Organic Dairy Farms Milking Big Business Opportunities

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Organic milk sales are $750m a year with room to grow

Organic milk sales have surged despite the economic troubles of the past few years. In early 2009, American drank about 130 million pounds of organic milk a month. By late 2011, that figure spiked 50 percent to over 190 million pounds monthly. That number has dropped off slightly in recent months; nonetheless,  consumers view organic milk not as a luxury, but a more healthful and sustainable alternative to the mass produced milk that flows out of confined animal feeding operations (CAFOs). Two decades ago, the organic milk industry was almost non-existent; now companies such as Straus Family Dairy, despite many hurdles, are successfully changing hearts and minds despite the challenges of both scale and outdated regulations.

To that end, The Union of Concerned Scientists (UCS) recently issued a report that touts the economic benefits of organic dairy farms. Currently sales of organic milk in the U.S. total about $750 million annually, and beyond the numeric figures organic dairies have a multiplier effect: according to the report’s authors, organic milk can serve as the gateway product to other foods that are produced more responsibly and sustainably. Federal agriculture policy, however, often stands in the way of the growth of organic dairy farms. This year’s drought also had a negative impact on this sector. To that end, UCS studied the organic sector in two states, Vermont and Minnesota. The results indicate that organic dairies can offer a stronger economic punch than their conventional competitors in rural areas.

Changing U.S. Department of Agriculture (USDA) policies to lend a fighting chance to smaller farms is a tall order considering the department’s history and the current secretary, Tom Vilsack–who is more of a friend to the likes of Monsanto than a dairy farmer in Marin. In order to help organic dairies scale while reducing their business risks, UCS suggests the following changes in federal policy:

Reform federal milk marketing order policies (FMMOs)

FMMOs, which date back to the 1930s, established revenue pooling systems that ensure minimum prices dairy processors must offer to farmers. But, because organic milk producers sell more of their product in fluid form than their conventional peers (who convert more of their milk into products such as butter and cheese), organic milk processors end up making higher payments into FMMO pools. Meanwhile, the farmers themselves do not benefit as their business models vary from conventional dairies–and often have higher costs since their cows graze on pasture, are not injected with hormones or antibiotics and eat organic cattle feed. Therefore, current FMMO structures actually inhibit the production of organic milk;  to give organic dairies a fighting chance, UCS advocates revamped policies to reflect the economic realities of 2013, not 1933.

Customize USDA risk management programs so they offer a cushion for organic milk production

Milk production, as is the case with much of agriculture, is volatile. Deliberations over the 2012 farm bill included ideas such as subsidies to offer a cushion between the cost of feed and milk prices. UCS, however, believes such policies were more of a “one size fits all approach.” Instead, the report’s authors suggest a more holistic approach that would benefit organic dairies that have confronted sharply higher feed costs in recent years. Any program, such as supply management programs that prevent dairies from producing excessive milk when markets do not warrant it, should be tailored to promote the demand for organic milk, not for conventional milk.

Maintain or boost funding that supports organic agriculture

Supporting organic agriculture is a tall order considering the state of the U.S. budget, notwithstanding the fact that politicians of all stripes avoid budget reform where it really matters: defense and entitlements. UCS acknowledges that the USDA runs a few programs to encourage organic farming and suggests that the department actually expand them. Initiatives such as cost-share certifications, organic production system research and on-farm conservation programs can help organic dairies while rebuilding stagnant rural economies.

Congress should fund USDA regional food programs

Do not expect any deep-pocketed lobbyists to push this idea, but the fact is that organic farming is more suited to regional, not national, food systems. UCS suggests programs such as rural development initiatives that would offer grants to build milk bottling plants or factories that would produce products such as butter, yogurt or ice cream. Farm-to-school programs would also help school cafeterias procure ingredients from more local farmers–including dairy, of course.

The budget impact of UCS’s suggestions would be minimal, but do not expect Congress to push the USDA to enact any such reforms. The organic dairy farmers of the San Joaquin Valley, Wisconsin or New England do not have funds to pay DC or state capital lobbyists who advocate for the likes of Cargill, ADM or Kraft. Consumer demand, however, may eventually nudge politicians and bureaucrats to understand that in the long run, they must rethink policies that would benefit local farmers and dairy producers–and in the end consumers’ health as well as small businesses.


Image credit: Leon Kaye.


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