities, a significant fraction of Wisconsin dairy farms still milk in stanchion or tie-stall barns that were built prior to or during the 1980’s.  Yet, the recent changes in size structure and farm strategies have also given rise to divergence in the adoption trends of a host of technologies and management practices.  These trends call into question the “simplistic view of structural change as an economically straightforward process of modernization and adjustment to new technical economies of scale” (Jackson-Smith and Barham 2000).

Modernization is frequently used in the U.S. agricultural circles to describe the adoption of new and often more sophisticated technologies. These technologies are assumed to keep farmers cost competitive and ideally increase in farm profitability.  The concept of modernization used in this dissertation  is consistent with Kaltoff (Kaltoft 2001) who characterizes the development of alternative practices as examples of reflexive modernization, driven in part by farmers and consumers that may be skeptical of the benefits associated with technological advance in the predominant (or conventional) agricultural system. (Beck 1995; Kaltoft 2001)   In the context of the dairy industry, the adoption of organic, management-intensive rotational grazing, and well-timed and located deliveries of manure are examples of this broader concept of modernization.  The argument we develop in this section goes beyond the common argument that links modernization in dairy to larger farms (e.g.  (Barham 2000; Brannstorm 2006)).  Instead, this dissertation demonstrates a more subtle account that also highlights the “modern” features of alternative farm strategies.

Technology Adoption
In Wisconsin, the adoption of parlors, freestall housing, and several technologies aimed at enhancing the milk production of cows have been strongly associated with herd expansions.  Those associations are evident, but a careful examination of those tables also demonstrates strong modernization outcomes on certain types of alternative, smaller-scale dairy farms.  The adoption patterns on organic dairy farms are particularly striking.  They utilize modern milking facilities and housing structures and have much higher adoption rates of some technologies than their herd size distribution alone would predict in a sample of conventional farms.

The adoption of different types of milking parlors and freestall housing by farming strategy is perhaps the most powerful example where adoption of technology does not necessarily imply large and/or expanding herd sizes.  About a quarter of organic operations have a pit parlor and some type of freestall housing which is about five times and three times the adoption rates amongst a random sample of farms that were under 100 cows.  The high adoption rate of these technologies is especially surprising given that the trend statewide has been one where parlor use has usually been very closely correlated to dairy farms undergoing major expansions in herd sizes usually to 150-200 cows. In contrast, organic farmers have not increased their herd sizes dramatically, and generally do not indicate intentions to expand significantly in the future.

Organic farmers also have adoption rates of other technologies that are higher than all but the largest confinement herds.  Computer usage amongst organic farms is 13% more likely than would be predicted by a random sample of farms in the under 100 cow herd size category.  The probability that organic farmers keep individual cow production records is similar to farmers managing larger confinement herds. The use of total mixed rationing equipment amongst organic farmers is also relatively high compared to a random sample of herds under 100 cows.

At the other end of the technology adoption spectrum, the Amish utilize more traditional milking facilities than even their small size distribution would suggest.  The vast majority of Amish producers have a stall barn with a bucket system and milk by hand. Thus, the Amish are utilizing older milking facilities and housing structures or setting up lower technology operations.  As one might expect, the Amish adopt “modern” technologies at rates that are roughly 25% or less of the other farming types.

MIRG farmers have adoption levels of milking structures and housing that are more typical of other moderately sized farms (with the exception of higher usage levels of bucket milking systems perhaps due to the presence of some Amish in the grazier sample).  They also have a lower probability of utilizing computers than organic farmers (24.7% versus 42.7%).  It is possible that MIRG farmers have more basic milking structures and housing and technology use because of their lower expectations to stay in farming.  As one organic dairy farmer in an on-farm interview states about graziers “the graziers may think that I am going to retire this way, and in a few years I am going to sell the place…graziers would put less money into it...[They work] closer to the backbone… “.

