The boom in demand for organic milk is transforming farming villages in the Upper Midwest — and milk producers are trying to persuade conventional farmers to convert.

Minneapolis Star Tribune
Matt McKinney

It’s not like Byerly’s to leave customers wanting, but for weeks this spring, the chic St. Louis Park grocer hung signs in its dairy cases; the organic milk had disappeared.

The supermarket sold out on some days because of lower winter production and the calving cycle. The milk came back this month when cows returned to pasture during what’s known in the industry as “spring flush.”

It’s a seasonal shortage that grows more acute each year with surging demand for organic milk. Estimates range from 10 percent to 25 percent undersupply for the nation. It’s enough to furrow the brow of even the most relaxed organic farmer.

“We’re almost a little worried about it,” said David Bruce, a spokesperson for CROPP, the nation’s largest organic farming co-operative and the people behind the Organic Valley Family of Farms brand, based in La Farge, Wis. “We’re not able to keep up as it is.”

This is the other side of the story behind the boom in organic foods: Growing demand has brought marketplace pressures to the once-fringey organics farmers of the Upper Midwest. Farmers are now courted by milk companies desperate for the organic product. Signing bonuses are not unheard-of. Organic dairy farmers can count on a premium price — sometimes twice as much as for conventional milk.

The larger companies, such as Hood Dairy Co. of Boston and the Dallas-based Dean Foods use whatever leverage they can to win new farmers. (Dean, which at 55 percent of the market is the nation’s largest purveyor of organic milk, sells milk under its Horizon label.)

“It’s become a giant bidding war,” said Ertuk Mehmet, the dairy buyer at the Wedge Community Co-op. “There’s all sorts of crazy rumors about signing bonuses going on.”

It’s not just organic milk flying off of store shelves. The organic industry accounted for just 2.5 percent of the nation’s food market last year, but organics of all types are having record growth: Organic meat sales grew 55 percent in 2005, sales of organic condiments grew 24.2 percent last year and dairy products grew 23.5 percent, according to the Organics Trade Association. Sales of organic produce have climbed every year at a rate of 20 percent since the early 1990s, according to the industry.

A majority of grocery stores now carry at least some organic products, and Wal-Mart, the nation’s No. 1 food retailer, recently announced plans to double the amount of organic produce sold in its stores. The United States last year imported $1.5 billion worth of organic products, according to a study by the London research firm Organic Monitor.

While the new business is more than welcome for family farms that have seen decades of slow or even negative growth, it’s also created an identity crisis of sorts for the industry.

“It really scares me to see the big guys coming in and trying to be a player in this,” said Dave Minar, a longtime organic farmer who with his wife, Florence, runs Cedar Summit Farm in New Prague. “Expecially the fact that a lot of their cows don’t graze,” he said.

The 160-cow Cedar Summit farm has 190 acres of grazing land and 210 acres for growing hay for winter feeding. The cows are milked twice a day and fed on alfalfa, grasses, dandelions and clover.

He said his cows produce 13,000 pounds of milk per cow. He knows the conventional farmers get more, but Minar refuses to feed corn to his cows, saying the practices used to grow corn are too destructive to the land.

Managers at CROPP are keen to find new farmers like Minar who will join them for the right reasons.

“How do we ensure that the organic producers are truly farming with nature in mind and not just essentially finding that organic is one way to make more money farming?” said Tedd Heilmann, a general manager for Organic Prairie, the brand name for CROPP’s meat products. “Let’s keep in mind that the real reason organics was developed was the support from the early organic consumers, and their early focus was a better sense of farming and a better sense of food.”

The cooperative holds regular “barn meetings” to talk up organic farming with conventional farmers. If a farmer agrees to convert, it’s a one-year process for animals and three years for the land. The conversion can be costly for farmers, not only because it requires an investment in organic grains but also because most conversions result in a sometimes temporary overall crop reduction.

Not an easy ride to riches

The cooperative offers to help pay for the cost of conversion, with a $2 per hundred pounds of milk bonus for the third year of conversion. There are additional bonuses once the milk starts flowing. Farmers must pledge a two-year commitment. The cooperative’s website extends an invitation to conventional farmers labeled “Farmers Wanted,” with an urgent message to consider joining CROPP rather than larger corporate organic farms.

It might seem simple to convince a dairy farmer to jump on the organic bandwagon. But for all of the sales that have been rung up — about $500 million in organic milk sales last year — so far there’s scant evidence that organic dairies make substantially more money than their conventional farming peers.

The U.S. Department of Agriculture just this year included organic dairies in its annual record keeping; it’s expected to provide hard data on the costs and benefits to organic dairy farmers by year’s end.

Organic milk farmers can expect $22 to $26 per hundred pounds of milk, a sizable premium over the $15 per hundred pounds of conventional, but organic farmers also pay more for labor and organic feed.

A preliminary study of Minnesota farmers has found that organic producers pull even or just a bit ahead of their conventional cousins, according to the Center for Farm Financial Management at the University of Minnesota.

The study — considered preliminary because it relied on just 14 farmers, half of them organic — found that most organic dairy cows produce 7,000 pounds less milk per cow each year than conventionally raised cows. Because of the higher price for organic milk, however, the organic farmers were able to make more with less. The study also found that costs were lower at organic dairies in all categories except labor, a difference that likely comes from the added labor needed to move cows from paddock to paddock in the rotational grazing practices used on organic dairies, said Dale Nordquist, of the Center for Farm Financial Management.

A pair of 2004 surveys in Wisconsin, meanwhile, found that organic dairies typically were 25 percent more profitable than conventional ones, but the price for conventional milk has risen since then.

Still, as many as 30,000 cows nationwide are making the one-year transition to become organic milk producers, adding 30 percent more capacity to the nation’s current herd of about 100,000 organic milk cows, according to the Cornucopia Institute, a nonprofit organization based in Cornucopia, Wis.

Not everyone thinks this rapid growth is a good thing. “We could be in a surplus situation in a year or less and it could spell absolute disaster for all of the families around the Midwest,” said Mark Kastel, senior farm policy analyst at the Cornucopia Institute. “We could see the wheels fall off this thing.”

In Minnesota, where there are 500 certified organic farms and 100 certified organic dairies, “people are wondering what will happen,” said Meg Moynihan, a spokesperson for the state Department of Agriculture.

In La Farge, such questions are all too real.

CROPP has a new $4 million headquarters, an office building set on a hill overlooking the village of La Farge, population 755. The 49,000 square foot office looks like a modernist take on a barn, with landscaping.

The cooperative has grown since its founding in 1988 to sales of $242 million last year, a near doubling since 2002.

For now, said Heilmann, the cooperative wants to meet demand, but not overproduce.

“The worst thing we could do here is overestimate the market demand and then have the market crash out underneath the farmers” he said. “We always have to keep in mind that we cannot get too eager.”

Matt McKinney — 612-673-7329

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