By Ed Maltby, NODPA Executive Director
USDA Agricultural Marketing Service (AMS) reports total organic milk products sales for March 2019 were 202 million pounds, an 8.1 percent decline from March 2018 and 4.5 percent decline, year-to-date 2019, compared with the same period in 2018. Total organic whole milk sales for March 2019, 89 million pounds, were down 1.4 percent compared with March last year, but up 2.1 percent compared with the same period in 2018.
| ALL CHARTS ARE ATTACHED AT THE BOTTOM OF THIS ARTICLE |
Producers are now entering their lowest months for pay price with a pay price drop to an average of $27.13 as reported by USDA AMS. This is the lowest price since 2008. While the pay price will pick up again in August and has a year round average of $31.30, these pay prices are well below a break even income for northeast organic producers. The latest Vermont study clearly shows that the average CASH expenses per cwt are $31.30 and when you take into account other expenses it is $35.03. All these expenses will vary depending on efficiencies, lifestyle, debt service and community support, plus a business model that is based on strong off-farm income or non-dairy income.
Before you disregard this next announcement, please remember that the DMC payout are based on the average of all milk and is not related to the costs of individual farms. It can be a useful amount of money for organic dairy producers, especially in those states where the State is stepping in to pay premiums.
USDA announced the availability of a new web-based tool to help dairy producers evaluate participation in the new Dairy Margin Coverage (DMC) program. [Access the tool at fsa.usda.gov/dmc-tool.] The tool, developed in partnership with the University of Wisconsin through a cooperative agreement with the USDA Office of the Chief Economist, was designed to help producers determine the level of coverage under a variety of conditions that will provide them with the strongest financial safety net. The tool calculates total premiums costs and administrative fees associated with participation in DMC. It also forecasts payments that will be made during the coverage year.
“The new Dairy Margin Coverage program offers very appealing options for all dairy farmers to reduce their net income risk due to volatility in milk or feed prices,” said Dr. Mark Stephenson, Director of Dairy Policy Analysis, University of Wisconsin, Madison. “Higher coverage levels, monthly payments, and more flexible production coverage options are especially helpful for the sizable majority of farms who can cover much of their milk production with the new five million pound maximum for Tier 1 premiums. This program deserves the careful consideration of all dairy farmers.” The 2018 Farm Bill authorized DMC. It replaces the program previously known as the Margin Protection Program for Dairy. Sign up for this USDA Farm Service Agency (FSA) program opens on June 17.
On the positive side for the organic industry, the industry’s trade association, the Organic Trade Association‘s (OTA), annual Organic Industry Survey released on 5/17/2019 reported that sales of organic food and non-food products were $52.5 billion, up 6.3 percent from the previous year. In 2018, the organic non-food category reached $4.6 billion in sales with a growth rate of 10.6 percent. They report that in 2018, U.S. sales of organic dairy and eggs grew just 0.8 percent to $6.5 billion – in 2017 the category was also worth $6.5 billion, but grew at a rate of 0.9 percent, just slightly above last year’s growth rate. The growth of organic poultry products is a key indicator of demand and price for organic corn and soybeans, together with controlling the integrity of organic imports.
The OTA reports that the U.S. organic food and beverage market grew 5.9 percent in 2018 to reach $47.9 billion in sales. As the organic food and beverage market reaches maturity its growth has consistently slowed over the past few years. The growth of the market in 2018 was down from the 6.4-percent growth in 2017, and the 8.4-percent growth in 2016, and far below the double-digit growth rate of the five previous years. The OTA said 5.7 percent of food sold in the United States is now organic.
U.S. Organic Food Sales & Growth, 2009–2018
|
|
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
|
Organic Food |
21,266 |
22,961 |
25,148 |
27,965 |
31,378 |
35,099 |
39,006 |
42,507 |
45,209 |
47,862 |
|
Growth % |
4.3 |
8 |
9.5 |
11.2 |
12.2 |
11.9 |
11.1 |
9 |
6.4 |
5.9 |
|
% of Total organic |
92.2 |
92.1 |
92 |
91.9 |
91.9 |
91.8 |
91.6 |
91.7 |
91.6 |
91.3 |
OTA reports that organic produce continued to be the largest organic food category, growing 5.6 percent to hit $17.4 billion in sales in 2018, on par with the growth attained in 2017. Produce now accounts for 36.3 percent of all organic food sales. Organic fruits and vegetable comprise 14.6 percent of all U.S. produce sold, and have nearly doubled their market share in the last 10 years.
