Monday, March 2, 2009

Organic milk producers dropped in Maine

A group of dairy producers in Maine who were selling organic milk to the H.P. Hood processor were dropped by that processor as reported in the Bangor Daily News.

"Hood ships Maine’s organic milk to New York to be processed and packaged and then returns it to Maine where it is sold as Stonyfield Farm Organic Milk. In the retail market, organic milk can easily cost twice as much as conventional milk and, for the farmer, this translated into premiums and bonuses that lured many conventional dairy farmers to switch to organic, which they believed would be more profitable for them."

People are missing the essential link in the " organic milk industry..." to the rate of growth. While the high costs of organic milk in the retail case is leading to a decline in consumption, the rate of growth was not really related to consumer interest in the product.

Instead, the rapid growth in the organic milk market was related to large processors (Hood, Organic Valley and Horizon, for example) paying grocery store chains for space in the retail dairy case. Those charges are called "slotting fees" and have become somewhat controversial.

"Exactly how sensitive is the food industry to the topic? Despite GAO's best efforts and promised confidentiality, it was unsuccessful in gaining industry cooperation needed to conduct the study." according to Food & Drink Weekly in 2000.

The 'perfect storm' from a natural cycle of a downturn in consumer spending when combined with the percieved, yet artificial, growth in organic dairy product sales may spell the end of the organic dairy industry as we've come to know it for the last few years. Dairy farm advisers should caution their clients about making this kind of very expensive switch.

Hope this helps


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