Organic Pay And Retail Price
Update For July 2012
By Ed Maltby, NODPA Executive Director
ADDED July 16, 2012.
The spring flush has ended and reports are that very few loads are going to non-organic sales. The heat is affecting dry matter yield from pasture and the NOP has granted a temporary variance for Wyoming for the level of dry matter required from grazing. The average pay price nationally is estimated at $30/cwt although that will vary by region. Horizon has left their MAP in place but OV has taken the $1 back for summer seasonal adjustment, which hit producers hard. Worse still, Organic Valley has informed their producers that there will not be any pay increase in 2013.
One of the leading buyers of organic milk reports that in 2012 more milk is being sold as bulk loads rather than branded product which has reduced their profitability. Producer's profitability is being hit at every turn and by every calculation and some new entrants (they must be crazy to be transitioning right now) are rightly insisting on transitional payments. With the introduction of the new dairy margin program in the 2012 Farm Bill the margin of milk price over feed costs using the formulae in the Bill but with organic data, would give a margin of just under $1(the estimated profitability level for a non-organic 200 cow herd is a margin of $6 and upwards)! For those that claim MLC, payments for April, May, and June are predicted at $1.20/cwt, dropping to an estimated $0.60 in July and August.
Consumers have not been discouraged by higher retail prices although some have moved to private label rather than branded product. Sales of fluid milk for April 2012 are at the 2011 level but with an average retail price for branded product 22 ¢ higher than 2011. USDA AMS Dairy Market News reports that the national weighted average advertised price of organic milk half gallons in June 2012 was $3.27, and the price range was $4.49 to $2.99/ ½ gallon, with an organic-conventional half-gallon milk advertised price spread of $1.14, below the average price spread for 2012 of $1.24 (the lower the spread, the more attractive the price is for consumers, especially new consumers). During 2012 the spread has ranged from $0.96 to $2.46.