MIRG Farming : Decision Making, Trends and Implications Caroline Brock Land Resources PhD Student University of Wisconsin-Madison PATS/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 for Doctoral Research Provide a descriptive picture of Wisconsin alternative dairy sectors as well as confinement Provide a descriptive picture of Wisconsin alternative dairy sectors as well as confinement Explore factors that influence management choice decision making (social, spiritual, economic and ecological). You can help! This is where I am at now. Explore factors that influence management choice decision making (social, spiritual, economic and ecological). You can help! This is where I am at now. Compare dairy sectors and identify factors that may influence viability Compare dairy sectors and identify factors that may influence viability

Alternative Systems: the Decision Making Process for the Family Farm “You don’t know who is right and who is wrong because there’s conventional and there’s organic and they’re all tugging in different directions as far as what you should do. “ – Farmer Interview (Low-Intensity Grazier) – Farmer Interview (Low-Intensity Grazier)

Alternative Systems: the Decision Making Process for the Family Farm The Economic Realm as a Starting Base The Economic Realm as a Starting Base Unbounded Rationality vs Bounded Rationality Unbounded Rationality vs Bounded Rationality Unbounded Rationality- assumes full information and time Unbounded Rationality- assumes full information and time In contrast, bounded rationality considers information constraints and social influences –rules of thumb, often more concerned with losses than gains, anchoring on a small dimension of the problem

Bounded Rationality: Information Constraints The Unknown As 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 –Cases for Bounded Rationality MIRG and Organic –Cases for Bounded Rationality Are both integrated systems w/ many unknowns Are both integrated systems w/ many unknowns Minimal research support/Extension Minimal research support/Extension Thus, mostly relies on localized knowledge (tacit vs codified) Thus, mostly relies on localized knowledge (tacit vs codified) Social networks may have significant influence in adoption decisions Social networks may have significant influence in adoption decisions

Alternative Systems: the Decision Making Process Amish Conventional OrganicGrazier

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 Possibilities Survey and interviews results indicate that MIRG and Organic are viable management systems…

Emergence of Alternatives: MIRG grazing in WI Please 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 WI 24% of WI dairy farmers use pasture intensively (rotating cows on pasture more than once a week) 24% of WI dairy farmers use pasture intensively (rotating cows on pasture more than once a week) Low cost entry into farming, good for smaller operations (Over 80% of WI’s dairy farms are fewer than 100 cows) & easier transition to organics given the importance of ‘grazing’ to the strategy Low cost entry into farming, good for smaller operations (Over 80% of WI’s dairy farms are fewer than 100 cows) & easier transition to organics given the importance of ‘grazing’ to the strategy Also primarily located in SW/WC Wisconsin where organics are growing fastest. Also primarily located in SW/WC Wisconsin where organics are growing fastest.

MIRG Profitability Research NIFO/cow Grazier--$ Conventional--$521.50) Tom Kriegl’s research indicates grazing is highly profitable with selected farms (e.g. NIFO/cow Grazier--$ Conventional--$521.50) NIFO= Net Farm Income from Farm Operations NIFO= 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 Milk Production WI has: WI has: The largest number of organic dairy farms in the US, The largest number of organic dairy farms in the US, 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: Organic certifying agencies (MOSA), Organic Valley members, other farmers, DATCP Good industry support for organic farmers: Organic certifying agencies (MOSA), Organic Valley members, other farmers, DATCP _ Please note this growth came out independently of university/extension support

Organic Profitability Research Overall--Mean organic herd size=52; Mean non-organic herd size = 87 Parlor-- Mean organic herd size=106; Mean non-organic herd size = 217 Non-Parlor-- Mean organic herd size=37; Mean non-organic herd size = 49 Tom Kriegl Seven Year Mean NIFO/cow Grazier--$ Organic--$ Conventional--$ NIFO= Net Farm Income from Farm Operations Small and Non-Random (Only 6-17 organic farms) USDA-ARMS Data

Dairy Organic Dairy: A Relatively Stable Pay Price

Organic Dairy Farms– Prosperous and Modern Organic Dairy Farms– Prosperous and Modern Net Farm Income Net Farm Income 90% of organic satisfied-very satisfied vs 15-18% of non-organic. 90% of organic satisfied-very satisfied vs 15-18% of non-organic. Quality of Life Quality of Life 75% of organic in the upper two satisfaction answers vs 45% 75% of organic in the upper two satisfaction answers vs 45% Herd Health Herd Health 75% of organic in the upper two satisfaction responses vs 53% in confinement operations. 75% of organic in the upper two satisfaction responses vs 53% in confinement operations. Organic also relatively “modern” Organic also relatively “modern” High rates of pit parlor, retro freestall adoption, keep production records and use TMR at high rates, also relatively intense pasture and manure management practices High rates of pit parlor, retro freestall adoption, keep production records and use TMR at high rates, also relatively intense pasture and manure management practices 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 - Factors that potentially influence the “Bounds” of decision making Parental or child Influence (especially if still on the home farm) Parental or child Influence (especially if still on the home farm) Social networks Social networks Structural barriers-may be real or perceived? (land area needed, land situation, labor required, road barriers), price of corn? Structural barriers-may be real or perceived? (land area needed, land situation, labor required, road barriers), price of corn? Want to see results from farm like their own Want to see results from farm like their own Shifting in the way you think about the farm Shifting in the way you think about the farm

Organic To be or Not to be- Factors that Influence - Factors that potentially influence the “bounds” of decision making Stronger reactions ( +/ -) than for MIRG (more clearly defined) Stronger reactions ( +/ -) than for MIRG (more clearly defined) Structural barriers-may be real or perceived? (animal health care, transition costs, book work, feed costs*, road barriers) Structural barriers-may be real or perceived? (animal health care, transition costs, book work, feed costs*, road barriers) Amongst intensive graziers– agronomic arguments as well as social Amongst intensive graziers– agronomic arguments 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-- Needs for the Future Research (ideally regional) which explores perceptions and the “realities” of organic and MIRG Research (ideally regional) which explores perceptions and the “realities” of organic and MIRG Need for research which looks at individual variation within organic– i.e. what makes MIRG/organic farms successful. Also looks at differences amongst Amish/Mennonite settlements Need for research which looks at individual variation within organic– i.e. what makes MIRG/organic farms successful. Also looks at differences amongst Amish/Mennonite settlements Research which follows farmers through the transition into MIRG and organic Research which follows farmers through the transition into MIRG and organic

Discussion/Questions THANK YOU FOR YOUR INTEREST! THANK YOU FOR YOUR INTEREST! CONTACT ? CONTACT ? Caroline Brock

Organic Dairy Farmers: Clustering

Trends -- Structure of Wisconsin Dairy

Wisconsin’s Organic Dairy Farms – Modern Note the higher frequency of rotation than other graziers. High intensity grazing as part of their management strategy.