It’s about volume, not price: How Straus Family Creamery is weathering the organic dairy storm

U.S. dairy farmers are in a fight for their lives. Things are really bad, particularly in California, where there have already been two suicides, reports the LA Times. Conventional wisdom has it that there's an oversupply of U.S. milk caused by plummeting demand both domestic and international. But as the Ethicurean's Elanor reported here in March, that's not the whole story: U.S. manufacturers' increasing imports of a highly sketchy, unregulated additive called "milk protein concentrates" is also a major culprit in the oversupply. There is almost no domestic production of MPCs. Even as U.S. dairy farmers threaten to pour milk down the drain, rather than sell it for less than half what it cost them to produce it, dairy processing companies have continued to move from cheap domestic milk to even cheaper MPCs from countries with poor food-safety records. Wrote John Bunting in the May issue of the dairy industry insider Milkweed: "More MPCs were imported in January and February of this year than any other year.... For the first two months of 2009, there was a 71.8% increase in MPC imports compared to [the same two months in] 2008."

Straus Family Creamery cows on pasture

Straus Family Creamery cows on pasture

No argument, things in conventional dairy are bad. But what about in organic? Organic dairy products don't use MPCs, and prices for organic milk are still at a premium: the CROPP Co-operative (parent of Organic Valley) is paying $24.75-$29.75 per hundredweight, compared with the $9-$12 per hundredweight conventional producers are currently getting. (U.S. milk producers still rely on the English system of price per hundred pounds of weight, abbreviated as "cwt.") Surely organic milk producers are celebrating?

Not so much, according to a New York Times article last week titled "Organic Dairies Watch the Good Times Turn Bad," which quickly made the email rounds of sustainable food & ag circles. The article implied that in Vermont at least, dairies were shuttering their barns like dominos due to a perfect storm of economy-slowed demand; skyrocketing prices for organic feed; and the "crushing debt resulting from the cost of turning organic, which can run hundreds of thousands of dollars." The article was vague on the details — was the slowdown hurting even small organic dairy producers who relied primarily on pasture? Over at ChewsWise.com, Sam Fromartz called his New England dairy contacts and found out that the situation was not quite as dire as depicted.

Dairy farmer Albert Straus in Tomales Bay, CA

Dairy farmer Albert Straus in Tomales Bay, CA

And I decided to call Albert Straus, head of Straus Family Creamery in Northern California, and hear his take on the situation.

Straus Family Creamery is a shining example of a successful small organic dairy. Albert converted it to organic in 1994, making Straus the first certified organic dairy and creamery west of the Mississippi River, and that year he also launched the creamery line, producing organic yogurt, butter, and ice cream as well as milk. Unlike most organic dairy farmers, who sell to large processors like H.P. Hood, Organic Valley, or Horizon, Straus bottles and sells its milk and dairy products under its own name. That's pretty unusual for such a small operation. (Straus itself has less than 300 cows, but buys from two partner farms: the Tresch family, which has about 900 cows on two sites totaling 2,000 acres; and the Hughes dairy, with about 150 cows on 200 acres.) Straus is unusual in other ways, which so far are allowing it to weather the current dairy crisis relatively unscathed. Some of them may provide instructive to other small producers looking for long-term sustainability.

Ethicurean: So, how's business for Straus Family Creamery?

Albert Straus: Well, our sales are still growing, just not quite as fast. They're up about 9 or 10%, down from about 12 to 15% last year.

That's amazing, considering the Times reports that organic whole-milk sales were down 2.5% in February since last year, and reduced-fat milk was down 15%.

We're very fortunate — we have a loyal following that hasn't gone to something cheaper. We've tried to make a quality product, and we've diversified. Sales of our ice cream and frozen yogurt bases are up. [Bay Area ice-cream makers like Three Twins Organic Ice Cream and Bi-Rite Creamery rely on Straus.]

Did the price tags quoted for converting to organic — "hundreds of thousands of dollars," the Times said — seem high to you for small dairies?

That does seem high, but they didn't say what size dairy. They may have had to do a lot of other things at the same time, like put in a bigger bulk tank.

When I went organic back in the 1990s, it cost me over $100,000 because I did the whole herd at once. You can't market the milk as organic until you finish the transition, and meanwhile your feed costs are close to double. Still the same problem. (Back then, I had to scramble to even find organic feed.) Last year feed cost me 60% to 65% of our income. Prices are starting to come down, especially for hay, but grains are still pretty high.

Do you grow any of your own grain for feed?

