Organic Pay & Retail Price, October 2013

Update

By Ed Maltby, NODPA Executive Director

Added October 6, 2013. Organic fluid milk sales are growing steadily nationally with an increase of 10.2% year to date over last year. There is strong competition in the dairy case in the northeast as Horizon Organic maintains the number one position in retail sales, with sales of store brand/private label in second place. Independent processors MOO Milk from ME and Trickling Springs Creamery from PA are slowly investing in this key marketing area.

While the average retail price remains fairly stable the low end of the retail price is currently $2.59 per half gallon which will be for in-store brand promotions and store brand loss leader promotions as organic milk is used to attract organic shoppers. Contracted pay price for producers hasn’t changed and with component and quality bonuses the farm-gate price is reaching the mid $30 per hundred for many producers but profitability for all but the most established organic farms is still dropping. Horizon (WhiteWave) has continued its MAP of $3/cwt (which has been in place for over a year) to the end of 2013 based on the continuing high price of corn, which misses the point that all inputs have risen and the base price needs to increase.

In July Organic Valley informed producers of a 100% base quota (they proposed only paying full price for the base production agreed between the company and producer) with a $12.00 per cwt deduct for milk produced over that quota each month starting with October 1st 2013. At the September Organic Valley Board of Directors meeting, the quota was rescinded and all winter bonus payments were left in place ($3.00/cwt for December, January and February). Organic Valley is cautious about the controlling supply because of a drop in demand from their largest purchaser of milk for manufacturing, Stonyfield Farms yoghurt owned by dairy giant Danone. While the cooperative leaders are optimistic that they will not have to impose a quota they are also facing an initiative by Stonyfield to investigate setting up their own milk pool in the northeast. Stonyfield executives are hiring consultants and meeting with organic dairy producers who would fit their requirements for a consistent quality supply. In the past the introduction of another buyer into the raw organic milk market has caused an increase in pay price but Stonyfield have stated in the past their need to meet Danone’s expectations for sales volume increases year over year while maintaining the same margins. Stonyfield still has yet to name a pay price for the milk they will purchase as part of their proposed pool of organic raw milk but have promised to make a decision by the end of the year on whether to proceed with purchasing milk directly from producers rather than from Organic Valley. The assumption is that this initiative by Stonyfield will be looking to cut their manufacturing costs by reducing trucking and pooling costs not by lowering the pay price to producers.

MILC has been extended through August 31, 2013 at a payment rate of 45%, covering 2.985 million total pounds of milk per year with a feed adjuster factor of $7.35. In September 2013, the payment rate falls to 34%, the milk production covered drops to 2.4 million total pounds, and the feed adjuster factor goes up to $9.50. With no sign of a Farm Bill and an increasing fear that there will be only a one or two year extension of the 2008 Farm Bill, what happens next is in the hands of the trusted politicians in Congress hopefully guided by Senator Leahy who has always championed dairy producer interests.

USDA Agricultural Marketing Service reports total organic milk products sales for July 2013 of 189 million pounds, up 15.3% from July last year. Organic Whole Milk sales for July 2013 of 50.02 million pounds were up 20.2% compared with July last year and up 10.2% year-to-date compared with last year. Organic Reduced Fat Milk sales for July of 52 million pounds were 30.7% above sales one year earlier and 12.2% above year-to-date sales last year. The weighted average advertised price of organic milk half gallons is $3.47 and the price range declined at the top and bottom of the price range, $4.49 to $2.59. One year ago the weighted average advertised price was $3.91. The Northeast has the highest weighted average price, $3.76, while the South Central Region has the lowest weighted average price this period, $2.91. The organic-conventional half-gallon price spread is $1.79, compared to an average over the year of $1.80.

Posted: to Organic Pay, Feed & Grain Prices on Sun, Oct 6, 2013
Updated: Sun, Oct 6, 2013