cows in field

Pay and Feed Prices May/June 2020

By Ed Maltby, NODPA Executive Director

Once again, we see the conventional dairy market collapse. Conventional milk is being dumped by the tractor trailer load into manure pits while many consumers are restricted in the amount of milk they can buy at supermarkets like Walmart. While the cause of the oversupply in the conventional market, this time, is something that was difficult to predict, the supply-side structure can only continue to function with massive amounts of milk being dumped.

There was no capacity to deal with system-wide demand for processing resulting from a pandemic that has been predicted by the government for many years. For organic dairies, there have been no signs from buyers of a massive drop in demand, and no reported drop in pay price, which is already below break-even. The organic dairy market is not so reliant on institutions, colleges, restaurants, and exports as the conventional milk market so organic sales should not have seen the drops that conventional has and, logically, the more people are at home, the more organic milk they might drink.

There is independent data on retail sales through USDA AMS, but the last figures published for that were in November 2019, which showed only continued growth in whole milk sales at about 5% year-over-year, and a slight decrease in Reduced Fat Milk (RFM). According to a USDA AMS representative, the Dean and Borden bankruptcies had disrupted reporting.

In the absence of national data on sales from USDA AMS, there is the Northeast Federal Milk Marketing Order 1 (FMMO) which publishes utilization of milk in that area. In March, Whole Milk (WM) utilization was up 5.5% over 2019 with Reduced Fat Milk (RFM) dropping by 15%. In February, WM was up 7% and RFM was down 13%. In the private label category, Aurora Dairy is a leader in supplying product. Sonja Tuitele, director of communications for Aurora Organic Dairy, is reported in the Missourian as saying that their Missouri processing plant has experienced an increased demand for milk. Aurora Organic Dairy processes and bottles milk from large scale organic farms in Colorado and Texas. “Our milk plant in Columbia is working hard to build inventories so that we may continue to meet the demand of our customers,” Tuitele said. Travis Forgues, Executive Vice President of Membership for CROPP Cooperative commented that “We are seeing strong demand spike driven by Covid-19, but that isn’t something anyone should be banking on long term.” The most recent report from CROPP on pay price is that it will not change from 2019, but it will no longer be made public. Travis Forgues said, “Organic Valley is not putting our pay price out on the website anymore currently, as the information was then used to try and get cheaper pricing from our customers.” CROPP Cooperative has initiated an increase in hauling. Instead of $180 per month, it has now moved to $220 a month, plus $0.05/cwt.

Travis Forgues also commented on my question about Californian dairies, “In California, we did not drop producers. We went through a through process with the Humboldt group about the realities of the market in their region. We did offer an early exit financial package if folks wanted to go elsewhere. We had 18 producers make that decision and took the incentive. We have 8 producers still in Humboldt with Organic Valley today, and look forward to holding that relationship moving forward.”

On May 1, 2020, a majority of Dean Foods’ assets were purchased by Dairy Farmers of America (DFA) as they completed a $433 million acquisition of Dean Foods properties after reaching an agreement with the U.S. Department of Justice. The dairy cooperative closed on a deal to buy 44 properties that handle fluid and frozen dairy products from Dallas-based Dean Foods. Among the assets associated with the transaction with DFA are the four facilities that were processing HTST products marketed through Organic Valley Fresh, LLC, the 50/50 joint venture between CROPP Cooperative and Dean Foods. Effective with the closing of this transaction, the joint venture between CROPP Cooperative and Dean Foods has been dissolved. However, in conjunction with the dissolution of the joint venture, CROPP Cooperative has entered into contracts directly with DFA for processing and delivery services of HTST products through the same four facilities. The HTST milk business, formerly under the umbrella of the joint venture, is now serviced directly by CROPP Cooperative and its broker network. Liz McMullen, CROPP spokesperson, said that, “Our cooperative does not expect any material disruption to our HTST business, and anticipates engaging in a smooth transition for all customers seeking Organic Valley branded HTST products. Organic Valley remains strong, and our business overall has been bolstered by new innovations we’ve brought to market, including Ultra, the first organic ultra-filtered milk.”

In a Wisconsin Examiner article by Marc Eisen about the CROPP Cooperative virtual annual meeting, he reports that Organic Valley lost money for the third straight year in 2019. He quotes Elizabeth McMullen, Organic Valley’s public relations coordinator, as saying in a written statement that “People are eating more at home, and that is driving more in-store retail organic dairy purchases.” McMullen, while acknowledging that 2019 ended in the red, declined to give a dollar figure, saying they were unaudited draft numbers. His full article can be found at It’s very unusual to release unaudited figures five months into a new year, especially without official explanations for a predicted loss. If there is a surge in retail demand, it hasn’t yet shown up in utilization of organic milk in FMMO Area 1 (the Northeast) (year-to-year comparison based on seasonal demand) which is home to two of the hottest markets for organic sales. An associated concern with an increase in demand and an unpredictable market is where CROPP and Danone will look for supply. Hopefully, they will not turn to the spot market or large dairies to satisfy the increased demand but rather invest in the existing producers and member owners by encouraging a controlled expansion.

Shane Grant has been named executive vice president and chief executive officer of Danone North America, headquartered in White Plains, NY. Mr. Grant joins Danone from the Coca-Cola Co., where he held various leadership roles in marketing, commercial and general management over nearly two decades. Most recently, he led Coca-Cola’s non-carbonated beverage business in North America. His appointment was announced as Danone revealed plans to operate its Essential Dairy and Plant-Based (EDP) business in North America separately. The global segment was formed three years ago when Danone acquired Silk soy milk maker WhiteWave Foods, Broomfield, Colo. Brands in North America include Dannon, Oikos, Activia, Light & Fit, Horizon Organic, International Delight, So Delicious Dairy Free, Silk, Vega and Wallaby Organic. Additionally, Danone said it will create a Plant-Based Acceleration Unit to unlock further growth opportunities and expand into new geographies outside of North America as well as new product categories, such as coffee and baby food. The unit will be led by Francisco Camacho, executive vice president of EDP International. It’s anybody’s guess what the future holds for producers supplying Danone, but their decision to outsource their procurement and field services does not bode well for the future.

Trade activity on organic corn and soybeans has been light as demand has slowed with the closure of meat packing plants. Slaughter of organic poultry and beef has been slowed down with the closure of the slaughter and packing plants, and demand for organic grain has been affected by retention of animals and lack of space to rear replacements. The consequences of the COVID 19 pandemic will also affect the level of imports. Prices have remained stable at $7 per bushel for organic corn and $19 per bushel for organic soybeans.

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