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Are there any alternative markets for Organic Dairy?

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There is no question that dairy producers, both conventional and organic, are feeling the pain of a prolonged down market. Organic milk buyers and cooperatives are not actively taking on new producers and have been on a production quota while existing producers are struggling with lowered prices, stable or climbing feed costs and even resorting to selling their milk on the conventional market.

Producers aren’t the only ones feeling the sting. At the Organic Valley annual meeting this April, they reported a $10 million loss; their first in 20 years as a cooperative. This is despite robust consumer demand and sales topping $1.1 billion dollars; 4% growth in 2017 alone. However, when considered in context, the organic dairy market has slackened in sales and volume from its height in 2013, as food companies and producers rushed in record numbers to increase production to meet demand just as the market began to slow and reach the saturation point.

Organic milk continues to offer one of the higher price premiums over conventional production; second only to eggs, which encouraged many new producers to consider or actively transition their herds and land to organic production. This added to an already abundant supply and will likely continue through 2018.

Organic milk is still a strong pillar of the besieged American dairy industry, accounting for over 5% of total fluid milk sales, but consumers and retailers have a growing preference towards plant-based alternative ‘milk’ like almond milk, coconut milk, etc. Though retailers and industry analysts expect the organic dairy market to rebound to some degree by 2019, producers have some difficult short-term decisions to make.

With oversupply still a real issue and price premiums shrinking to $1.32/half gallon (down from $1.57/half gallon in 2017) through 2018, what can organic dairy producers do to help ease their families and their farms through the slump? Unfortunately, there aren’t any easy answers or quick solutions. Some producers are responding by cutting their production or even culling their herds to control costs. That may have to be an option to keep the farm on sound financial footing. There are price premiums available for organic beef and organic markets for dairy cull cattle are limited but they do exist.

Additionally, there may be alternative marketing outlets for organic milk with smaller-scale creameries, cheese-makers or other specialty dairy product manufacturers. These outlets are limited, but it would certainly be worthwhile to contact them; these specialty products often end up in co-op’s and grocery stores in large urban centers. The dairy buyer at these retail locations may have suggestions of who to contact.

Something for dairy producers to be aware of is Dairy Revenue Protection, an insurance program under development by the American Farm Bureau Federation and the American Farm Bureau Insurance Services. It would allow dairy producers to purchase risk management protection against falling milk prices and/or production. For each quarterly policy, the farmer would choose milk-based pricing, which is based on average milk pricing from Chicago Mercantile Exchange milk class futures, or a component-based pricing model. The program has been approved by the USDA and details are being finalized by the RMA with slated availability for purchase mid to late summer at the earliest. It is unclear at this point if organic milk will be considered as a separate track from conventional.

Finally, for those producers with available land and equipment, you could consider diversifying your rotation or raising more crops to fill some of the financial gap. It may be worthwhile to have a trusted financial advisor or banker look over the farm finances and suggest the most feasible ways to control costs. Marbleseed is happy to connect you with folks that can help. It bears mentioning that if you, your family, neighbors or friends are needing crisis support through this difficult farm market, please see the Farm Crisis Center or call the Farm Aid hotline (during business hours) at 800-FARM-AID.

Posted: May 2018
Answer By: Matt Leavitt