Organic dairy farmers juggle higher grain prices, growing need
BRATTLEBORO -- A sudden spike in the demand for organic milk is leading to shortages across the region, and experts in the industry are trying to figure out how to plan for an uncertain future.
There is a sign up near the organic milk in the Hannaford supermarket on Putney road, warning consumers about the nationwide organic milk shortage that is currently affecting availability.
At the same time organic grain prices are hitting all time highs, and farmers have one more cost increase to absorb along with increases in fuel, insurance and electricity rates.
Brattleboro farmer Ross Thurber, a member of Organic Valley, a national organic dairy cooperative, said organic farmers face many of the same challenges as conventional farmers, and surprise market conditions can catch the organic industry off guard just as swiftly as the conventional industry.
"Finding a balance between providing a healthy, stable price for dairy farmers and the price retailers will pay, forever will be a challenge," Thurber said. "You can try to manage supply, and maintain prices, but when the price of grain goes up you have to figure out a way to make that up somewhere else."
Thurber said there is only so much he can produce on his small farm, and when demand picks up there are very few options that the industry has to meet the growing need.
"There is a limit to expansion for most farmers," he said. "There is a lot of potential for more young farmers to come on, but they have challenges too in raising capital and access to land. It might be a while until supply catches up to demand."
Organic milk sales dropped in 2009 when the recession first hit.
But sales have rebounded quicker than analysts predicted, and now producers are trying to catch up, though there are challenges specific to organic farming practices.
The organic dairy industry has to contend with a lag time in availability, as farmers have to wait up to three years to transition to organic.
So when there is a shortage in the market, processors cannot simply get farmers to produce more milk.
Changes in the conventional farming industry also affect organic farmers.
When farmers get a high price for their conventional corn, there is less incentive to grow organic grain, and with less organic grain available the price rises.
Already facing rising fuel costs, some organic farmers are forced to feed their cows less feed, which leads to a smaller yield, and less organic milk on the market.
Hannaford Supermarket Spokesman Eric Blom said store managers around New England put the signs up to explain the empty shelves to consumers.
"Like other retailers, we are being impacted by the nationwide organic milk shortage," he said. "The shortage is affecting retailers nationwide and we hope the situation will improve in the spring."
When sales dipped in 2009 Organic Valley forced its farmers to produce less to control supply.
Now the company is working to increase production.
Organic Valley Northeast Dairy Pool Coordinator John Cleary said the decision to ramp down production was difficult to make, especially since the industry had seen double digit growth for years.
"It's a complex process," he said. "If you screw up and produce too much milk, the price will be low and everyone will lose money. It's like trying to drive with one foot on the gas and one foot on the brake. We've done a really good job of managing supply and demand and now we have to try and find that balance again."
Cleary said it is hard to predict how long the current shortage could last.
When cows move back out to pasture in the spring there should be a jump in production, but if demand continues to climb the shortage could continue.
Organic Valley saw a 12 percent increase in the number of farmers across the county, and the board voted to increase the pay price by $2 per hundredweight in 2012.
Organic dairy farmers have always enjoyed a stable contract, while conventional farmers are tied to a nationally set price that can go up and down throughout the year.
But when supply tightens and grain prices go up, organic farmers will not see their pay reflect the market conditions.
"In the long run organic farmers benefit from the stability," Cleary said. "But it does mean that they don't see their prices go up or down, and they miss the peaks and valleys."
Nicole Dehne, a certification administrator for the Northeast Organic Farming Association of Vermont, said the organic milk shortage could wind up being a boon for the industry.
After the dip in sales a few years ago, some experts said the organic industry was reliant on a strong economy.
But while the overall economy continues to sputter along, organic sales are still going up every year, she said.
"It is good for farmers," Dehne said. "When the market was flooded farmers did not see the benefit of moving to organic, but there is an opportunity for farmers to get on the bandwagon."
Northeast Organic Dairy Producers Alliance Executive Director Ed Maltby said the shortage is actually due to a crisis in the organic dairy industry that is forcing farmers to cut back on production.
Maltby points to a University of Vermont study that showed a sharp decrease in the equity that organic farmers lost in their businesses since 2006.
He said organic farmers are still only receiving a fraction of every dollar that is spent on a gallon of milk.
And while consumers seem willing to pay a premium price, even in the face the ongoing recession, farmers are not seeing their pay go up.
Maltby said organic farmers need at least a 40-cent increase, per gallon, to survive and continue to meet the growing demand.
"It simply is not economically feasible for farmers to continue producing," Maltby said. "Demand is increasing and we need to keep farmers on the land. There is a shortage of milk now, but if we continue at this rate we won't even have the farmers around to produce more."
Howard Weiss-Tisman can be reached at email@example.com or 802-254-2311, ext. 279.
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