Few segments of the dairy industry have struggled more than organic producers in the Northeast, where market exits by Horizon Organic and Maple Hill Creamery resulted in the termination of more than 130 producer contracts.
Ed Maltby, executive director of the Northeast Organic Dairy Producers Association (NODPA), characterizes many producers as “depressed,” with the severity depending on how long they’ve been organic producers, their debt service demands and the size of their operations.
“The years of a consistently low pay price have left organic dairies with depleted savings and lack of collateral to leverage operational loans to fund cash flow,” Maltby says. “This has impacted small to midsize operations more significantly than well-established, larger herds.”
Even before the challenges of 2022, USDA data showed declines in the number of certified organic dairies in the U.S. A 2021 survey, released in December 2022, estimated the number of farms with certified organic cows to be 2,528, down 572 since 2019. Of all organic dairy herds, about 2,478 marketed milk in 2021, down 622 (20%) compared to the previous survey.
Maltby expects many will stop producing organic milk in 2023, either deciding to retire, sell their cows and/or land or return to conventional dairying. Some estimates put the attrition rate at 25% or higher. That departure stresses organic hauling and processing structures even further.
Like their conventional counterparts, input costs are high, while producer pay prices have been below the cost of production for the last five years. Maltby estimates the 2022 average cost of production was $8 per hundredweight higher than average pay prices. The price of organic soybean meal doubled from 2021, hitting $1,900 per ton delivered to the farm. The price of organic corn is about $16 per bushel.
There were times in 2022 when the Northeast Federal Milk Marketing Order (FMMO) milk price was higher than organic milk price contracts, Maltby reports. There’s little indication that pay prices will close the gap on feed costs, even if those costs come down somewhat in 2023.
While organic producers saw Dairy Margin Coverage (DMC) payments in 2021, there were few payments in 2022.
With retailers increasing demand for extended shelf-life (ESL) products, the cost of processing will only increase, Maltby says. Milk buyers report that they cannot increase the pay price either, due to the constraints and challenges of the domestic market, their inability to compete against operations with economies of scale and access to their own processing capacity.
“The opportunity for growth lies in a regionally branded organic milk that tracks the milk miles and guarantees high environmental, social and governance (ESG) scores that are publicly accountable,” Maltby says.
Federal and state safety nets provide a small amount of comfort. There’s also hope that changes and greater enforcement of USDA organic regulations will halt the growth of larger operations.
Although details are limited, the USDA announced a new $100 million Organic Dairy Marketing Assistance Program (ODMAP). Administered by USDA’s Farm Service Agency (FSA), the program intends to help smaller organic dairy farms. The assistance, made on a per-hundredweight basis, will help eligible organic dairy producers with up to 75% of their future projected marketing costs in 2023, based on national marketing cost estimates.
The payments will be capped at the first 5 million pounds of anticipated production, in alignment with preexisting dairy programs that target assistance to those smaller dairies vulnerable to marketing challenges.
Previously, the USDA released a long-awaited “origin of livestock” (OOL) final rule, establishing uniform standards for transitioning dairy cattle to organic production. The rule closes what many in the industry considered a loophole, which created unfair organic marketing practices.
“The move of organic and nonorganic dairy to larger operations is having a catastrophic effect on the economic health of rural America,” Maltby says. “Consolidation, monopolies and monopsonies dominate the industry. Federal safety net programs need to be designed for organic dairies if we want to see any diversity of size in the industry.”
