What's Happening In The Northeast Organic Milk Market

Lots of jockeying going on in the Northeast organic milk pool says Organic Dairy Alliance leader.

Published on: Oct 11, 2013

Organic fluid milk sales are growing steadily nationally with an increase of 10.2% year to date over last year. That's good news, noted to Ed Maltby, executive director of the Northeast Organic Dairy Producers Alliance in his recent report to NODPA members. Here are the high points of that report.

There's strong Northeast competition in the dairy case as Horizon Organic maintains its number one position in retail sales. Sales of store brand/private labels come in second. Independent processors, MOO Milk from Maine and Trickling Springs Creamery from Pennsylvania, are slowly investing in this marketing area.

Average retail price remains fairly stable, with low-end prices currently running $2.59 per half gallon. That's for in-store brand promotions and store brand loss leader promotions, as organic milk is used to attract organic shoppers.

Whats Happening In The Northeast Organic Milk Market
What's Happening In The Northeast Organic Milk Market

Contracted pay price for producers hasn't changed. With component and quality bonuses, the farm-gate price is reaching the mid $30 per hundred for many producers. But profitability for all but the most established organic farms is still dropping.

In July, Organic Valley informed producers of a 100% base quota. They proposed only paying full price for base production with a $12 per cwt. deduct for milk produced over that quota each month starting with October 1, 2013. At September's Organic Valley Board of Directors meeting, the quota was rescinded and all winter bonus payments were left in place -- $3 per cwt. for December, January and February.

Organic Valley is cautious about controlling supply due to a drop in demand from their largest purchaser of milk for manufacturing, Stonyfield Farms, now owned by dairy giant Danone.

New Stoneyfield milk pool?
Cooperative leaders are optimistic they won't have to impose a quota. But they're also facing an initiative by Stonyfield to investigate setting up their own Northeast milk pool. Stonyfield executives are hiring consultants and meeting with organic dairy producers who would fit their requirements for a consistent quality supply.

In the past, introduction of another buyer into the raw organic milk market has caused pay price increases. But Stonyfield intends to maintain the same margins to meet Danone's expectations for sales volume increases.

Stonyfield still has yet to name a pay price for milk they'd purchase from their proposed pool of organic raw milk. A decision is promised by year-end on whether to proceed with purchasing milk directly from producers rather than from Organic Valley. The assumption is that Stonyfield would be looking to cut manufacturing costs by reducing trucking and pooling costs, not by lowering producer pay price.

With no sign of a Farm Bill, and an increasing fear that there'll be only a one or two year extension of the 2008 Farm Bill, what happens next is in the hands of the trusted politicians in Congress. Hopefully, they'll be guided by Senator Leahy who has always championed dairy producer interests.