Danone CEO Emmanuel Faber commented that Danone NA sales of plant-based product business could surpass its dairy-based yogurt business within the next 10 years. Its plant-based category, which includes vegan brands Silk and So Delicious, currently generates approximately $1 billion in sales—compared to $2 billion in dairy—but is growing faster as demand for vegan alternatives continues to rise. “Penetration is very high and it’s very widely adopted already,” Faber said at a recent company event in Barcelona. The corporation acquired WhiteWave Foods in 2016 for $12.5 billion and plans to triple its total plant-based revenue to about $5.6 billion by 2025, starting with the expansion of its Alpro brand in Europe with new products such as non-dairy ice cream. Danone also plans to launch vegan yogurt under its largest brand, Activia, to countries such as Spain, France, and the United Kingdom within the next 12 months. Plant-based milk such as soy and almond make up approximately 80 percent of Danone’s current plant-based sales, while 15 percent are from non-dairy yogurts, and five percent from vegan desserts. To meet its targets, Danone plans to expand further into non-dairy ice cream, vegan cheese, and vegan baby food.
Danone NA is not alone in their movement to non-bovine juices to serve an ever increasing consumers demand based on very limited nutrient information. All dairy farmers are indignant about beverages calling themselves milks when they are actually made of oats or almonds or sunflower seeds. These impostors have been draining away at the market share of what cows produce. The National Milk Producers Federation, which represents dairy cooperatives across the nation, has been and is currently advocating for the Dairy Pride Act, legislation introduced in the Senate to force the Food and Drug Administration to police labels. In public comments to the FDA last September, yogurt-maker Chobani LLC said using dairy terms on labels for plant-based alternatives was “improper,” “illegal,” and “poses a public health risk.”
While farmers and the NMPF use every venue possible to loudly voice their complaints about alt-dairy products, organic and conventional processors are starting to churn them out alongside traditional milk, aiming to cash in on their fast-growing popularity in the U.S. Chobani recently launched non-dairy products that are coconut-based. Notably, though, the products aren’t labeled as “yogurt.” In the northeast HP Hood, has released a product called Planet Oat. On the organic side CROPP cooperative (Organic Valley) is the distributor for a line of almond-based drinks made by New Barn Organics. While its dairy producer owners are suffering from historically low pay prices because of competition from other “milks,” CROPP have in fact used their existing resources to launch and grow New Barn Organics. “We wouldn’t exist without Organic Valley,” said Ted Robb, chief executive officer of New Barn, which makes the almond drinks and other nut-based products, including what it calls a buttery spread. “They have a very hard time calling it milk. That really, really bothers them. But they do understand we’re thinking the same way around organic and deeper values.”
Americans are drinking 40 percent less milk than in 1975, and prices have suffered a rout. Meanwhile, the plant alternatives are hot. Sales of alt-milks were up 8 percent in the year through Jan. 26, hitting $1.7 billion, according to data from Nielsen. Plant-based cheeses and yogurts, while a smaller category, are seeing even bigger gains. Beyond Meat Inc., the maker of vegan burgers and sausages surged 163 percent on its May 2 trading debut -- the biggest U.S. listing since at least 2008 among initial public offerings that raised at least $200 million.
The goals of dairy cooperatives and milk buyers have always been a cause for concern for dairy producers. With highly paid executives and numerous examples of price fixing, it has been evident for many years that the cooperatives primary goal is to maintain the profitability of the company and its workforce rather that the profitability of its farmer member-owners. The statement below from Michele Simon, executive director at the Plant Based Foods Association, sums up the situation. She said that while it looks like there’s a fight on the surface, there’s an embracing of milk alternatives by traditional dairy companies because, particularly for processors, it’s “a huge economic opportunity.” “From a processor perspective, they don’t care what goes into the cartons, they just want the cartons filled,” she said.
Chobani statement may deny reality - The new products aren’t “a replacement to dairy -- dairy and yogurt aren’t ever going to be replaced,” the company said in an emailed statement. But the marketplace is proving otherwise.
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