Surprisingly given the similar pasture based focus, organic farmers use TMR at about two and a half times the rate of MIRG farmers.  Organic dairy farm operations and MIRGers look similar in their lower frequency of use of veterinarian services as compared to confinement dairy farms. While this gap may originate in the constraints organic farmers face on the use of certain types of veterinary medicine, it may also be that lower veterinary use rates are a function of better herd health on farms that graze their animals overall.  The small proportion of Amish that utilize scheduled veterinary services (3 percent) is an especially stark contrast to the vet use amongst the other management types.  Perhaps the smaller herd sizes and lower production levels of cows on Amish farms decreases the relative necessity of veterinary services.  Some of the Amish use a significant amount of home remedies and rely on veterinarians only as a last resort according to on farm interviews.

Manure and Pasture Management Practice Adoption
Intensive manure and pasture management practices are strategies associated with some alternative dairy farms, and can be viewed as a different kind of “modernization” as described above.  While some research finds a positive relationship between smaller farm sizes and sustainable agricultural practices, (Tavernier and Tolomeo 2004) dairy studies that focus on manure management suggest that larger farms are more likely to follow recommended practices than are smaller farms.  Larger farms may have the advantage of being able to spread the substantial fixed costs of storage systems out over a larger operation as well having more specialized labor. (Fulhage 1997; Burton et al. 1999)  The recommended strategy is to store in a lined structure and haul mostly in the spring and fall when tillage incorporates manure into the soil after spreading (Turnquist et al. 2006).  Manure is neither collected nor stored on many Wisconsin dairy farms, which could be explained at least in part by financial and labor constraints on small to medium-sized operators in Wisconsin. (Powell et al. 2005; Turnquist et al. 2006)   Intensive rotational grazing may have sustainability benefits, such as reductions in soil erosion, fossil fuel expenditure, (Rayburn 1993) and nitrogen volatization ,(Soder and Rotz 2001) as well as providing enhanced dimensions of soil ecological health (Rabatin and Stinner 1989; Johnson and Pfleger. 1992) and better habitats for fauna.  Intensive rotational grazing, especially on improved pastures, may also offer additional agronomic benefits in terms of productivity and forage quality. (Pratt et al. 1962; Kristensen 1995; Martz 1999; Henning et al. 2000)   But, given that there is a host of complex factors to consider on farms when designing manure and pasture systems, it is difficult to say conclusively whether one practice in particular is better than the other in terms of on and off-farm environmental impacts.

Organic dairy farmers have the highest adoption rates of intensive manure and pasture management practices.  Organic dairy farmers are far less likely (16%, compared to 68% for MIRG and 79% for Amish) to put manure directly into a spreader than are the other alternative types of dairy farmers.  They are also far less likely than the 57% of confinement operators who report putting the manure directly into a spreader and/or spreading daily.  Rather, organic farmers are much more likely to either store the manure in a lined structure (45 percent) or in a pile (20%), practices that are generally considered to be more environmentally beneficial. This stark difference in manure management practices between organic dairy farmers and all other management types may be due to the higher incentives organic farmers face to efficiently utilize manure as a source of nitrogen given certification restrictions on their use of chemical fertilizers. In contrast, the less intensive manure management practices in the other pasture based groups are more similar to the typical farms in that herd size category.

Organic farmers are also the most likely to rotate their cows in an intensive manner and the Amish are the least likely of the pasture based groups to rotate intensively.  The average rotation frequency of MIRG farms is in between these two extremes.  About one-half (46 percent) of organic dairy farmers rotate pasture once a day or more, as compared to only one in four (26 percent) of the MIRG farmers and 11% of the Amish farmers.  On a national scale, the extent of pasture exposure and intensity of management may vary across organic farms as national pasture standards are not totally explicit.  However, these data indicate that the majority of organic farms in Wisconsin rely on pasture to a significant extent and manage it an intensive fashion.  Almost all (98%) of organic producers rely on pastures for at least part of the forage ration and about two-thirds (65%) rely on pastures for the primary source of forages.  These rates are similar to the extent of pasture reliance for MIRG farms.  According to the survey results, almost all Amish producers rely on pastures extensively rather than intensively, yet they indicate that pasture was their primary source of forage during the grazing months.  Almost all of the Amish also stated that they were practicing MIRG.  Since the intensive reliance on pastures amongst the Amish as mentioned above does not square with the intensiveness of rotations utilized on these farms, it could be that the Amish did not interpret the question the same way as the other groups.  It could also be that the Amish rely heavily on pastures that are only moderately productive.

