Natural Foods Merchandiser

Demand for organic dairy drops

The crumbling economy is taking its toll on organic dairy farms as demand from money-strapped consumers drops.

That's in sharp contrast to just a few short years ago, when farmers couldn't keep up with growing demand.

Lynnfield, Mass.-based dairy giant HP Hood recently notified eight of its organic dairy farmers in Maine that it would not renew their contracts. Hood also said it would cut production by 15 percent at most of its 14 remaining farms in the state.

Maine had the highest percentage — 16 percent — of organic dairy farms vs. conventional farms in the country in 2006. Currently 72 farms in Maine produce organic milk.

But Hood said recent demand has not kept pace with production.

"Due to a softening in organic milk sales triggered by the recent economic downturn, Hood has made the difficult decision to end supply agreements with eight Maine dairy farms," said Hood spokeswoman Lynne Bohan in a statement. "Increased transportation costs also factored into Hood's decision, as the raw organic milk procured in outlying areas must be shipped to the company's processing plants. Hood pays all costs associated with transportation — both farm pick up costs and cost for finished product to reach consumers."

Bohan said all farmers whose contracts are being released have been given a minimum of six months' notice.

With $2.3 billion in annual sales, Hood operates 23 manufacturing plants and works with more than 300 family farms to process organic milk throughout the country. Hood sells organic milk under the Stonyfield Farm brand.

Other states as well as organic dairies also are feeling the effects of the recession.

In California, dairy farmers also are experiencing dropped contracts as well as plummeting prices. In January farmers saw the biggest monthly price collapse they've seen in more than 50 years, according to the California Farm Bureau Federation. Record high fuel and feed costs have added to the burden of the ailing global economy. Producers will not be able to recoup their production costs — estimated by the California Department of Food and Agriculture at about $19 per hundredweight — at the current milk price, which for February was set at about $11 per hundredweight for Class I milk. That's nearly half of what California farmers were earning six months ago, the federation said.

Boulder, Colo.-based Horizon Organic, which works with 489 family farmers throughout the country, says it has seen a slowdown in the growth rate of organic milk. The company did not say specifically whether it had decided not to renew contracts because of the slowdown. "With a family farm network as large as ours, some farmers have come and gone over the years for several reasons, including when farmers opt to not finish their transition to organic or farmers or Horizon decide to not renew a contract at the contract term's end," said spokesman Jarod Ballentine in an email.

On the other hand, "We are currently recruiting farmers in regions where demand is strong and growing, thus we need additional milk supply," Ballentine said.

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