MIRG Farming : MIRG Farming : Decision Making, Decision Making,

Trends and Trends and ImplicationsImplications

Caroline BrockCaroline BrockLand Resources PhD StudentLand Resources PhD Student

University of Wisconsin-MadisonUniversity of Wisconsin-MadisonPATS/Agricultural and Applied Economics AffiliationPATS/Agricultural and Applied Economics Affiliation

This research was partially funded in part by a grant from the Sustainable Agriculture Research and Education (SARE) Graduate Student Program

Introduction: Objectives Introduction: Objectives for Doctoral Researchfor Doctoral Research

Provide a descriptive picture of Wisconsin Provide a descriptive picture of Wisconsin alternative dairy sectors as well as confinementalternative dairy sectors as well as confinement

Explore factors that influence management Explore factors that influence management choice decision making (social, spiritual, choice decision making (social, spiritual, economic and ecological). You can help! This is economic and ecological). You can help! This is where I am at now.where I am at now.

Compare dairy sectors and identify factors that may Compare dairy sectors and identify factors that may

influence viability influence viability

Alternative Systems: the Alternative Systems: the Decision Making Process Decision Making Process

for the Family Farmfor the Family Farm

““You don’t know who is right and who is wrong You don’t know who is right and who is wrong because there’s conventional and there’s organic because there’s conventional and there’s organic and they’re all tugging in different directions as far and they’re all tugging in different directions as far as what you should do. “as what you should do. “

– – Farmer Interview (Low-Intensity Grazier)Farmer Interview (Low-Intensity Grazier)

Alternative Systems: the Alternative Systems: the Decision Making Process Decision Making Process

for the Family Farmfor the Family Farm The Economic Realm as a Starting BaseThe Economic Realm as a Starting Base

Unbounded Rationality vs Bounded RationalityUnbounded Rationality vs Bounded Rationality

Unbounded Rationality- assumes full information and Unbounded Rationality- assumes full information and timetime

In contrast, bounded rationality considers information In contrast, bounded rationality considers information constraints and social influences –rules of thumb, constraints and social influences –rules of thumb, often more concerned with losses than gains, often more concerned with losses than gains, anchoring on a small dimension of the problemanchoring on a small dimension of the problem

Bounded Rationality: Bounded Rationality: Information ConstraintsInformation Constraints

The UnknownAs we know, There are known knowns. There are things we know we know. We also know There are known unknowns. That is to say We know there are some things We do not know. But there are also unknown unknowns, The ones we don't know We don't know. —D. H. Rumsfeld Feb. 12, 2002, Department of Defense news briefing

What are the information “bounds” of alternative systems ?

MIRG and Organic –MIRG and Organic –Cases for Bounded Cases for Bounded

RationalityRationality Are both integrated systems w/ many Are both integrated systems w/ many

unknownsunknowns Minimal research support/ExtensionMinimal research support/Extension Thus, mostly relies on localized knowledge Thus, mostly relies on localized knowledge

(tacit vs codified)(tacit vs codified) Social networks may have significant Social networks may have significant

influence in adoption decisionsinfluence in adoption decisions

Alternative Systems: the Alternative Systems: the Decision Making ProcessDecision Making Process

Amish

Conventional

Organic Grazier

How the Amish Fit into the Scene-Overall, 5-7% percent of Wisconsin

dairy (Cross) (also a significant fraction of the dairy farms in the traditional dairy regional PA, IN, OH and NY)

--Amish may comprise a significant fraction of MIRG growth in WI (but especially in IN and OH)

-State average herd size 19 cows

-Less inherited the farm because of settlement history

-Some organic and some are MIRGers

--Milk by Hand- Old Order Amish Settlements sell canned milk--Don’t use rBST, very little vet services as well as other modern technologies--Average Herd Size 14 Cashton = early settlers mostly from Ohio Hillsboro = early settlers mostly from IN --They allow electric fence and were familiar with MIRG

Amish Dairy

Introduction: Data/Methodology

Consider the PossibilitiesConsider the Possibilities

Survey and interviews Survey and interviews results indicate that results indicate that

