New York Times, April 20, 2007
article by Andrew Martin (business section)
Organic Milk Supply Expected to Surge as Farmers Pursue a
Payoff
By ANDREW MARTIN
The New York Times Published: April 20, 2007
Dairy farmers are rushing to convert to organic milk production, and it is largely
because of a blueberry farmer who lives in Maine with a solar-powered computer and an
outhouse outfitted with a stained-glass window.
Edward Walldroff said he had saved money on feeding his cows by converting to organic
farming before more stringent rules begin in June. Demand for organic milk has been
growing 20 percent or more a year.
Arthur Harvey, the blueberry farmer, persuaded a federal court in 2005 that some
regulations on organic milk were too lax, including those governing how a dairy farmer
can convert to organic status. As a result, hundreds of dairy farmers decided to switch last
spring so they could complete the yearlong conversion before the more stringent “Harvey” rule
takes effect in June.
“When this court case was decided, we said, ‘Now’s the time for us. Let’s do it,’ ” said
Edward Walldroff, a farmer in La Fargeville, N.Y., who said that five other dairy farmers
nearby were doing the same thing. “It’s really kind of exciting to see that happen,
and know that six smaller-type farmers have some real viability now.”
On a larger scale, Organic Valley, a cooperative based in Wisconsin that sells dairy
products, is adding 269 farmers this year for a total of 972; it will process 45 percent
more milk this spring than a year earlier. “It looks like we will have a serious oversupply in the
next two months,” said George Siemon, Organic Valley’s chief executive. “We are now telling
people, ‘Please stop thinking that there is a bottomless market.’ ”
Horizon Organic, the biggest organic dairy company in the country, added 64 organic
dairy farmers in 2006 for a total of about 350, and about 230 more are in transition, said
Sara Unrue, a spokeswoman.
The sudden glut would be remarkable because there is usually a chronic shortage of organic
milk. Demand has been growing 20 percent or more a year, so much so that in 2005, some
retailers posted signs in their dairy cases apologizing for not having enough of it.
While the increase should fix the supply problems, consumers probably will not see lower
prices. Several manufacturers and retailers said they did not plan to reduce prices, in
part because the oversupply would be quickly absorbed by increasing demand. Organic
milk can cost twice as much in stores as regular milk.
At Whole Foods Market, the additional milk will be used to offer more organic dairy
products, like yogurt and cheese, a company spokeswoman said. At the yogurt maker
Stonyfield Farm, a subsidiary of Danone, the extra supply will allow the reintroduction of
organic smoothies and organic fat-free quarts of yogurt, which had been discontinued because
of supply shortages, said Nancy Hirshberg, vice president for natural resources. Stonyfield is
buying 48 percent more organic milk this spring than a year ago, she said. “This boom was a
gift from above,” Ms. Hirshberg said.
The Agriculture Department does not track the number of organic dairy farmers, nor does
the Organic Trade Association, the primary trade group. But farmers say that many among
them are converting to organic farming, and Mr. Harvey’s lawsuit is not the onlyreason.
Rock-bottom prices for conventional milk have also pushed farmers to consider more
lucrative alternatives.
Farmers can charge nearly twice as much for organic milk, but feed costs are higher and
the conversion can be challenging, since no antibiotics or growth hormones are
permitted. In addition, organic dairy farmers must give their cows organic feed, meaning they
graze on pasture land or eat feed grain that has not been sprayed with chemical fertilizer or
pesticide.
Last April, for instance, conventional dairy farmers received a national average of
$12.10 for 100 pounds of milk, compared with $15.20 in April 2005, according to the
department. Organic dairy farmers, by contrast, were paid about $22 for 100 pounds of
milk last spring.
Under the current rules, dairy farmers can feed their cows 80 percent organic feed and 20
percent conventional feed during the first nine months of the yearlong transition. During
the final three months, a farmer has to feed the cows 100 percent organic feed.
But Mr. Harvey successfully argued that the regulation was more lenient than Congress
intended when it passed the 1990 Organic Foods Production Act. As a result, the new
regulation, which takes effect on June 9, will require farmers to feed their cows 100
percent organic feed during the entire transition year.
While it may seem like a minor change, dairy farmers say it is significant. The challenge
of making a dairy farm organic is that the farmer’s costs rise during the conversion
year, but they are not yet offset by the higher income from selling organic milk. The
high cost of feed corn is a big factor; corn farmers see few incentives to go organic
because they can make so much money selling their crops to make ethanol.
Mr. Siemon of Organic Valley said that reducing retail prices because of a short-term
oversupply would hurt organic farmers and discourage conventional farmers from
converting. “We don’t want to harm the viability of organics and the price point that farmers
need to make a decent living,” he said.
Those are some of the reasons that Organic Valley, Stonyfield and others encouraged dairy
farmers to convert last spring, taking advantage of the more lenient feed regulations
while they still lasted. “Farmers were told, ‘If you were ever going to think about converting to
organic, do it now,’ ” said Katherine DiMatteo, an organic consultant and the former executive
director of the Organic Trade Association.
Mr. Walldroff, the New York farmer, said that he had enjoyed substantial savings by
converting to organic farming before the more stringent rules took effect. Under the
existing rules, he said, he could feed his cows about 20 percent soybean meal or some
other feed concentrate and the remainder could come from his pastures, which are
organic. “So over the course of the year, provided I had good forages, I wouldn’t have
additional expenses for the organic dairy cows except for those last three months,” said Mr.
Walldroff, a member of Organic Valley, who said his milk would end up in Stonyfield yogurt.
Keith Marshall, a farmer in Orange, Va., said that he would complete his yearlong
transition in two weeks. “We were kind of moving in that direction without realizing what we
were doing,” said Mr. Marshall, 48. He explained that he has permitted his cows to graze on
pastures for the last decade or so, as opposed to feeding them in barns, which is increasingly
the norm at conventional dairies. He said he would sell his organic milk to Horizon Organic,
which is owned by Dean Foods. “I guess the 80-20 rule kind of pushed us to make that jump.”
Mr. Harvey, who is 74, vows to continue pressing the Agriculture Department to make sure
the organic program is not watered down by the pressures of big business. He said it did
not bother him that dairy farmers were rushing to beat the more rigorous standards.
“They would have done it sooner or later,” he said. “That they are doing it in a bunch,
that’s just the breaks.”