Overall, the diversity of farm structure shapes technology adoption outcomes in the Wisconsin dairy industry, with larger confinement farms more likely to adopt some of the modern technologies and management practices.  Yet, there are also very important and distinctive dimensions of the modernization story that are evident on the smaller scale alternative dairy farms, especially on organic dairy farms. Organic farmers use a hybrid of modern milking and housing structures which are combined with a range of practices that are “reflexive” but also clearly intensive and innovative in their management demands.  Amish farms, for the most part, stand in contrast to this modernization story as many of the technology and management practices are far less modern and intensive than on any other farm system.  These extremes highlight the diversity in technology and management practices that has emerged over the past two decades in America’s Dairyland.

Productivity, Performance and Satisfaction
The impact and viability of these diverse types of dairy farms will depend on a multitude of factors.  In this section, we compare a few critical performance indicators: herd productivity levels; farmers’ self-reported satisfaction with income and quality of life; and their expectations for how long they envision themselves farming.

Organic and MIRG farms have similar levels of milk productivity (measured in pounds of milk – lbs per cow per day), but productivity is significantly lower on these pasture based farms than on confinement farms.  It is worth noting that large scale confinement farms are also significantly more productive than the smaller scale confinement producers.  Among the pasture based systems, productivity levels did not vary much by grazing intensity level.  Average productivity on Amish farms is around 48 lbs per cow per day which is 10-14% less than average production levels on organic (at 53 lbs per cow day) and grazing farms (at 55 lbs per cow per day), respectively.  Given that Amish producers milk by hand, these nearly comparable production levels suggest that intense labor efforts on Amish farms may explain why they manage smaller herds.  The combination of low cow and low productivity levels mean that Amish milk production and acres operated comprise only about one percent of the total Wisconsin dairy sector.  Organic farms account for no more than two percent of milk production in Wisconsin currently, with MIRG farms accounting overall for under 20% of total milk production.

Organic and Amish dairy farmers report relatively high levels of satisfaction with net farm income and overall quality of life compared to other types of dairy farms.  Well over half of organic farmers (57%) are satisfied or very satisfied with net farm income, and 76% are satisfied or very satisfied with overall quality of life.  By contrast, only 5-10% of the other non-Amish dairy farmers reported being satisfied or very satisfied with net farm income in a comparable survey.  The high levels of satisfaction with income that organic farmers express likely reflect significant improvements in income over the previous five years that other farmers have not experienced.  In the 2002 and 2005 data we analyzed, satisfaction with income and overall quality of life did not consistently vary with grazing intensity level.

It should be noted that the average organic milk price received by organic dairy farms in 2003 was $19.50 per cwt ($18.20 base price), or roughly $7.00 greater (or 60% higher) than non-organic operations.  Hence, the striking difference in satisfaction levels with net farm income and quality of life in the 2003-04 data may be muted in other years like 2005 when there was not as stark a contrast between conventional and organic prices.  When asked what price they would need to remain profitable, organic farmers, on average, reported needing $16.80 per cwt, which was well below the price they were earning at the time and during the past decade.  Since 2004, the mean organic milk price has been well above $18.00, buffering organic farmers from the down-side price pressures that have been so challenging for other types of dairy farms.

Large confinement operations (greater than or equal to 200 cows) report somewhat higher satisfaction levels with respect to income than other dairy farm types, but they do not have levels of satisfaction comparable to those reported by organic or Amish dairy farmers.  Relatively high levels of satisfaction in larger confinement farms is also evident in other studies on dairy farm modernization (Bewley et al. 2001) and quality of life (Lloyd et al. 2007 ), and appears to be explained both by higher incomes and more freedom to take time away from the farm.  When we account for the fact that over 80 percent of household income comes from farming across all types of dairy farms in our sample, the strong performance of farm income on organic dairy farms indicates that these farmers are also more likely to experience satisfactory overall family income levels compared to other farmers.