MIRG and Organic are MIRG and Organic are viable management viable management

systems…systems…

7.3

13.9 14.6

21.8 22.425.0 26.0

30,00028,000

25,000

22,000

19,10016,900 15,316

0

10,000

20,000

30,000

0

10

20

30

40

50

1993 1995 1997 1999 2001 2003 2005

Tota

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f dai

ry fa

rms

Perc

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f dai

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Figure 3. Use of Management Intensive Grazing

Emergence of Emergence of Alternatives: MIRG Alternatives: MIRG

grazing in WIgrazing in WIPlease Note

In 2005, organic farmers comprised 7.5% of the MIRG sector

In 2002, Amish were 14% of the MIRG sector

Organic plus Amish were 20-25% of the MIRG sector

MIRG sector may be underestimated because of minimal Amish survey participation in 2005

Prevalence of Grazing in Prevalence of Grazing in WIWI

24% of WI dairy farmers use pasture intensively 24% of WI dairy farmers use pasture intensively (rotating cows on pasture more than once a (rotating cows on pasture more than once a week)week)

Low cost entry into farming, good for smaller Low cost entry into farming, good for smaller operations (Over 80% of WI’s dairy farms are operations (Over 80% of WI’s dairy farms are fewer than 100 cows) & easier transition to fewer than 100 cows) & easier transition to organics given the importance of ‘grazing’ to the organics given the importance of ‘grazing’ to the strategystrategy

Also primarily located in SW/WC Wisconsin Also primarily located in SW/WC Wisconsin where organics are growing fastest.where organics are growing fastest.

MIRG Profitability Research Tom Kriegl’s research indicates grazing is highly profitable

with selected farms (e.g. NIFO/cow Grazier--$737.18 NIFO/cow Grazier--$737.18 Conventional--$521.50)Conventional--$521.50)

NIFO= Net Farm Income from Farm OperationsNIFO= Net Farm Income from Farm Operations Survey (QOL/PATS) research indicate highest quality of

life (especially amongst the most intense graziers = large scale confinement)

Recent USDA ARMS 2005 data suggests that it is not competitive but there is not enough sample size (40 graziers in the whole Midwest region) to make definitive call

Wisconsin is an ideal in Organic Wisconsin is an ideal in Organic Milk ProductionMilk Production

WI has:WI has: The largest number of organic dairy farms in the The largest number of organic dairy farms in the

US, 350-400.US, 350-400. That is ~ 2-3% of the state’s 14,343 dairy farms.That is ~ 2-3% of the state’s 14,343 dairy farms. Good industry support for organic farmers: Good industry support for organic farmers:

Organic certifying agencies (MOSA), Organic Organic certifying agencies (MOSA), Organic Valley members, other farmers, DATCPValley members, other farmers, DATCP

_ Please note this growth came out independently _ Please note this growth came out independently of university/extension supportof university/extension support

Organic Profitability Research

Farm Income Per Cow

$675

$884$837

$588

$756$719

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Parlor Non-Parlor Total Sample

Far

m i

nco

me

per

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w

Non-organic

Organic

Overall--Mean organic herd size=52; Mean non-organic herd size = 87Parlor-- Mean organic herd size=106; Mean non-organic herd size = 217Non-Parlor-- Mean organic herd size=37; Mean non-organic herd size = 49

Tom Kriegl Seven Year MeanNIFO/cow Grazier--$737.18 Organic--$732.03 Conventional--$521.50 NIFO= Net Farm Income from Farm Operations Small and Non-Random (Only 6-17 organic farms)

USDA-ARMS Data - 2005

Dairy

Organic Dairy: A Relatively Stable Pay Price

Organic Dairy Farms– Prosperous Organic Dairy Farms– Prosperous and Modern and Modern

Net Farm IncomeNet Farm Income 90% of organic satisfied-very satisfied vs 15-18% of 90% of organic satisfied-very satisfied vs 15-18% of

non-organic.non-organic. Quality of LifeQuality of Life

75% of organic in the upper two satisfaction answers 75% of organic in the upper two satisfaction answers vs 45%vs 45%

