cows in field

September/October 2019 Pay and Feed Prices

By Ed Maltby, NODPA Executive Director

The good news on the data from the Agricultural Marketing Service (AMS) is that they made a mistake in April and while the trend in total sales is still downward, whole milk is maintaining its steady increase into June 2019. Conventional milk price in Class 3 is predicted to increase and then drop dramatically while Class 4 is predicted to increase at a steady rate which is good news for sales of surplus organic. There are no predictions that organic pay price will increase and no good data that shows the utilization of organic milk from which producers can gauge their future. There are plenty of projections by buyers and marketers of organic milk that they see a strong future in nut, plant and candy based drinks that have hijacked the word milk and are undermining the market for organic milk.

USDA AMS revised its estimated sales of total organic fluid milk products for April 2019, and while sales were still down, the drop was not as drastic as the original figure portrayed. Total sales of organic milk products for April 2019, 188 million pounds, declined 11 percent from April 2018 and dwindled to 6.1 percent compared with the same January-April period last year. Total organic whole milk sales for April 2019, 80 million pounds, was down 8 percent compared with April last year, and 0.3 percent lower, compared to year-to-date 2018. Fat-Reduced milk continued its downward trend and decreased from a year earlier by 13 per cent and year-to-date by 10 percent.

May 2019 total organic milk products’ sales were 217 million pounds, down 0.7 percent from May 2018 and down 5.0 percent compared to January-May 2018. Total organic whole milk products’ sales for May 2019, 90 million pounds, were up 2.4 percent compared with May last year and up 0.2 percent compared with the year-to-date in 2018. May’s Low Fat milk (1%) sales declined 19.6 percent from the previous year. The trend continued into June 2019. June 2019 total organic milk products sales were 197 million pounds, down 2.5 percent from June 2018 and down 4.6 percent compared to January-June 2018. Total organic whole milk products sales for June 2019, 85 million pounds, were up 4.5 percent compared with June last year and up 0.9 percent compared with the year-to-date in 2018. June Fat-Reduced milk sales were 111 million pounds, down 7.2% from 2018 and down 8.3 per cent year to date. June Low Fat milk (1%) sales declined 21.9 percent from the previous year and 11.2 per cent year to date.

After the changes in management at CROPP Cooperative and a $10.8 million loss, the company is launching some new products which will compete with mainstream conventional dairy based foods. Its new CEO is quoted in the Sustainable Food News as saying: “At Organic Valley, we’re always creating innovative ways to give consumers high-quality, great-tasting organic options that meet their needs for healthy food from companies that align with their values,” said Bob Kirchoff, CEO of Organic Valley. “Not only does Organic Valley Ultra provide consumers with an organic, ultra-filtered product they can feel good about buying and consuming, it ensures we can support our cooperative’s mission to save small family farms by marketing their organic products. It also further affirms our commitment to ensuring that all of our animals live happy, stress-free lives.”

CROPP’s new Organic Valley Ultra contains 50 percent more organic protein and 50 percent less sugar than regular milk due to the filtering process, which reduces the naturally occurring sugar-lactose in the milk. Plus, the addition of a lactase enzyme makes the milk lactose-free. The ultra-filtered milk category, until recently, has been dominated by Coca-Cola’s Fairlife brand, which is sourced from conventional, non-organic farms. The milk is currently available for $5.99 only at Whole Foods Market stores nationwide, but is rolling out to other retailers in October.

CROPP has also launched its reformulated, certified-organic, high-protein milk shake under the FUEL brand. The reformulated FUEL contains 20 grams of organic protein. During the milk’s ultra-filtering process, the naturally occurring sugar-lactose in the milk is lowered and a lactase enzyme is added, making the beverage lactose-free and containing half the sugar of the original formula. FUEL comes in three flavors: chocolate, vanilla and new to the product line, coffee, which Laurie Drake, senior brand manager at Organic Valley says is the “first-ever organic coffee milk protein shake.” The coffee variety has the same amount of caffeine as an eight-ounce cup of coffee.

USDA is now making payments under the new Dairy Margin Coverage (DMC) program, which replaced the Margin Protection Program for Dairy (MPP-Dairy). As of July 16th, more than $110 million has been paid to enrolled dairy operations. Dairy producers can enroll through September 20, 2019. The program provides no-cost catastrophic coverage (other than an administrative fee), and various levels of buy-up coverage. Farmers can choose buy-up coverage levels ranging from $4.00 to $9.50 per cwt, in $0.50 increments, and can cover 5 to 95 percent of the dairy operation’s production history. All dairy operations in the United States are eligible for the DMC program. There are no restrictions from participating in DMC in conjunction with any Risk Management Agency insurance products. The program provides coverage retroactive to January 1, 2019, with applicable payments following soon after enrollment. The margin is not calculated on your individual production but on a national set of criteria and pricing.

We all greeted the passing of the Pasture Rule in 2010 and the educational work that was done by the NOP over the following few years with hope for the future. After all, the regulation was not a surprise and had been intensively worked on and lobbied for by all organic groups for over 6 years. The comments made by Greg Ibach, Under Secretary for Marketing and Regulatory Programs to the House Committee on Agriculture Subcommittee on Biotechnology, Horticulture, and Research in his opening statement make it seem like the regulation was recent and certifiers still needed education on it. His comments included the following on dealing with fraud on organic dairies: “In the U.S. organic dairy sector, in 2018, USDA initiated a Dairy Compliance Project to better assess industry compliance with the USDA organic regulations, particularly with respect to the pasture standard. This initiative began with face-to-face training on pasture compliance for certifiers in January of 2018. This was followed by unannounced, on-the-ground visits by Federal auditors to assess both certifier and operation compliance. The visits were conducted at dairies across the United States. The visits confirmed that all the dairies visited were grazing their animals on pasture. Several correctable issues were identified, requiring action from operations. This work also resulted in targeted audits of certifiers based on their oversight of specific livestock operations. We will also be publishing training materials this summer to ensure that certifiers and operations have the same information needed to ensure compliance. Based on the 2018 results, we are expanding the Dairy Compliance Project into 2019.” This very weak and ineffectual response that they did find non-compliances (otherwise why would they need to publish more information) and they will continue their auditing (they know the problem is ongoing) is clear government speak that there are problems with the competency of certifiers and their ability to enforce regulation. How many organic dairy farm families has suffered because organic CAFO’s are more experienced in regulations than their certifiers?

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