MIRG and confinement farmers did report a more positive view on their overall quality of life with 68% of the former reporting satisfaction levels that were satisfied or very satisfied in 2005 compared to only 46% having satisfaction levels at those levels in 2002.  Over half (59%) of the confinement farmers reported being highly satisfied in 2005 compared to only 42% in 2002. Note though that again both organic and Amish farmers reported higher quality of life outcomes than other types of dairy farmers.

If we combine the two satisfaction measure of net income and overall quality of life results, we see that the majority of Amish dairy farmers have high satisfaction levels with respect to overall quality of life (91%) but the majority do not have high satisfaction levels with respect to net farm income (30%).  In 2003, Amish farmers were only receiving $10.03 per cwt for their Grade B milk.  The Amish farmers high satisfaction with life may be a reflection of the Biblical conception of contentment as explained in 1 Timothy 6:6-9 where followers of Jesus are essentially instructed to live simply and to be content with it.  When asked what is the biggest obstacle for the Amish people, an Amish elder in the Kickapoo Valley responded by stating, “The devil. He is very busy. In prosperity, the devil gets a lot of people.  When prosperity goes too far, it is dangerous. We should make a living but not more.”

The Amish are also more likely to use non-farm self-enterprise activities (21 percent) versus off-farm employment income (6 percent) to support household income.  For the other types of dairy farms, off- farm rather than on-farm employment does not play as significant a role.  This contrast reflects the Amish commitment to a rural lifestyle, self-reliance, insulation from the surrounding culture, and the limited employment opportunities given transportation and technology restrictions.  As is well known, Amish operate a variety of farm cottage industries on their farms which include saw mills, woodworking, bakery, quilts, and processing food products, all of which are used to secure additional income for the household.  In addition, more than one-third (38 percent) of the Amish dairy farmers in our study also grow and market vegetables.  Many Amish market their produce through a local produce auction and to the same organic co-op, CROPP, which buys much of the fluid organic milk in Wisconsin.

Organic and Amish farmers are more likely than other dairy farm types to report plans to stay in farming for the indefinite future which is consistent with their high overall satisfaction levels with quality of life.  Seventy percent of organic farmers and 74% of Amish farmers expect to stay in farming for the indefinite future (i.e. beyond 10 years), compared to 27% and 24% of MIRG and confinement farmers, respectively.  The intentions to expand and improve are modest amongst all the farm strategies especially amongst the pasture based farmers, with MIRG farmers being even less likely to consider those changes given their lower reported levels of intention to remain in farming for many years.  Confinement operations are the most likely to expect future expansion with one out of four considering either expanding their herd size significantly or improving their milking or housing facilities.  Grazing intensity also did not affect the farmer’s intention to stay in farming nor the farmer’s intentions to expand or improve farm infrastructure.  One distinguishing aspect of the MIRG strategy is that it may provide an easier transition to other farming or career endeavors given the lower levels of sunk investments involved compared to the infrastructure necessary to implement confinement systems  (Barham et al. 1994).  It is also important to emphasize that MIRG farmers are also in a better position to switch to organic given their pasture based focus though some may decide that the knowledge and investments costs associated with transitioning to organic are too high.  According to the performance data analyzed here, especially the organic and Amish dairy farms should persist and grow in the years to come.

These results provide one of the first statistically representative comparisons of the diverse structure, behavior and performance of alternative dairy farm strategies which are growing in prevalence in traditional dairy states like Wisconsin.  Much remains to be learned about farmers’ choices with respect to size and farm strategy, their viability in terms of profitability, as well as their satisfaction with quality of life given their choices. With the Amish, we might see a different picture of farm structure and performance if we were to study more liberal Amish settlements in Wisconsin and other states.  The extent of overlap between the Amish and the adoption of organic and management-intensive grazing practices is also a potentially important research topic. In sum, future systematic comparisons on economic, environmental, and social dimensions will likely be useful to inform farmers regarding their choice of farming systems and to guide other public and private decision makers as they work with farmers and communities to achieve desired outcomes and to mitigate undesirable ones.