Excerpted from The Milkweed
The state of the (organic) dairy nation is not good. That shouldn’t be too much of a surprise since the entire dairy industry, and general economy, is in freefall. But for many of us who have been involved in building the organic dairy sector over the last two decades, as a viable and economically just alternative for farmers, we are not ready to idly sit by as farmers get screwed.
Looking Back – 2008
I’ve spent the last 20 years as an evangelist for organic food and farming. There is no doubt that abandoning agrichemicals has a big payback for consumer health and our environment. But, organics has been the best social-justice vehicle we’ve seen in the family farming movement. The premium price for organic milk has, historically, been a lifesaver for about 1800 family dairy farms.
Unfortunately, with the meteoric rise in organic commodity prices, 2008 was the first year in history that I couldn’t look a farmer in the eye and say that your family would be better off making the arduous and expensive conversion to organic production. Profit margins, for many families, have eroded to zero or worse – some conventional producers were doing far better than their organic neighbors.
Just like in conventional dairy, a lot of middlemen were making big money in speculating and trading organic feed grains and hay. And I know many dairy families do not begrudge cash-crop producers for inching back up to parity. But, unfortunately, 2008 was the first time in the history of the organic dairy marketplace that farmers were just flat-out unable to pass along their increased costs to maintain a living wage.
This is not because organic consumers have turned their back on their long-term support for the “story” behind the organic milk label. But rather, it was illustrative of an evolving conspiracy over the last decade between the USDA and a handful of “factory farm” organic milk producers taking over the industry – making organic milk, in their words, “more affordable.”
The Lay of the Land – 2009
The entire organic industry is navigating in uncharted waters. We are experiencing the first protracted economic recession since organics was commercialized, and the landscape is shifting.
1. Consumers are eating more meals at home. Because organic food is still underrepresented in food service (restaurants and institutions), especially dairy, a shift toward more home-cooked meals is a positive trend for the industry – making up for some consumers that might be losing their jobs and compelled to switch back to conventional.
2. However, a disturbing trend is a shift away from name brands to more private-label organic products. These “anonymous” products are oftentimes divorced from what consumers think they are supporting when they buy organic food (e.g., factory farms, sourcing from China).
3. Meanwhile, as organic consumers at supermarkets might be cutting back or “trading-down” to private-labels, managers of cooperatively owned natural foods groceries around the country are telling us that their sales are booming! These are the most loyal organic customers, and they are not about to shift back to conventional food. Keeping their trust in organics is essential.
Simultaneously with the changes in retail market patterns, the wholesale industry is reacting.
Dean Foods (Horizon Organics) continues to grow their industrial-scale production base. In addition to being vertically integrated, milking thousands of cows between their own dairies in Idaho and Maryland, they have continued to add independent “factory farms” as patrons (and continue to disingenuously communicate to their customers that 80% of their milk comes from family farms).
Dean recently transferred thousands of cows/heifers from their giant industrial dairy in Idaho to a new operation in New Mexico. Although they have denied an ownership stake in that and other industrial dairies, we discovered through an obscure filing with the Securities and Exchange Commission that they were “leasing” the New Mexico dairy. And the word on the street, in Texas and New Mexico, is that they are partnering with certain individuals to create the illusion of independent ownership that’s a lot of effort and expense to prop up their public relations greenwashing! Patrons now report the giant dairy processor is said to be considering pricing cuts and/or cutting farmer production.
Building more factory dairies would be bad enough, but we have now been contacted by family-scale farmers shipping to Dean/Horizon, in a total of four states, where the giant dairy processor was using strong-arm tactics to squeeze them out, terminating their contracts. Dean basically mailed the farmers letters stating, emphatically, that they would stop picking up milk on a date certain and then offered the farmers the option for a buy-out, at dramatically less value than they would receive for the balance of their contracts. “We thought we were dealing with ethical people. My family and I hitched our wagon’s future to the commitments we received from the Horizon folks,” said Don Halverson who milks about 50 cows near Rupert, Idaho.
Cornucopia of course advised the producers and helped them with securing legal counsel. Most of them are still shipping today, at least for the time being, after having told the Horizon procurement officer in Longmont, Colorado, to, essentially, forget it. But they’re mighty insecure about the future.
