How Now, Organic Cow?

March 14th, 2008

As energy, healthcare, and feed costs skyrocket, organic dairy farmers get squeezed

Guest post by Ed Maltby, executive director
Northeast Organic Dairy Producers Alliance

Deerfield, MA: What is more important to Stonyfield Farm and HP Hood, market share or the health and welfare of their organic family farmers?

If you ask 24-year-old Mark Ouellette Jr., who supplies organic milk to HP Hood that is sold under the Stonyfield label, his answer is very clear: market share. “I’m losing up to 60 cents per gallon producing milk for the Stonyfield brand. I’ve used up my line of credit, I’m close to maxing out my credit card because of spiraling feed and fuel costs.”

He adds, “Last fall, I and many other organic farmers told both Stonyfield and HP Hood what was happening and we were given a 3 cent per gallon increase. Now another 8 cents starting on April 1. This is a slap in the face.”

Mark’s father was one of the first dairy farmers to sell organic milk in Maine, and Mark started working with him when he was 14, with a dream of working together to expand the family farm. After graduating from high school, Mark realized he needed more experience and equity and started working on the farm, which he purchased two years ago.

“I had the opportunity to buy this farm and everyone said there was a tremendous future in organic dairy,” says Mark, “so my family and I made the commitment and invested over half a million dollars believing that [Stonyfield CEO] Gary Hirshberg would stand by his pledge to his organic dairy farmers.”

Gary Hirshberg, Stonyfield’s president and CEO, proudly proclaims on the Stonyfield Farm milk carton that “organic dairy farmers are our heroes,” and the company’s website states, “Paying farmers a fair price for their products is an important tenet for many involved in organic agriculture.” Stonyfield Farm licenses its name to HP Hood LLC, owned by the John Kaneb family, which procures, processes, and distributes the organic fluid milk line.

Stonyfield Farm also donates “10% of its profits to help protect and restore the Earth.” “Perhaps Gary’s priorities are misdirected and he should not make so much profit at the expense of organic farmers that lead the way in protecting and preserving the Earth,” says Maine organic dairy farmer Henry Perkins.

Mark Ouellette’s answer is a lot simpler: “Gary should honor his marketing pledges. I milk 80 cows and don’t make enough to pay all my farm bills,” says Mark. “I can’t afford basic health insurance for my wife and son; these low milk prices are killing me!”

Mark is not alone. Aaron Bell, a 30-year-old organic dairy farmer, has analyzed his costs and knows that he needs at least a 60-cent-per-gallon increase to break even. “The cost of electric, grain, fuel, labor have all gone up in the last year, but the pay price has remained static,” says Aaron. “We invested $250,000 in our organic dairy with the expectation that it would increase our profitability, not that we would lose money. It would be a shame to close up shop after eight generations with the ninth looking on with eager eyes.”

Maine dairy farmer Nick Michaud had a different response. He is giving up organic production and heading back to conventional production. Nick is not alone; four farms in Vermont and five in New York have stopped organic dairying and returned to conventional production in the last six months.

Since 2001, the average price paid to farmers for their organic milk has increased by only 29 percent. By any measurement, whether soft costs (insurance, living expenses) or production costs, this does not represent an adequate return for the skilled labor and capital investment of organic dairy producers. The data that has been collected by the USDA Agricultural Research Service and the universities of Vermont, Maine, and Wisconsin indicate that the base price paid to family farmers in the Northeast in 2007 should have been $28.50 and needs to rise to $33 for 2008 rather than the current average of $27.50.

Across the country, other farmers are suffering from the same problems. “There is a very serious situation going on right now and some of our very best farmers are looking at bankruptcy,” says Darlene Coehoorn, Wisconsin farmer, Organic Valley member-owner, and president of the Midwest Organic Dairy Producers Alliance. She adds, “We need Organic Valley, Stonyfield Farm, HP Hood, and Horizon Organic to recognize that our families are suffering. While the major brands are signing on new farmers with bonuses and incentives, they need to take care of their farmer-owners and farm partners by paying us a price for our milk that allows us to support our families and pay our farm bills.”

The costs of doing business are rising. Health insurance rises each year with an increase of 78 percent from 2001 to 2007 and a projected increase of 10 percent in 2008. Fuel prices have risen by an average of 20 percent over the last two years depending on the location of the farm.

The cost of organic shell corn has risen from $168/ton in 2001 to $380/ton and higher in 2008; barley increased from $150/ton in 2001 to $290/ton in 2007, and is now $390/ton as well as purchased forages having more than doubled in the last six years. Given the rapid increase in the organic poultry industry and human demand for corn and soy, combined with little increase in organic grain acreage and oil peaking over $100 a barrel, there is no sign of any decrease in the price of purchased feed and energy.

As New York farmer, Organic Valley member-owner, and National Organic Standards Board member Kevin Englebert writes in the latest NODPA News, “The problem comes back to the same old story — [organic] dairy farmers are not receiving enough money for their efforts. The best long-term solution remains receiving a fair price for our organic milk.”

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