cows in field

Organic Pay & Retail Price, November 2013

By Ed Maltby, NODPA Executive Director

Added November 18, 2013. Organic fluid milk sales are growing steadily with some strong competition in the dairy case in the northeast as Horizon Organic maintain the number one position in retail sales, with sales of store brand/private label in second place. While the average retail price remains fairly stable at an average of $3.48, the low end of the retail price is currently $2.99 per half gallon which will be for in-store brand promotions and store brand loss leader promotions as organic milk is used to attract organic shoppers. The retail price at the high end is $4.49 per half gallon. All brands and store brands are offering specials depending on geographic location and willingness to use organic milk as a loss leader.

Contracted pay price for producers hasn’t changed and with component and quality bonuses the farm-gate price is reaching the mid $30 per hundred for many producers in the northeast but profitability for all but the most established organic farms is still dropping. WhiteWave have extended their MAP to January 2014 because of the continued high cost of feed. They have decided to sell their large organic dairy in Idaho and move out of the production of raw milk. They have also decided to use the Horizon brand name to market other organic products and increase the production of non-dairy ‘milks.’

In July Organic Valley informed producers of a 100% base quota (they proposed only paying full price for the base production agreed between the company and producer) with a $12.00 per cwt deduct for milk produced over that quota each month starting with October 1st 2013. At the September Organic Valley Board of Directors meeting, the quota was rescinded and all winter bonus payments were left in place ($3.00/cwt for December, January and February). Stonyfield Farm (manufacturers of organic yoghurt) executives are meeting with organic dairy producers who would fit their requirements for a consistent quality supply. Stonyfield expect to make a decision on whether to have their own pool by the end of 2013 with an aim of securing milk contracts in 2014. They are still in the investigative stages of the process and are looking at different ways to calculate pay price including a cost plus method plus other incentives of providing technical expertise to make organic farm families more efficient. They have yet to name a pay price for the milk they will purchase or what farms they will contract with and at what volume but have promised to make a decision by the end of the year on whether to proceed with purchasing milk directly from producers rather than from Organic Valley. They will be holding more meetings in Maine and New York and welcome comments and questions from producers. In the past the introduction of another buyer into the raw organic milk market has caused an increase in pay price but Stonyfield have stated in the past their need to meet Danone’s expectations for sales volume increases year over year while maintaining the same margins. The assumption is that this initiative by Stonyfield will be looking to cut their manufacturing costs by reducing trucking and pooling costs not by lowering the pay price to producers.

USDA Agricultural Marketing Service reports total organic milk products sales for August and September as 195 and 192 million pounds respectively, up 4.8% from August 2012 and 10.4% for September 2012. Organic Whole Milk sales saw the biggest growth, increase of 14.5% over August 2012 and 18.9% over September 2012. Year to date sales are up 5.3% over the same period of 2012. The weighted average advertised price of organic milk half gallons is $3.48 and the price range declined at the top and bottom of the price range, $4.49 to $2.99. One year ago the weighted average advertised price was $3.86. The Northeast has the highest weighted average price, $3.76, while the South Central Region has the lowest weighted average price this period, $2.99. The organic-conventional half-gallon price spread is $1.46, compared to an average over the year of $1.80.

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