CROPP (Organic Valley) has notified their producers in the state of Texas that they will discontinue picking up their milk by mid-2009. Unlike Dean Foods, which has a history of cutthroat capitalism in the dairy world, CROPP’s problems in Texas stem more from mistakes and miscalculating the Lone Star State’s weather/environment, along with trying to compete with Dean Foods’ alleged predatory pricing practices.
CROPP suffered its first blow in Texas after many of their initial farmers went belly up over the last few years during drought conditions. Alan Nation, a national grazing expert and publisher of Stockman Grass Farmer, said he wasn’t surprised by CROPP’s Texas misstep: “Converting from conventional to organic is a real challenge in the sub-tropical areas of this country. Heat intolerance in some breeds, parasites and other insects, and establishing productive pasture, is something that takes more time and a lot of support to accomplish.”
CROPP then turned to the 7200-cow Natural Prairie dairy in Texas for a supply line so they could continue serving their customers in the state, prominently private-label milk for the giant HEB grocery chain. After shifting to Natural Prairie, HEB, predictably, saw no utility in using CROPP as an intermediary and cut them off to purchase milk directly from the nation’s largest single “organic” dairy.
Lacking economy of scale, and being pummeled by Dean Foods on pricing, CROPP, after a sizable investment, abandoned their attempt to maintain their “Texas Pastures” label. That has left a handful of dairy producers in the state, generally 250-cow outfits committed to grazing, languishing without a future market. Dean/Horizon told them that they “might” have a home for their milk, if they are still alive, in late 2010.
Other smaller regional players in organic dairy around the country are also said to be adjusting pricing and production quotas downward. Although the retail market for organic milk continues to increase, albeit at a much slower rate, years of the major processors signing up potential farmers, regardless of their geographic desirability, and subsidizing their transition to organics, appears to be over.
Obama and the Future of Organics
Whether it is Chinese imports of suspect grains and vegetables, or faux organic milk from giant industrial dairies, the USDA has become a facilitator and enabler in the corporate takeover of organic agriculture. Based on freedom of information documents, we might go further and even call them a coconspirator. Under the Bush administration they disregarded the intent of Congress in running the National Organic Program and even failed to materially penalize the perpetrator of the largest scandal in the history of the industry, Aurora Dairy.
The timing is exquisite, at the beginning of the Obama/Vilsack administration at the USDA, for organic producers to make their case for “CHANGE.”
With Obama being the first president to speak openly about his support for organics, and his promise to change business as usual in Washington, which we would assume includes the proagribusiness bias at the USDA, there is a real opportunity here, and we need to seize the moment.
Tom Vilsack’s nomination as the new president’s pick for USDA secretary received mixed reviews from organic insiders. His probiotechnology and proethanol history made some understandably uncomfortable.
But he has crafted a reputation in the Midwest as a good politician and pragmatist. At the same time as partnering with corporate agribusiness, while Governor of Iowa, he reached out to sustainable food proponents and developed infrastructure to support organic farming.
So we are hoping that given the climate of change, that these two gentlemen will recognize the political opportunity to create a new, literally healthier, balance at the USDA.
Past abuses by the Department include a gross lack of supervision of imported organic inputs, especially from China, factory farm livestock production scandals in dairy, beef, and eggs, overruling USDA staff enforcement as favors to corporations, ignoring National Organic Standards Board recommendations, and then stacking the panel with corporate executives.
We need President Obama and USDA Secretary Vilsack to bring in new management and cleanup the mess they inherited.
If we are going to save the organic dairy industry it’s going to be because the USDA cracks down on the giant corporations producing phony-baloney organic milk, much of it as private-label store brands, undercutting sustainable pricing for family farmers.
We invite concerned producers to visit the Cornucopia web site: www.cornucopia/changeusda.org. There you will find a proxy-letter that you can sign and send to Obama and Vilsack, supporting change at the USDA. This won’t happen unless you make your voice heard.
Mark Kastel is codirector and Senior Farm Policy Analyst at the Wisconsin-based Cornucopia Institute.