Due to my job as plant manager of Farmer’s All-Natural Creamery (where we procure, bottle and sell milk), I get to observe quite a bit of what happens in the organic dairy industry. The past year and a half has been devastating to the dairy industry in general, and very difficult for organic farmers specifically.  A lot of the pain has been caused by general economic conditions and “the recession” that has effected most of the United States (and the world for that matter), but also weather events have played a large part.

Prior to the economy taking a nose-dive, there were three large buyers of organic milk nationwide. These were Organic Valley, Horizon Organic, and Kemp’s (a subsidiary of HP Hood). All three competed with each other in various markets for farmers (meaning milk supply). Last year Hood pulled out of the market, dropping routes and farms at almost a moment’s notice for some (and honored other contracts until the end). This painful restructuring has caused consternation in the supply chain — what does the industry do when there is too much milk overall? It is easy to shut dairy farms down (just stop picking up their milk), but it is extremely hard to start them back up.  Milk by definition is highly perishable, and organic milk is not only highly perishable but relatively expensive as compared to conventional milk. Compounding the problem is the age-old dairy issue: cows give milk every day.  And that milk has to go somewhere.

In a recession people stop going out to eat and eat at home. Usually, a recession is good for the food industry. However, organic food is higher priced, so recessions are bad because while people need food to survive, they do have a choice between conventional and organic food. If organic is a lot higher priced, then it is easy to just “buy down” until times get better — which is exactly what has happened over the last year or so.

There has been a shakeout of the number of organic dairy farms that are continuing to operate.  Recently the industry got a wake-up call when there were two large back-to-back major snowstorms on the east coast of the US. People generally panicked and bought up food supplies to keep them going while being snowed in. Shelves were stripped of food, milk in particular, and all of sudden everyone began asking for more milk. Ironically, there was little to be had.  While this has been a short-term event, it’s highlighted a growing concern for a more long-term perspective.

We are now coming out of a period of over-supply, and entering into a phase of under-supply. With the mainstream consumer becoming more and more aware of the impact that food has on one’s health coupled with the general easing of the recession, I foresee the pendulum swinging back the other way soon — organic milk will be in demand and there will not be enough farms to supply it.

Filed under: Organic Dairy, Organic News on March 15th, 2010