No Room At The Inn – Oversupply of Organic Milk

 

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.

 

 

 

 

About Mike Haley

Mike Haley is the 5th generation to farm their family farm in Ohio. Currently he farms alongside his father Steve and wife Pam. On their farm they raise corn, soybeans, wheat, hay and purebred Simmental cattle.
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