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Organic milk production is one of the fastest growing segments of organic agriculture in the U.S., but little is known about the relative costs and returns of organic and conventional dairies. This study utilizes a nationwide survey of dairy operations for 2005 that includes a targeted sample of organic dairies. Sample selection models were specified to isolate the impact of choosing the organic approach on various levels of milk production costs. Size and location of dairy operation were among the primary factors affecting choice of the organic approach and milk production costs. Organic dairies had production costs about $4 to $6 per cwt higher than conventional dairies and received an average milk price premium of $6.69 per cwt. Results suggest that there may be incentives for small conventional dairies to covert to the organic approach, but probably not for startup organic dairies unless they can enter at a much larger scale than the current industry norm.


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