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Burgoyne D. research on the economics of organic milk production

Rentabilité comparative de la production laitière biologique au Québec. Agriculture, Mars. Burgoyne, D. 1992.

Rentabilité de fermes laitières biologiques; Mythes et réalités. Symposium sur les Bovin Laitiéres, CPAQ, Québec. Burgoyne, D., R. Levallois, et J. Perrier. 1992.

Analyse économique comparée de l'impact du niveau d'intensification, de l'utilisation d'intrants et de la production biologique sur la rentabilité des entreprises laitières au Québec. MSc thesis, Faculté des science de l'agriculture et de l'alimentation, Université Laval, Québec. Burgoyne, D. 1992.


To date, the most comprehensive comparative study of organic and conventional dairy production in Canada was undertaken by Burgoyne. Burgoyne's objective was to examine differences in short term economic performance between organic dairy producers and several forms of conventional production in the province of Québec.

Data was sourced from AGRITEL, a databank managed by the Fédération des Syndicats de Gestion Agricole du Québec, which is a federation of farm management clubs in Québec. This databank is particularly rich, with data for about 1500 farms, on 105 variables, and covers several years in most cases. For this study, only 1989 data were used.

The sample of conventional producers included 336 farms, in addition to 16 organic farms that were either certified, or purported to be farming using organic methods. For the purposes of comparison, the conventional farms were stratified along several dichotomous dimensions related to their farming practices. The most general divisions were made between high versus low yield farms, and between farms that tended to use high versus low levels of inputs. These divisions resulted in twelve groups of conventional farms for comparison.

The sample size was large enough to produce statistically significant results when comparing the various conventional groups. However, the sample size for the organic farms was not considered large enough to be statistically representative of the population, and Burgoyne advised some caution in interpreting the results.

Table 1 sumarizes the results for the organic group and two of the conventional groups that were identified as having intensive farming operations. CON-1 represents those farms that were identified as intensive in terms of their milk output per unit area of forage production. CON-2 is that grouping of farms that showed high yield of milk per cow. Table 1 also provides the range of results over all 13 groups.

Regarding general characteristics, the three groups were fairly similar in terms of labour available, and number of cows. As might be expected, yield per cow, and crop yields for the organic farms were lower than the intensive farms, but well within the range of all conventional farms. However, the organic farms recorded the lowest variable costs for both the dairy operation (variable costs per cow) and for their field operations (variable costs/hectare). This reflected relatively low charges for veterinary services, purchases of off-farm feed, and feeding of concentrates. Yet labour costs per cow were the highest of all groups.

Financial performance was measured in several ways. The first measures performance in terms of a Standardized Return to Labour (SRL). SRL is the return over variable costs that is available to labour, assuming there is no long or medium debt service requirements, while allowing for depreciation and a return to capital. It is a useful measure because it facilitates comparisons between farms with different capital structures. For all measures using the SRL, the organic farms showed the best performance.

As might be expected, for the organic group, revenue per cow was not as high as the intensive groups, yet total costs per cow were lower, although not lowest of all groups. On the other hand, net returns per cow, and more importantly return on assets for the organic groups was the highest for all 13 groups.

As is evident from the data in Table 1, the organic group was superior to all conventional groupings in terms of financial performance. Yet, in most cases for the individual measures where the organic group was at an extremity, statistically it was not significantly different from at least one of the conventional groupings. However, the frequency with which this occurred is suggestive of a pattern.

It is worth noting that these results are not the result of the organic group receiving higher prices than other groups. The prices received for milk across were very similar (about $50/HL), and is the result of the system of supply management in the dairy sector. The average price received by the organic group was $50.99/HL.

Burgoyne advises some caution in the interpretation of these results since only one year of data was used (1989), and that no attempt was made to account for the role of management ability. He also points out that the farms in the sample are not entirely representative of all dairy farms in Québec, since they belong to the AGRITEL system. These farmers are generally regarded to be the most progressive and best trained farmers in the province. Thus, the fact that the organic farms compare so favourably within this group is quite encouraging.

Table 1: Characteristics of Organic Dairy Farms Compared to Conventional

  ORG CON-1 CON-2 Range
Number of Farms 16 56 61 16 61
Number of Cows 45 52 41 32 52
Labour - FTE 2.0 2.1 2.0 1.6 2.1
Milk/cow (kg) 5936 7130 7640 5255 7640
Cereal Yields (tonne/ha) 2.4 3.9 3.0 1.2 4.5
Forage Yields (tonne/ha) 4.0 6.8 5.5 3.4 6.8
Veterinary charge/cow ($) 47 73 86 47 90
Feed purchased/cow ($) 283 522 562 283 609
Concentrate fed/cow (kg) 1848 2704 2730 1508 3175
Labour charge/cow ($) 210 135 153 79 210
TVC Dairy - ($/cow) 450 629 692 450 728
TVC Field - ($/ha) 61 205 152 61 245
SRL/cow ($) 976 825 791 416 976
SRL/ha ($) 431 688 517 187 431
SRL/(hl milk) 16.4 11.6 10.4 7.0 16.4
Revenue/cow ($) 3602 3962 4204 2816 4204
Total Costs/cow ($) 2857 3273 3561 2511 3698
Net Return/cow ($) 745 689 643 280 745
Return on assets (%) 3.4 3.1 2.1 -1.4 3.4


All data are recorded on an annual basis

FTE - time time labour equivalent (3000 hours/year)

SRL - Standardized return to labour

TVC Dairy - Total Variable Costs for the dairy enterprise

TVC Field - Total variable costs for field operations

CON-1 - farms identified as intensive in terms of milk yield per acre of forage production

CON-2 - farms identified as intensive in terms milk yield per cow

Sources: Burgoyne (1992a,b,c)

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