Organic dairies report surge in demand


Issue Date: April 1, 2015
By Ching Lee
Sonoma County dairy farmer Jarrid Bordessa throws organic hay to his cows. Finding quality organic hay and other feed ingredients—which are in short supply and expensive—is one of the challenges facing California organic dairy farmers as they try to increase their milk production to meet growing demand.
Photo/Steven Knudsen
Sonoma County dairy farmer Jarrid Bordessa shows his supply of organic canola feed concentrate, which he said is very hard to find right now. Other organic feedstuffs, such as soybean meal, grains and other proteins, are also expensive, and transportation issues can delay shipments to farms.
Photo/Steven Knudsen

A nationwide shortage of organic milk has improved the price paid to organic dairy farmers, as milk processors and buyers scramble to secure more supply. But the state's ongoing drought and availability of quality organic feed may temper California farmers' ability to boost organic milk production to meet the growing demand.

Dairy farmers and processors agree that the state's organic milk supplies started to tighten last fall, with shortages becoming more serious by winter, prompting a bidding war among local processors in hopes of luring producers to ship milk their way.

"I think every single processor is looking for more milk right now," said Jarrid Bordessa, a Sonoma County dairy farmer who ships milk to Organic Valley. "Some of them started paying more and in turn, everybody else raised their price."

Sales of organic milk products have seen steady growth since 2006, when the U.S. Department of Agriculture began tracking them, but they dipped slightly in 2009, during the height of the recession—though organic fluid milk sales have remained flat during the same period.

Higher demand for organic milk products led Petaluma-based Clover Stornetta to begin expanding its markets and product line, said Dayna Ghirardelli, producer liaison for the company.

"Clover is growing tremendously,"she said, "so our need for more organic milk is really self-serving."

Ghirardelli said the company has attracted some conventional dairy farmers to transition to organic through competitive pricing. A handful of organic producers who currently ship their milk elsewhere have also sought a home for their milk at Clover, she added.

Bordessa said the "significant pay raise" organic dairy farmers received in January should stimulate more supply, but it will take time—and there are still some challenges to overcome.

Transitioning to organic is typically a three-year process, to certify the land and the animals. Therefore, conventional farmers who are making the switch now will not contribute to the overall organic milk supply for some time.

Bordessa added that poor pasture conditions due to drought have increased production costs for dairy farmers because they are feeding more organic hay, which is in short supply and expensive, and that has "priced out some people from increasing (production)." Though he's been able to find hay, he said it's lower quality and his cows' milk production has suffered.

Dairy farmers are also limited by the National Organic Program pasture rule, which requires organic cows to be on pasture for at least 120 days while they get 30 percent of their dry matter intake from grass. This becomes a land-mass issue and, for many, a water issue, Ghirardelli said. Farmers who lack irrigation can't replenish their pasture, making the organic model more difficult for dairies in the Central Valley—where water supplies are often tight and where it's far more efficient to grow high-quality feed versus pasturing cows, she added.

In California, organic dairies tend to be concentrated in the North Bay and coastal regions of Sonoma, Marin and Humboldt counties.

"There just aren't very many areas, especially here in California, where cows can go out and graze and meet those (pasture) requirements," Humboldt County organic dairy farmer John Vevoda said.

Last year, the U.S. Department of Agriculture relaxed the pasture rule because of lack of grass growth in drought-stricken regions. Bordessa said if his region does not receive more rain, "it might be real tough to make the pasture rules again."

Because organic dairy cows get much of their feed from grass, they also produce less milk than conventional cows, Vevoda said.

Nutrients in grass vary throughout the year, Ghirardelli noted, and that could affect milk production.

Purchasing other feed ingredients such as soybean meal and grains—most of which are imported from other states and other countries—also has been difficult, Vevoda said. Snarls in railroad traffic have caused delays in shipments, and the recent slowdowns at West Coast ports added a new obstacle for deliveries, he said.

Because of these ongoing feed issues, Vevoda said he's looking to just maintain his herd and make do with "whatever our land will produce." With the drought and grasses not growing, this means there will be less milk production, creating more of a shortage, he added.

Conventional dairy farmers continue to struggle with market volatility and, more recently, falling prices, and Blake Alexandre, an organic dairy farmer in Del Norte County, noted that organic farmers have had their own struggles with depressed milk prices and mounting feed costs that made production unprofitable and expansion difficult.

When conventional milk prices soared to $26 per hundredweight last year and organic prices stayed at $30 per cwt., Alexandre said, some organic dairy farmers went back to being conventional, and that has contributed to the current organic milk shortage.

"That's starting to open up, as we've gotten new contracts negotiated with milk processors that are much higher than they were a year ago," he said, noting that prices are now closer to $40 to $45 per cwt. "Every dairyman can now choose to hang on to a few more cows and heifers, or buy a little more grain and make more production."

But with the drought hurting grass production and other issues limiting organic milk production, Larry Peter, owner of Petaluma Creamery, said California producers may not be able to keep up with the growing demand for organic milk.

"It'll keep driving the price so high that eventually people will go back to natural (milk)," said Peter, who also runs a 300-cow dairy in Sonoma County. "I think the bubble will burst and organic (milk prices) will eventually come down."

Ghirardelli said Clover Stornetta is aware of these market dynamics and wants "responsible growth," by making sure that those transitioning to organic "are in it for the long haul."

"It's crazy times right now," she said. "The dust will settle, but in the meantime, there's a lot of opportunity out there."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.