Herd HealthHerd Health 75% of organic in the upper two satisfaction responses 75% of organic in the upper two satisfaction responses

vs 53% in confinement operations.vs 53% in confinement operations. Organic also relatively “modern”Organic also relatively “modern”

High rates of pit parlor, retro freestall adoption, keep High rates of pit parlor, retro freestall adoption, keep production records and use TMR at high rates, also production records and use TMR at high rates, also relatively intense pasture and manure management relatively intense pasture and manure management practicespractices

Interview w/ Dairy Farmer who transitioned to organic---Economically speaking, compared to where we were four years ago it’s a night and day difference.

MIRG - To be or Not to be - MIRG - To be or Not to be - Factors that potentially Factors that potentially

influence the “Bounds” of influence the “Bounds” of decision makingdecision making Parental or child Influence (especially if still Parental or child Influence (especially if still

on the home farm)on the home farm) Social networksSocial networks Structural barriers-may be real or perceived? Structural barriers-may be real or perceived?

(land area needed, land situation, labor (land area needed, land situation, labor required, road barriers), price of corn?required, road barriers), price of corn?

Want to see results from farm like their ownWant to see results from farm like their own Shifting in the way you think about the farmShifting in the way you think about the farm

Organic To be or Not to Organic To be or Not to be- Factors that be- Factors that

Influence - Factors that Influence - Factors that potentially influence the potentially influence the

“bounds” of decision “bounds” of decision makingmaking Stronger reactions ( +/ -) than for MIRG (more Stronger reactions ( +/ -) than for MIRG (more

clearly defined)clearly defined) Structural barriers-may be real or perceived? Structural barriers-may be real or perceived?

(animal health care, transition costs, book (animal health care, transition costs, book work, feed costs*, road barriers)work, feed costs*, road barriers)

Amongst intensive graziers– agronomic Amongst intensive graziers– agronomic arguments as well as socialarguments as well as social

Cashton #1- “People cheat with organic! Not Amish but some other people do it… It is a temptation for people to be dishonest the way it is set up..”

Hillsboro #1- “I would have to buy some organic straw and I like to get it from a local fellow that I know.”

Distinctive characteristics in adoption of organic and graziers amongst different (perceptions of govt, cheating with organic, milk is milk)

Pasture Based Dairy-- Pasture Based Dairy-- Needs for the FutureNeeds for the Future

Research (ideally regional) which explores Research (ideally regional) which explores perceptions and the “realities” of organic and perceptions and the “realities” of organic and MIRG MIRG

Need for research which looks at individual Need for research which looks at individual variation within organic– i.e. what makes variation within organic– i.e. what makes MIRG/organic farms successful. Also looks at MIRG/organic farms successful. Also looks at differences amongst Amish/Mennonite differences amongst Amish/Mennonite settlementssettlements

Research which follows farmers through the Research which follows farmers through the transition into MIRG and organictransition into MIRG and organic

Discussion/QuestionsDiscussion/Questions

THANK YOU FOR YOUR INTEREST!THANK YOU FOR YOUR INTEREST! CONTACT ?CONTACT ?

Caroline BrockCaroline Brock

ccbrock@wisc.edu

Organic Dairy Farmers: Clustering

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

1 to 49 50 to 99 100 to 199 200 or more

Perc

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Herd Size Categories: Source Census of Agriculture 1987 (Total 36,459 farms), 1997 (Total 21,997 farms), and NASS-USDA 2006 (Total 14,900 farms)

Figure 1. Percent of Wisconsin Dairy Farms by Herd Size Category 1987, 1997, 2006

1987

1997

2006

Trends -- Structure of Wisconsin Dairy

Wisconsin’s Organic Dairy Wisconsin’s Organic Dairy Farms – ModernFarms – Modern

Note the higher frequency of rotation than other graziers. High intensity grazingas part of their management strategy.