Agribusiness: 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).