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Organic Dairy Farmers Squeezed By Low Prices And Production Quotas

Feb 20, 2018
Originally published on February 21, 2018 9:51 am

Organic dairy farmers are getting paid less because of an oversupply of their milk, a market glut that’s led one major organic buyer to delay signing on new farmers.

For years, organic farming was a bright spot in the regional dairy economy. Demand for organic milk was growing, and farmers could earn much more than their conventional counterparts.

Randolph Center farmer David Silloway and his family is working to become part of that trend. Last summer, he was in the middle of the slow – and expensive – three-year process of switching over to a certified organic operation.

That involves not using chemical pesticides or fertilizers and feeding the 65 milkers organic grain that costs about twice as much as the conventional stuff. 

Silloway was counting on the investment paying off this spring, when he was supposed to start earning a much higher price by selling organic milk to a dairy cooperative. But that’s not happening on schedule.

I caught up with him at the Vermont Farm Show, shortly after he got word that — because the market is down — his organic buyer has delayed accepting his milk.

“We are stuck in a transition mode where organic will not take us for possibly another year and a half, but we are having to feed organic grain to stay in the transition mode,” he says while handing out free milk samples for Hood Milk and Booth Brothers Dairy, where he ships his milk now. “So it’s costing us an extra year for high-priced grain to be on hold, so to speak.”

The Wisconsin-based Organic Valley dairy co-op is helping cover some of the expense of the organic grain. But being on hold is still costly for Silloway’s family operation.

On top of this delay, and the higher costs of organic production, many organic dairy farmers are seeing a lower milk price.

“Basically, we could be looking at a 15 percent pay cut in 2017 and 18 as compared to the previous two or three years,” says Bob Parsons, a dairy economist at the University of Vermont.

[Editor's note: We interviewed Bob Parsons several weeks ago. We learned Monday that he passed away Friday night. Our condolences to his family and his UVM colleagues.] 

Parsons says the reason is simple: supply and demand.

Just like in the conventional milk market, there’s too much organic milk out there so prices are falling.

“We’re in an oversupply of organic milk,” he says. “So until we have some farms going out of business, and we have a cutting back of the dairy herd, that’s your major problem.”

Hans Eisenbeis is a spokesman for Organic Valley, the farmer-owned cooperative that David Silloway hopes will someday buy his milk.

Eisenbeis says the co-op has delayed taking on new farms, and set production quotas in order to keep the milk supply in check.

“We don’t want to get in a race to the bottom in a price war for organic milk, because that will hurt nobody except farmers,” he says.

Organic Valley has 119 farms in Vermont and it pays about $30 for 100 pounds of milk. That’s about $4 down from the peak, but it’s still about twice as much as farmers get for conventional milk.

Eisenbeis says he can’t detail how many potential new farmers are in the same situation as Silloway: on hold while the co-op tries to balance supply.

“In 2017, the oversupply situation got to be such that we had to say [to farmers] you can’t produce excess milk because we can’t find a home for it in organic,” he says. “We can find a home for it on the conventional side but then you’ll get paid the conventional price [for the excess].” 

He says demand for organic butter and cheese is still strong.

“But organic fluid milk, especially two percent and skim has really kind of gone off a cliff in terms of consumer demand for those things.”

The national oversupply is exacerbated by the growth of large-scale organic dairies, with some in western states milking 2,000 cows or more. As the organic food industry matures, Eisenbeis says there’s a risk consumers will view organic milk as a commodity rather than a value-added product.

“That is a conversation that’s happening: are there pressures in the marketplace to turn organic milk into a commodity and have a race to the bottom for prices?” he asks. “And that flies in the face of 30 years of organic dairy; it would turn the system kind of on its head and it would really be a problem for organic farming that has really relied on that premium. And we rely on consumers to sort of vote with their dollars and say ‘we actually want to support family-sized farms by buying organic milk and we realize we’re going to pay more to do that.’”

Eisenbeis notes that consumer interest is growing in milk produced by cows that are grass-fed only. It’s yet another way that farmers are trying to tailor their product for consumer demand for food from farms that are hyper-local and perhaps gentler on the environment.

“There are these dairy product categories that still very much being embraced by consumers and trending,” he says.

And that can be seen in a supermarket outside of Burlington, Vermont, where the dairy case is stuffed with organic milk.

Heike Meyer passes by the cartons of Organic Valley and picks up some from a local Vermont farm that bottles its own milk. “Because it’s a local farm and I thought it’s nice to support them,” Meyer says.

Price is not an obstacle for Meyer. “I am probably not a good example, but I don’t care about the price. I am willing to pay double,” she says. “And I know that I have to pay more for quality and for local things.”

And while this, highly specialized market, continues to expand, the farmers making the more mass-market organic milk are not seeing the benefit. 

Back at the Farm Show, David Silloway says he knows he’ll have to wait at least another year to get the higher prices.

“We’re lucky to have a strong maple business, and a strong firewood business, that help us keep going until we can get the full organic price,” he says.

Both Hans Eisenbeis from Organic Valley and dairy economist Bob Parsons think prices will go up again.

“It’s a matter of holding on maybe another year,” Parsons says. “They’re still better off than their conventional neighbors are, because they can see that maybe there a light at the end of the tunnel that’s coming a little sooner.” 

Copyright 2018 Vermont Public Radio. To see more, visit Vermont Public Radio.