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Got Organic Milk?

Jeff Wells April 4th, 2008

Well, sure. But maybe not for long, judging by what we’re seeing lately with this wily economy.

Right now the price of conventional milk is higher than it’s been in years, at around $20 per hundred weight, according to the U.S. Department of Agriculture. Compare that to this same time last year, when the payout was just over $13 per hundred weight. This is great news for a lot of farmers.

The benefits don’t extend to organic dairy, though. And the current situation has the potential to sour organic milk supplies in the not-too-distant future. Industry experts say that, with conventional prices this high, fewer and fewer farmers want to undertake the onerous three-year conversion process required to get herds certified organic by the Department of Agriculture. To many, it’s just not worth the headache.

Ed Maltby, executive director of the Northeast Dairy Producers Alliance, says the problem is actually twofold: Conventional prices are too high, and organic prices are too low. He estimates that organic milk payouts in the northeast average $28 per hundred weight right now.

As a result, organic supply is stagnant.

“There’s nobody out there looking to transition,” said Maltby, in an interview. “And there won’t be until the price goes up or, alternatively, the conventional price drops back to where it was a year ago.”

Farmers who have made the conversion are being hit hard with the lower organic prices, he added. Many have had to run through lines of credit or dip into their savings to purchase supplies (including expensive organic feed, which is also affected as grain farmers decide to raise in-demand, ethanol crops). They’ve started working longer hours and are trying to grow their own forage to save costs.

Maltby and others have appealed to manufacturers like organic yogurt maker Stonyfield Farm to raise prices. And companies have responded — though not to the extent that many organic dairy farmers would like to see.

A supply shortage hasn’t hit supermarkets yet. But it very well could by as early as fall. Retailers should take note of Maltby’s warning: “I think by September or October there will be signs up in grocery stores saying that there’s a shortage of organic milk,” he said.

2 Comments to “Got Organic Milk?”

Corey Durling Says:

April 9th, 2008 at 9:02 am

Hi;

I am a partner in a dairy food consulting company Dairy Tech. We supply cost formula to the retail and other industry on dairy products. In a past life I ran two plants; one in NJ and the other a yogurt plant in SW Poland which I built from scratch and latter sold.

Raw milk is measured in pounds. The common term in hundred weight or 100cwt. I believe you used counterweight.

The dairy farmer are not uncommon. They want to get the best value for their product. Pricing has moved up to where they can now survive.

You commented on the price of non organic raw as being high. This is where it should be especially for the farmers in the NE to stay in business. If they sell out then the raw milk will have to come from outside the area costing more to move it.

The cost of organic will move higher to keep the spread between the two products making the effort to gain organic status worth while.

The organic milk market is strong and should stay strong. There are a lot of health concerned people buying the product.

Please feel free to contact us with any questions.

BR
Corey Durling
Dairy Tech
W 908 437 1274
Jeff Wells Says:

April 9th, 2008 at 9:43 am

Oops! Thanks for pointing out the error, Corey; the corrections have been made. As to your point about conventional farmers — pricing has moved up not just to the point where they can survive, but to where they’re thriving. That’s great, and we wish them all the success in the world.

Now the organic industry just needs to step up their game. You mention that cost will move up so that there’s still an incentive to go organic. But that’s precisely what’s not happening right now. Ed Maltby of the NODPA says payment per hundred weight (got it right this time!) needs to go up by $6 or $7 in order for organic dairy farmers to stay afloat. Manufacturers have upped their payouts by a dollar or so, but that’s not enough. And according to him, they’re not responding to requests from farmers and cooperatives to sit down at the bargaining table to work out a long-term deal.

Part of this is because of competition between the major players in organic dairy — Horizon, Organic Valley and Stonyfield Farm. None of them are willing to raise prices at retail. There’s also the high price of conventional milk. And let’s not forget the 800lb gorilla in the room: the rising cost of feed thanks to the ethanol boom, which now appears to be a bust.

Demand for organic dairy continues to rise by around 20% a year, something you made note of. The supply has to be there, however. Let’s hope we get solutions instead of out of stocks.