Economic analysis of issues concerning organic dairy farming

Abstract

This report reviews organic production and consumption with particular focus on organic dairy farming in Denmark (DK) and New Zealand (NZ). A brief introduction describes the current world wide status of organic production and consumption. This is followed by a literature review of the Danish and NZ market situations within organic – and in particular dairy - farming. Organic dairy farming is very developed within DK, whereas it is only just beginning in NZ. The Danish experiences are used to define scenarios for future development within NZ. These scenarios are modelled in the Lincoln Trade and Environment Model (LTEM), resulting in estimates of NZ dairy producer returns derived from a shift towards organic production. Assumptions on development within NZ's main trade partner countries – United States, European Union and Japan – are included in the modelling. The LTEM modelling shows how the NZ dairy sector could benefit overall from some conversion to organics. Even very conservative estimates of organic consumption and consumers' preference for organic dairy products result in increases in NZ organic and total producer returns. We argue, therefore, that it is important for the NZ dairy sector to commit itself towards organic production and signal this to the NZ dairy farmers.