By Georgina Gustin
ST. LOUIS POST-DISPATCH
When a group of organic dairy farmers in Missouri and neighboring states banded together to sell their milk through a cooperative a few years ago, they thought they had stumbled onto a dairying gold mine.
The industry had been a bumpy ride for a decade. Prices fluctuated wildly. But demand for organic milk, which commands twice the price of conventional milk in groceries, promised a stable and sizable check.
“It looked really good,” said Wayne Hale, an organic dairy farmer in northwest Arkansas. “And it looked like a simpler way of life.”
So Hale and 22 other dairy farmers made the investment to move to organic production, selling their milk to Central Equity Milk Cooperative. Central Equity, in turn, launched the first organic cooperative in Missouri.
But last year, demand for organic milk stalled amid the sagging economy. Suddenly, the cost of producing organic milk was exceeding the return.
“People are reluctant to pay twice the price,” said Joe Hylton, manager of Central Equity, “and there’s been a lot more milk developed in recent years.”
Organic dairy producers across the country are now scrounging to find new markets for their product. Some are unloading organic milk at conventional milk prices and losing money. Others are facing debt arising from the conversion to organic because their contracts have been canceled or not renewed. Co-ops, like Central Organic, are closing.
“I invested everything we had in this,” said Hale, who is now selling his organic milk to a local cooperative at conventional prices. “Now they say it’s over.”
Kevin Poetker of Waterloo is a lifelong dairy farmer who also sold his milk through Central Equity. Like Hale, Poetker is selling organic milk for half the price he was getting just a year ago.
“I have invested my life in building this dairy farm,” he said. “Now my entire livelihood and the financial future of my family is at risk.”
A SMALL START
Modern organic milk production — without pesticides, hormones or antibiotics, among other things — started with small farms, mostly in the northeast. As consumer concerns rose about the use of growth hormone rose and animal welfare, more shoppers started buying organic milk.
But small farms couldn’t produce enough organic milk to meet demand, which opened the door for conventional milk producers to enter the organic market. By the mid-2000s, several organic milk operations became large-scale productions.
In 2004, the largest conventional milk producer in the U.S., Dean Foods, got into the organic game, acquiring Horizon Organic, which now has a dozen farms milking more than 1,000 cows each. Aurora Organic Dairy is another big producer, selling milk to Walmart and Costco. It has dairy herds approaching 5,000.
“It was like a land grab,” said Sonja Tuitele of Aurora, which is based in Colorado buts sells its organic milk to stores around the country for their private labels, including Schuncks. “Every (retailer) was clamoring to get
organic on their shelves.”
From 2002 to 2007, the number of organic dairy farms rose nearly 80 percent, according to the U.S. Department of Agriculture. Between 2006 and 2008, sales of organic milk and cream shot from $1.3 billion to $2.1 billion, according to the Organic Trade Association. Organic milk accounted for about 3 percent of
all milk sales and was the most consumed organic product, after produce.
But in the past year, according to Department of Agriculture, sales of organic whole milk were about 4 percent lower this February over February 2008. Sales of reduced-fat organic milk was down 18 percent over the same period.
One government study showed that producers, who have to pay more for organic feed, are losing between $3 and $5 per hundred pounds of milk, depending on where their dairies are.
Struggling small dairies are now pointing the finger at the large producers, blaming them for a glut of milk and the drop in prices. The Cornucopia Institute, a Wisconsin-based farm advocacy group, has accused the big producers of exploiting vague language in the federal organic standards and violating certain organic principles, especially one requiring animals access to pasture.
‘LOOK WHO’S PAYING’
Mark Kastel, a co-founder of Cornucopia, says the small farmers who pioneered organic are being put out of business by a flood of “tainted” milk.
“As long as the market was growing, we postponed the day of reckoning,” Kastel said. “But when the market slowed, Bam! Look who’s paying for it.”
The organization has pursued the larger dairies, filing complaints with regulators. Ultimately, those complaints resulted in a 10,000-cow dairy in California to be stripped of its organic credentials, while Aurora was forced to move cows from one of its farms and stop selling some of its milk as organic.
Regulators are now reviewing the organic standards to specifically define how much access to pasture animals should have. Federal officials said they’re reviewing the standards but cannot say when the rules will be finalized.
The larger dairies insist they’re bringing the healthy properties of organic milk to more people for less money.
“The oversupply of milk is not being caused by the larger dairies,” Tuitele said. “We’re making organic more affordable and accessible.”
Some dairy economists, too, say the oversupply has more to do with shrinking demand than an influx of milk from large dairies. “If the demand had not collapsed with the economy there would not have been this problem,” said Joe Horner, an agricultural economist from the University of Missouri in Columbia. “It’s not just one company. It’s not the fact that we had a big bulge (of milk) going through. It’s truly a change in demand.”
That’s small consolation for small farmers.
Mervin Martin milks 50 cows in Barnett, Mo., about 170 miles west of St. Louis, and is in the middle of converting to organic production, a decision that once seemed to promise a big check. Now he’s selling his milk for conventional prices at a loss — and waiting for the market to turn around.
“I guess I’ll keep an eye out and see what develops,” he said. “So far, it’s cost us quite a bid of headache. We’re hoping it works out, but it doesn’t look too promising.”
