• No Room At The Inn – Oversupply of Organic Milk

    Posted on March 26, 2011 by in Agvocate, Farm, livestock care

     

    This week I was visiting with a neighbor that began the process a few years back of transitioning his family’s dairy farm to organic.  There are several reasons why a farmer may consider transitioning to organic farming, for my neighbor it was an opportunity to increase his profits from the same number of acres and will provide the opportunity for his kids to stay and work on the farm. 

    This is not an easy process as it takes 3 years cultivating crops organically and one year of feeding cows organic feed before one qualifies to sell their products as organic.  During this period farmers must sell their crops at commodity prices even though they are experiencing much lower yields and a huge increase in labor.  

    I applaud my neighbor for developing a plan that he felt offered the best returns for his farm and taking this risk.  After four years, his hard work and perseverance is able to pay off, with only one problem and it is something he couldn’t have forecasted 4 years ago — economists call it “supply and demand.”  Currently the supply of organic milk is greater than demand; with most commodities most companies would decrease the price in order to create more demand.  Unfortunately, organic farmers demand more stability and lowering the price of organic milk would mean that the farmer would be selling it for less than it costs him to produce.  So instead when there is an oversupply dairies cut the amount of organic milk being produced and any extra milk is sold as non organic.

     

    Unfortunately this means for my neighbor that there is no room at the inn for his milk, and until more people are willing to purchase organic milk he will have to forfeit his premium and sell his mild for a lower price.  Hopefully with time demand will strengthen and he will be able to sell his milk as organic, if not his family will have to investigate other opportunities in the market that will allow his children to continue the family business of farming.

    Four years ago there was a growing demand in the organic sector and farmers have more than risen to meet that demand.  For us, we focus on other areas of consumer demand.  We grow a special type of soybeans that are lower in trans fat called Lo-Lin that is used to create healthier butter and cooking oil, this product has been especially popular at universities trying to prepare healthier meals for students.  With our cattle we focus on raising the best quality of replacement bulls and heifers for our customers as well as supply high quality freezer beef to local customers.

    Farmers are entrepreneurial in nature and whatever form of food that the market demands farmers will find a way to satisfy it and in several cases like my neighbor’s even over satisfy that demand.

     

     

     

     

  • http://www.walkinginhighcotton.net Jamie (@va_grown)

    Sometimes the only way to be successful in these “niche” markets is to create your own market–and if you’re going to do that, you have to have a product people like and you have a lot of time to nurture your market. Direct marketing works for us, but we spend as much time cultivating our market as we spend making our products.

    This makes me think of alpacas. When we got into sheep, we had people left and right trying to sell us alpacas because they were “so much better”. Here’s the thing–there’s no big market for $30 socks. So first you have to explain why your socks are $30 and then you have to convince people that your socks are worth $30, and then you have to convince ENOUGH people that your socks are worth $30 to pay your bills. We judged selling $7 yarn to be an easier sell and thus a better return for our time.

  • http://www.friendsdriftinn.com/ Joyce @friendsdriftinn

    This blows my mind!  I have to practically have a wrestling match with other shoppers in order to emerge "victorious" with my carton of organic milk.  The grocery store cannot keep it on the shelves….flies out QUICK.  The food chain is broken.

  • http://www.crystalcattle.com crystal.cattle

    Interesting blog. Sometimes the bandwagon is only great to those who jump on first. I really hope that he can create demand for his product after all the work him and his family have gone through. The soybeans you are raising are really interesting. I hadn't heard about them before.
    http://www.cdycattle.blogspot.com