State loans encourage dairy farmers to go organic
By Bruce Edwards
Herald Staff | October 18,2006
Vermont dairy farmers contemplating a switch to organic milk production are getting some help from a new state loan program.
Called the Organic Transition Program, it offers farmers loans of up to $20,000 to defray the costs of switching to organic dairy production.
The program is sponsored by the Vermont Agricultural Credit Corp., a subsidiary of the Vermont Economic Development Authority, and by the Vermont Agency of Agriculture, Food and Markets.
To receive organic certification, a dairy farm must use feed grown on land that has been free of herbicides, pesticides and chemical fertilizers for three years. Cows on the farm must be managed organically for at least 12 months.
VEDA Chief Executive Officer Jo Bradley said Tuesday the loan program was established to help farmers defray costs during the 12 months preceding organic certification. She said those costs include feed, fencing, barnyards and barn remodeling.
"It's not much, it's $20,000, because there's only $1 million available to lend in this program, but it can help with some of the expenses," Bradley said.
She said the Legislature earmarked $100,000 to the Agency of Agriculture to pay interest on the loans for 14 months while the Vermont Agricultural Credit Corp. committed $1 million in financing.
To be eligible for a loan, a dairy farmer must be in the last year of transition to organic dairy production. The loans are interest-free for the 14 months following certification, Bradley said, after which farmers would pay the going interest rate for agricultural loans, currently 5.75 percent. All loans must be repaid within 62 months.
While organic dairy farmers receive a hefty premium for their milk, an Agency of Agriculture official said that the cost of organic dairy farming can discourage farmers from making the switch.
Diane Bothfeld, a senior agriculture development coordinator, said transition costs increased in June when an organic certification rule change took effect.
The new rule by the Northeast Organic Farming Association requires farmers to use 100 percent organic feed during the final year of the three-year transition from conventional to organic dairying. Prior to the change, she said, a farmer could use 80 percent organic feed and 20 percent conventional grain in the final year.
In both cases, once the three-year transition is completed, the herd can be fed only organic grain.
"The organic grain is very expensive," Bothfeld said. "Some farms may have to purchase organic forages, which is also an expense."
Based on a 60-head farm, Bothfeld said, organic feed would cost an estimated $20,000 more a year than conventional feed.
While organic dairy farmers incur higher costs, they also reap the benefit of receiving much higher prices for their milk. Bothfeld said the state's organic dairy farmers currently receive $26 to $30 a hundredweight compared to $12.75 to $13 a hundredweight for conventional milk.
Of the state's 1,166 dairy farms, 126 are certified organic with another 80 farms expected to be certified next year, Bothfeld said.
Organic dairy farming not only costs more; organic cows produce less milk than conventional cows. Production on an organic dairy farm is about 70 percent of that on a conventional farm, according to state Agency of Agriculture Secretary Steve Kerr.
As far as consumer demand goes, Bothfeld said demand for organic dairy products has been growing at 25 percent a year while supply has been growing at 10 percent.
"There's definitely an imbalance there and it will take some time due to the certification requirements and the management requirements to make that supply catch up with demand," Bothfeld said.
Contact Bruce Edwards at firstname.lastname@example.org.