We produce about 50% of our feed needs for the cows ourselves — pasture and sileage. [Read more about Straus's feed philosophy.] About 30-35%  of their feeds are grains I buy from Canada and the Midwest, but I've gotten more and more local farmers to grow grains for us. The proteins are still coming from Canada and some even from China, although much less.

So do you think the "crisis" in organic dairy is overstated?

No, there is a problem. We went through it a while ago. There was a big influx of organic dairies in 2007 who came on board all of a sudden in response to the Harvey lawsuit. [Editor's note: Under the old organic rules, dairy farmers could feed their cows 80% organic feed and 20% conventional feed during the first nine months of the yearlong transition, then required 100% organic feed for the final three months. Blueberry farmer Arthur Harvey persuaded a federal court that this was too lax, and as of June 9, 2007, the rule became 100% organic feed for the entire transition year. Dairies rushed to switch before the new rule took effect.] We had this massive increase in organic dairy production and a surplus of milk. That lasted a long time. Now the sales are flattening out for most of the industry, organic dairy farmers got caught.

You think the organic dairy industry went through a little bubble?

A big bubble. It got totally out of whack.  Our sales have been steadily rising over the years, double digits every year, but when you have a blip like this, most of the processors out there have dropped dairies — cut their contracts. They also reduce pricing rather than controlling volume. Dairymen will produce more milk when the price is low and they'll produce more when the price is high. They have these cow-kill programs [like Cooperatives Working Together] where they buy people out — but all that does it reduce the farms in this country. We've lost 5% of our farms per year for decades. We have to stop that.

So how did you deal with the glut back in 2007?

We had so much milk we didn't know what to do with it, and we lost a lot of money. So we started changing everything in 2008. We let a competitor take one of our dairies, because they were producing too much milk for us to handle. Instead we brought in the much smaller Hughes dairy, which was more in line with what we needed. We were able to work with our dairies to control volume instead of trying to control price. Now, the three of us meet every quarter and agree on price and volume, so we don't have this surplus. Finding buyers for surplus milk is very difficult, and very unprofitable because it costs us so much to produce.

How can we control volume on a national level?

I think each processor has to do it, individually. Like in Canada and in some European countries, they have quota systems where they can't produce unless they have a quota to produce it. And that keeps milk volume a lot more in line. That way you can keep pricing sensible, and keep farms. If farmers know how much milk they can produce and what they can get paid for it, they can budget, and survive and thrive. At least in organic we have these fixed-price contracts, so you're not going to have these big wild swings like you do on the conventional market. But these big swings are really devastating for farms.

Quota systems don't seem very popular with farmers. What do you think the chances are we'll see that happen?

No system has worked so far. I feel that this will be the best solution for the industry in the long run.

Long term, do you think other small organic dairies should follow your lead and do their own processing and marketing?

It works well for us, but it takes a lot — and to try to do that quickly and under pressure is very difficult.

Basically, we think the model we had in the 1940s and '50s, where you had lots of processors in different local communities, with local dairies supplying them, was a lot better than having national processors and dairies shipping product all over the country. We don't want to ship our products all over the country.


Photos: Courtesy of Straus Family Creamery.

10 Responsesto “It’s about volume, not price: How Straus Family Creamery is weathering the organic dairy storm”

  1. Karen Price says:

    Thank you for sharing this! I'm a long-time fan of Straus milk and ice cream. I kinda wish I could go through more than a gallon a week, just to help them out more.

  2. Amanda Rose says:

    I'll do my part: Straus ice cream has become available here in the San Joaquin Valley. I bought a quart of vanilla about a month ago, two hours away from home. Three people and three plastic spoons took care of it quickly on a hot day in Fresno. It's a cost-saving measure too: Why buy 3x$3 ice cream cones when you can buy a quart of Straus for under four bucks (and eat even better at the same time)?

  3. Laura says:

    I live in New York and buy directly (at the farmers markets) from Ronnybrook, which although not technically organic, is a local, high quality dairy that is kind to its cows.  The milk and butter is so much more delicious than the other brands I've tried (large scale organic brands included) that I would never dream of cutting back!  It only costs an extra $1 or so...totally worth it in my opinion!

  4. Diana Foss says:

    Clover Stornetta's organic line is also a few small farms who keep their cows on pasture. Any idea how they're doing?

  5. foodwoolf says:

    This is such a thorough and insightful piece that can give readers--and food lovers--something to hope for in this dire crisis. I wrote about this subject today and am currently compiling sources for concerned consumers that want to do something to help the plight of this nation's dairy farmers. If you have any source materials you would like to share, please don't hesitate to contact me!

