The speeding organic milk train has come to a slow crawl, according to a new report from the U.S. Department of Agriculture’s Economic Research Service. To blame: high operating costs, complicated production systems and unclear access-to-pasture rules.
The slowdown in production is best illustrated through consumer sales figures, which offer a gauge of a product’s demand. In 2008, the U.S. organic milk market grew 10 percent, adding $166 million in new sales. In 2009, sales declined 3 percent, losing $45 million, according to the Nutrition Business Journal.
“It just seems like a valley in between a mountain range of peaks,” Bob Scowcroft, executive director of the Santa Cruz, Calif.-based Organic Farming Research Foundation said. “[It’s a combination of] new startups shutting down and a certain strata of consumers buying very little organic.”
According to the report, organic milk is much more costly to produce, driving new organic milk farmers away from the market. In 2005, organic dairies were paying $4.78 per hundredweight of milk (cwt) more than conventional dairies. In November 2009, organic dairies paid $6.37 per cwt more than conventional. As the economy crashed, feed and labor costs increased, forcing new milk farmers to shy away from the business, the report noted.
“Those dairy farmers that have been certified organic for four or five years are generally doing OK,” Scowcroft says. “They’ve already diversified enough, and they didn’t bet the ranch and add so many head when prices were high.”
Ed Maltby, executive director of the Northeast Organic Dairy Producers Alliance, says it’s the new farmers that the industry really has to worry about. “They still have to transition [to organic]. They have a lot of debt. They’ve reached the end of their lines of credit. They’re the ones we’re going to see disappear—or go conventional. And they’re the young farmers—the ones we need,” Maltby said to Jane Hoback for NFM’s “Dairy Industry Report.”
In addition to high operating costs, a smaller yield from organic dairy farms has led to the decline in production, according to the USDA’s report. Half of organic dairies that gave their cows the least allowable amount of time foraging the pasture yielded more than 15,000 pounds of milk per cow; dairies that gave their cows the most time in the field yielded less than 10,000 pounds of milk per cow.
“This disparity suggests that organic operations using conventional dairy feeding methods, such as confining cows and feeding higher energy feed, were more likely to generate higher returns to capital and labor resources than those relying more on pasture-based feeding,” according to the USDA’s November 2009 report, “Characteristics, Costs, and Issues for Organic Dairy Farming.”