cows in field

From the NODPA Desk

By Ed Maltby, NODPA Executive Director

Beginning of a new year, hopefully not like the last one. Those producers that are reading this have, undoubtedly had a bad year. Whether it was disastrous or not could well depend on the length of time you have been in organic dairy, your debt service and the size of the operation. Some dairies will not be producing organic milk in 2023, either deciding to retire from the daily, unprofitable work or returning to conventional dairy where costs are lower and risk management better, or on the advice or lender and family, selling their cows and/or land.

Natural attrition from age or family reasons is expected but the anticipated level of organic dairy farms leaving in 2022 and 2023 will be higher than usual across the country. Some estimate 25% and others, even higher.

Why is this possible with such a high retail price? Milk buyers have a variety of reasons all very relevant to their business model. For example:

  • ‘Our owners are multinationals that set a return on investment that we must meet.’
  • ‘The logistics of picking up milk from small farms no longer works.’
  • ‘We are held captive by the high charges that processors charge because of a shortage of processing.’
  • ‘We don’t control retail prices, retailers do.’
  • ‘We are tied to bad contracts.’

Finally, I will add two more:

  • In Aurora Organic Dairy’s 2022 Sustainability Report as of March 2022 they had 21,200 milking cows at 9 locations with 2 dedicated processing plants. Their ESG scoring was well developed, very detailed and, of course, excellent.
  • Buyers have an adequate milk supply from outside the region.

I hope everyone is signed up for the Dairy Margin Coverage since they project payments in 2023. The Pandemic Assistance Revenue Program (PARP) is dependent on loss of gross revenue not net income, which does not fit the situation for organic dairy. The Farm Service Agency (FSA) is accepting applications for PARP from Jan. 23, 2023 to June 2, 2023 for the years 2020 and 2021. I do not expect that FSA will be able to find a relevant program for organic dairy quickly, so do not anticipate any emergency payments soon. A full safety net organic dairy program will have to come through legislation, probably the Farm Bill, which won’t become law until the end of 2023 and be available sometime in 2024.