In lieu of cutting its own sustainable-based dairy farmer pay prices, Organic Valley will require its farmer-owners to reduce their organic milk supply by 7% beginning July 1.
The mandatory supply reduction is a pioneering move within the organic dairy industry in which the cooperative is collectively reacting to economic difficulties without cutting pay prices or cooperative membership. Organic Valley also hopes the move will enable its farmer-owners to increase the quality of their milk by focusing more on top-quality producing cows, increasing pasturing and decreasing grain feeding (as cows who pasture more in place of eating grain produce less.)
“Our competitors in the organic milk business are facing similar challenges and are meeting them with farmer pay cuts, artificially deflating their retail price at the expense of the farmer or dropping the farmer off the truck altogether,” said George Siemon, one of the founding farmers and CEO of Organic Valley. “And, once a dairy company drops an organic farmer, the farmer is left without a market after the costly and lengthy commitment to become certified organic. With conventional milk at a record low, this could be devastating to the organic farmer left to choose between going back to conventional or to sell organic at an unsustainable price.
“At the encouragement of our board of directors, our farmer-owners formed a Supply Management Committee and convened to determine the best solution,” he said. “The cooperative agreed that requiring the farmers to lower their active base of milk output, while still paying them the current organic price, best serves our mission to preserve family farms and safeguard our cooperative. And, it provides us the greatest opportunity for long-term economic sustainability. We keep our farmers on the land and in the cooperative, and in the process each individual herd is stronger.
“Today, conventional milk is extremely cheap, and we feel for the conventional farmers who are trying their best to absorb this decline,” Siemon added. “It’s having an impact on the retail level for us: the price difference between conventional and organic milks is wide. We had contingencies in place if the price spread widened and the economy worsened. This is one piece of the plan, and we’re carrying it out with much thought, care and farmer participation.”
Organic Valley farmers are receiving a letter from Siemon outlining the changes. Each farmer will have an opportunity to appeal the requirement, and his or her appeal will be taken under consideration by the farmers’ regional coordinators, as well as the Organic Valley board of directors, if necessary.
Organic Valley pioneers supply management program
May 21, 2009