cows in field

Pay and Feed Prices: March/April 2020

By Ed Maltby, NODPA Executive Director

In February 2020, the Agricultural Marketing Services (AMS) reported that estimated US sales of total organic retail milk products for November 2019 were up from 2018. In November 2019, total sales of organic retail milk rose by 1 percent from 2018, to 220 million pounds, but year-to-date sales for 2019 fell 2.0 percent compared to 2018.

Organic whole milk retail sales continued its slow rise in November, 100 million pounds, which was up 7.8 percent compared to a year earlier, and up 4.7 percent compared to year-to-date in 2018. Reduced fat milk (2%) sales, 72 million pounds, climbed 3.2 percent over a year ago, while year-to-date sales increased 1 percent. With some more recent data, the Federal Milk Marketing Order One reported that in January 2020 utilization of organic Whole Milk totaled 11.5 million pounds, down by 25% from the 15.2 million pounds one year earlier. Utilization of Reduced Fat organic milk was also down by 35%. This drop in utilization is unusual for January as it’s usually a month that organic milk sales peak. Hopefully, February data will show a more typical trend.

At this time of year, CROPP Cooperative usually publishes its pay price for the year. Currently, all we hear is that there will be no changes from last year (awaiting a reply to my request for comment from CROPP). Concerns that organic dairies in California were going to be dropped by CROPP, which was mentioned in the January 2020 issue of the NODPA News, has become a reality with 18 farms being dropped by CROPP. Some farms have found a market with Organic West; however, there is no confirmation on how CROPP is handling the end of those cooperative agreements. Having been to the Humboldt CA area for a WODPA conference many years ago, I saw how wonderful the area was for real organic dairying, with some of the best pasture I have seen. Some of these organic dairies in the Humboldt area that have been dropped by CROPP were among those that took their arguments about a fair pay price to the CROPP Board. Reports from supermarkets are that the Dean Foods/CROPP joint venture, "Organic Valley Fresh," has problems with the supply of HTST (lower temperature pasteurization milk) milk. That had been one of the selling points of the joint venture in using the surplus capacity of Dean Foods regional plants in areas where grass milk product are available and being able to deliver fresh, traditionally pasteurized milk, directly to retailers supporting the regions producers. CROPP is also offering free half gallons of their Ultra Milk in northeast supermarkets.

In December 2019, Danone North America announced in a letter to its producers a change in the procurement relationship between the company and its ‘Dairy Farmer Partners’ as of January 2020,‘Danone North America/Horizon has selected Kalona Farms (which is operating under Small Farm Program LLC) as a connection point.” While Kalona Farms has not returned our request for comment, we have found other information on their operations and their longer history with Horizon/Whitewave/Danone. They have been supplying milk for Horizon’s Grass Fed brand of organic milk using the standards of the American Grass Fed Association and pool milk from different areas and coops, including Westby Coop. Kalona Farms experience with pools of milk from small and hand milked dairies is obviously valued by Danone and hopefully they set the example for other handlers who deal with the numerous challenges of maintaining milk quality from these dairies. There have been undocumented complaints directed at handlers that pool small amounts of milk about the use of Hydrogen Peroxide to reduce the bacteria content and improve the quality of milk.

Kalona was on the list of customers for Nature's Way Dairy LLC, “a 3,500 head organic dairy that has two milking parlors, 1,200 acres of organic certified pasture, 2,500 acres of rangeland and a 1,500 head heifer facility located in Sulphur Springs, Texas,” as quoted in the real estate listing for the sale of Nature’s Way Dairy. Kalona Farms is also launching some new product for national distribution. They have launched a 100% organically certified Grass-fed Whole Milk Kefir Whole Chocolate Milk and Whole Milk Cottage Cheese. While Kalona Farms are obviously increasing their national presence, there needs to be transparency in how any potential conflict will be resolved with both local and national utilization on the supply side, which ultimately affects pay price. Kalona Farms base pay for organic milk is reportedly at $21.50; there is no protein or other solids premium; the butterfat premium is $.10 below Organic Valley; and there is no winter bonus. They also routinely take deductions for marketing losses; as recently as August 2019 there was a $3.00/cwt deduction for marketing losses. What is the future of this relationship with Danone? Are they just creating a level of distance and deniability that will insulate them from past problems with managing their own supply, especially with smaller operations?

French dairy firm Lactalis has announced it aim for a bigger presence in the US. Three years ago, Lactalis purchased Stonyfield from Danone for $875 million, which gave it a strong foothold in organic. It followed that in 2018 with the addition of Siggi's, the New York-based maker of Icelandic-style yogurts using simple ingredients, and Green Mountain Creamery, an organic yogurt producer located in Vermont, a year ago.? Thierry Clement, CEO of Lactalis North America, is reported to have said: "We are a leader in the world [in dairy] and we are not in the U.S.. We want to be the one stop for all the dairy. We can't offer all the ranges [of product] so we still have a lot to bring if we want to be a leader in this country, and this is our mission." His statements also reflect that, unlike Danone NA, they do not see their growth in plant based products but Clement is quoted as saying, "I'm not against plant-based. It's very nice in the diet, but it's not exclusive. And I think dairy in terms of nutritional value has something to prove that's even bigger."

Domestically, the price for organic corn and soybean has dropped with organic feed grade soybeans trading $0.09 cents lower and organic feed grade corn trading $1.04 lower than prices recorded in January 2020. The USDA’s Global Agricultural Trade System (GATS) reports declining imports and exports of U.S. organic commodities in the first few months of 2020, as shipments to markets overseas dropped 14 percent in January, while the value of organic commodities crossing the U.S. border were down less than 1 percent. The most notable change in imported organic commodities in 2019 was the sharp drop in the volume of organic livestock feed ingredients such as soybeans and corn, which registered declines of 18 percent and 27 percent, respectively. Organic soybean imports from Ukraine soared 151 percent to $5.8 million in January. The big push of organic livestock feed ingredients from the Black Sea region exporter offset declines from the two largest organic soybean exporters to the U.S. market, India and Argentina. Meanwhile, organic corn imports from Romania, another Black Sea region exporter, were up 154 percent in January to about $500,000.

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