Too much supply and too little demand in a recession have caught up with the fast-growing organic milk industry, dealing a harsh blow to Maine producers.
Dairy industry giant HP Hood recently told eight Maine organic dairy farms their milk contracts will not be renewed. In its next move, Hood notified most of the remaining 14 organic milk producers in the state under contract to the company that they must cut their production this year by 15 percent.
There are 72 farms in Maine producing organic milk. Some sell in bulk to other processors such as Organic Valley and Ho-rizon Cooperative.
The farms being dropped by Hood are in Aroostook and Washington counties only, an area courted heavily by Hood just three years ago, when the organic boom was at its peak.
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.
But in recent months, as the economy collapsed, so did consumers’ shopping habits.
“They told us they have too much milk,” organic dairyman Vaughn Chase of Chase Farms in Mapleton said. “It is the worst possible news at the worst possible time.”
Organic milk is produced according to certain strict production standards on both the state and federal level. A farm must be certified, and crops fed to cows must be grown without the use of conventional pesticides and artificial fertilizers, free from contamination by human or industrial waste, and processed without irradiation or food additives. Livestock must be reared without the routine use of antibiotics and without the use of growth hormones, and generally fed a healthful diet.
Organic dairies have grown by leaps and bounds throughout New England over the past 15 years. By 2006, organic dairy farming had become the fastest growing agricultural sector in New England and Maine had the highest percentage of organic dairy farms compared with conventional farms in the country — 16 percent.
But with the declining economy, the demand for organic milk has just not caught up with production, according to Hood’s spokesperson Lynn Bohan.
“Due to a softening in organic milk sales triggered by the recent economic downturn, Hood has made this difficult deci-sion,” Bohan said. “Increased transportation costs also factored into Hood’s decision, as the raw organic milk procured in outlying areas must be shipped to the company’s processing plants. Hood pays all costs associated with transportation — both farm pickup costs and cost for finished product to reach consumers.”
Bohan said the farmers who are being dropped have contracts that end at various times from August 2009 to June 2010, and she said they have been given a minimum of six months’ notice.
Founded in 1846 and based in Massachusetts, HP Hood LLC is one of the country’s largest branded dairy operators with 23 manufacturing plants throughout the country. It sells organic milk under the Stonyfield Farm brand and has annual sales of $2.3 billion, according to company information.
“We’ve been left high and dry without a market,’” Chase said. “We’ve all made investments based on organic milk prices and some of us need to know before spring if there is another processor willing to take our milk. We need to know if we should sell our herds. We need to know if we should continue to make hay.
“This is a helluva time to be dropped,’” he said.
Chase has a herd of 100 organic dairy cows and ships 2,800 pounds of milk a day, 7,500 pounds a day in the summer.
Just like their conventional counterparts, organic dairy farmers are struggling. Their expenses — fuel, energy, health care and feed — have skyrocketed, while the price they receive from processors has been relatively stagnant.
Matt Oliver at Oliver Farm in Hodgdon bought into the organic program just last June. He put up a new barn and is raising 20 heifers in anticipation of expansion. He said he just doesn’t know what he will do when his contract runs out in June 2010.
But David James at James Pond Dairy in Charlotte knew exactly what he will do.
“We’re done farming if we don’t find a market,” James said.
After 17 years of conventional dairying, James switched to organic three years ago. “Hood kept at us and kept at us to get going as organic as fast as possible. They promised a rosy future, then, three years later, they shut us off.”
James said the prospect of selling a $2,000 organic milk cow for beef, at $700 to $800 a head, makes him sick. “We just don’t know what is going to happen,” he said.
Although the Aroostook County producers could possibly switch to conventional milk, the two dairy farms in Washington County cannot. No conventional milk truck serves the area.
Aaron Bell of Tide Mill Farm in Edmunds is one of those farmers without a conventional option.
“We are hoping to avoid financial ruin,” he said. “We are hopeful another processor will take us, even if on a temporary basis to give us a lifeline, some oxygen, until we could build up some direct marketing.”
Chase said he believes Hood is making a grave mistake. “Dairy experts are predicting by the fourth quarter of this year, everyone will be short of milk. When organic processors are short, they can’t just go out and grab milk from any old farm. It takes from one to three years to transition [from conventional to organic.]”
Meanwhile, the organic farmers in Aroostook and Washington counties are working together to entice another organic processor, such as Organic Valley or Horizon, to work with them.
“Me, personally, I’ll stay organic as long as I can, even if I have to sell conventionally,” Chase said.