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May 2014 Feed, Pay
and Retail Price Update

By Ed Maltby, NODPA Executive Director

Added May 19, 2014. With retail fluid sales increasing by approximately 7% per year, an increased demand for no-grain milk, and a supply shortage, which has some supermarkets posting lack of availability signs in stores, we are seeing a distinct difference in how the two national brands of organic milk are responding to the increased demand for milk. CROPP Cooperative is tentatively offering a small $1/cwt increase and WhiteWave Horizon Organic is extending their MAPP for Northeast farmers until December 31, 2014, but offering no increase. CROPP is responding to increased demand for “Grass milk” by upping their premium in the face of competition from other companies’ higher pay price and increased marketing of “100% grass-fed” organic milk. The Northeast market has become increasingly competitive for milk due to a late ‘spring flush’ and producers who have cut back production in the face of high feed inputs and stagnant pay price, with one processor reporting that they are down 40 tanker loads from last year, and no milk going into the conventional market.

Stonyfield Yogurt has enrolled one producer in Maine for their direct contract program, with the milk being delivered to the Stonyfield facility co-mingled with milk from independent processor, “Moo-Milk.” Stonyfield is still working on a pay price but anticipates it will match what other processors are paying, and reliable sources have the pay price for the first producer at $39-40 /cwt, although this is not confirmed by Stonyfield and is subject to a confidentiality agreement. Their program will include a payment package that will reflect costs of production and quality, and also the producer’s willingness to be part of their education program by opening their books to Stonyfield and working with Stonyfield consultants to make producers more efficient.

We learned this week, May 15, 2014, that MOO Milk in Maine has ceased production because of the lack of processing infrastructure to match the growing market needs. For the next three months at least, their 11 members will sell their milk to Stonyfield yoghurt which started to source its own milk in the last couple of months. MOO Milk has stated that all vendors will be paid and almost a year ago they were able to refund the founding members capital investment with a $3 million anonymous donation through Slow Money. No farmers will lose money, especially as the demand for organic milk is high, but this is yet another indication of the complexity of the supply chain for independent processors.

It is reported that Organic Valley will increase its pay price by an additional $1/cwt National MAP on August 1, 2014 (Northeast pay price would be $30.80/cwt and New England $31.05/cwt), with the CROPP Board mandating that the dollar come from the retail market (a cost of $0.05 per half gallon) rather than budget for reducing overall company-wide profit. CROPP responded to producer concerns over pay price by reinstating the monthly meetings of their producer committee to look at regional pay price structure in light of changing cost of inputs, especially with the challenges facing western producers who are experiencing high feed costs. CROPP is looking into establishing a no-grain milk supply in NY and New England once they find a processing plant that can handle the separated product to process both fluid milk and cheese. Currently, their no-grain milk premium is $3/cwt plus a $1/cwt for soil mineralization, and a projected dollar increase in August, which would bring the premium to $5/cwt, and a no-grain pay price of $35.80/cwt in NY and $36.05 in New England, plus quality, components and seasonal premiums.

Horizon Organic took their $3 seasonal premium back in March (the contracted agreed time) after leaving it in place for all of 2013. This caused confusion among the co-ops that handle payments, with some leaving the $3 in place for March milk then having to take the $3 back in April, plus the $3 drop for a total drop of $6 for one month. This happened at the worst time for producers who have endured a particularly long winter and late spring. In mid-April, 2014, Horizon notified their farmers that they were extending the $3.50 MAP until December 31, 2014. This extension only applies to producers located in Maine, Maryland, New Hampshire, New York, Pennsylvania and Vermont. This makes the price $28.50/cwt, plus premiums, for the rest of the year, which is approximately $2 behind CROPP. Horizon’s logic around choosing just the Northeast states for the prolonged MAPP is confusing as some producers in Michigan are only at $28.00/cwt. and their milk goes to the same plant as New York producers, and they are closer to the plant than a lot of New York producers.

Maple Hill Creamery (MHC), with their 100% grass-fed organic milk, currently pays $42/cwt for the 6 “winter months” and $38/cwt the other 6 months for the milk they receive. It is a flat price regardless of components and quality and is only paid for milk on the MHC truck. MHC pays the producer’s share of check-offs and has no deductions for hauling and other costs. MHC producers currently contract with Horizon Organic, who handles their quality testing, inspections, and balancing.

Upstate Niagara has increased its MAP to bring their pay price up to $31/cwt, matching the CROPP price, as they expand to a new line of organic Greek yogurt. Like other processors, they offer $2.50/cwt to new organic members for their first 12 months, and will pay $3/cwt to existing members for the final year of transition.

Byrne Dairy, the privately owned Central NY processor headquartered in Syracuse, NY, will soon finish constructing a new yogurt facility and are establishing their own organic line. They are reported as having offered an organic dairy a straight $38.50/cwt with minimal quality standards, and may be interested in entering the no-grain dairy market as well.

Trickling Springs Creamery, the Pennsylvania-based company marketing milk, cream, butter, ice cream, yogurt and cheese in the Mid-Atlantic market from its two farms in Chambersburg, PA, will offer grass-fed organic dairy products from its new farm in Koshkonong, Missouri. The farm is 100% grass-fed as certified by the American Grass-fed Association, and Certified Organic. Milk and other dairy products will be sold in the Midwest and Southeast, while Mid-Atlantic markets will continue to be served from Chambersburg, PA.

With the lingering cold and wet weather, this year’s planting of corn and soybean is behind schedule and pastures are slow to grow. The price for organic feed grade soybeans is at the same level it was this time last year of $25.55 per bushel and the price for feed grade organic corn is approximately $1.50 per bushel lower than last year at $11.70 per bushel. These prices are out of the Midwest and any transport charge needs to be added.

 


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