    In the meantime, here is a link to <a href="http://foodwoolf.com/2009/06/how-to-help-your-local-dairy-farmer.html">my article on Food Woolf</a>. Thank you for your insights and hopeful news from Strauss!

    concerning what concerned consumers can do for dairy farmers.

  6. farmboy says:

    The Straus Family has a great history on their beautiful corner of Marin County.  I think that they have maintained a very ethical and honest position for themselves in the organic dairy community, which has not always  brought out the best in its players, especially the big ones.  Mr. Straus is very candid to acknowledge that some of the feed for his dairy is imported from China.

    I don't have first hand knowledge, but I believe that the economic horror story up in New England is confined to a number of dairies that converted to organic and then lost their contract with Hood.  All that debt, with no premium market is a train wreck, no doubt.  I don't believe that organic dairies across theboard are in a free fall, though the flat market for organic fluid milk is very telling.  In my opinion, the market for pasturized, homogenized organic milk is about as large as it is going to get.  Perhaps it can grow if the certified mega-dairies keep the price for private label product down, but I don't believe that many more people will want this product, or be willing to pay a lot more for it.   It comes down to differentiation: how different is organic milk from conventional milk.  Something tells me that consumers are spending about as much as they think that difference is worth, and I wouldn't disagree with them.  Now, pasture raised raw milk - that is quite different, and consumers are just beginning to learn how much more valuable it is.  I do believe that the market for any of these highly refined, mass distributed organic products - pasteurized milk, tomato sauces, cereals - is at about its peak.  Whole food - fresh and raw - is where people are discovering the benefits.

    Full disclosure: we are not fluid milk drinkers but love Seven Stars Yogurt (is there any better brand on American shelves?), eat tons of Kenny's raw milk cheese made hear in Kentucky and keep the freezer full of Organic Valley butter.

  7. April Atlee says:

    Good article; however the author is clearly biased.  Organic Valley should never be lumped in with Horizon and Hood.  They have done more for organic dairy producers across the country than any company, and they're a co-op.  Straus is a very good dairy too and they have done a great job with their ice cram biz.  The article didn't mention the Ici ice cream in Berkeley.  They use the same Straus mix that BiRite and Three Twins does.  Good stuff!

  8. farmboy says:

    I agree that Organic Valley deserves a lot of credit and respect for their achievements.  However, despite being a cooperative, they have made numerous business decisions that are indistinguishable from those of their corporate competitors.  Organic Valley ultra-high temperature pasteurizes its milk which is one of the most non-organic things one can do to nature's perfect food.    I would like to see a survey of Organic Valley producers and see how many of them drink their milk raw and how many of them drink it after processing.  Additionally, Organic Valley has not always been averse to sourcing some of its milk from mega-dairies, as was recently disclosed in regards to their operations in Texas.  A national milk distribution model is incompatible with the site-specific nature of organic production.

  9. adam says:

    No argument, things in conventional dairy are bad. But what about in organic? Organic dairy products don’t use MPCs, and prices for organic milk are still at a premium: the CROPP Co-operative (parent of Organic Valley) is paying $24.75-$29.75 per hundredweight, compared with the $9-$12 per hundredweight conventional producers are currently getting.

    Is this article right??  I believe organic milk is barely above the price of conventional milk.    The average organic producer is not getting half of the prices mentioned above.

  10. Tom Beach says:

    Dear Albert Straus,
    Be careful what you wish for, Albert.  When the end of cheap oil comes in the next few years, your distribution will not be national, it will be local.  You and all the rest of agriculture.  ADM and ConAgr and the big boys will be unable to compete with the locals.  Local ag will rule again.
    They will be responsible to the people in their community or be shunned.  Farmers will have a face that will be in the local community. 
    As for Straus Family Dairy, you will downsize like all the rest, but you will still have a loyal customer
    base..just like you used to.  Right now you are anonymus and people just go on price only.
    That will cease too.  Food will become precious and expensive.  The only reason that distribution has florished is that oil was cheap and foreign labor was essentially slave labor.  They will not be able to compete with you in your region. 
    However, in the mean time, you will find it hard to met and beat the numerous threats to your business from abroad and even nationally.  Factory dairy farms do not care anything about quality or about the nutritional value of their products.  They care about selling at the lowest possible price and stand back and watch fools eat the stuff.  Good Luck!
    I support you and all the other reputable farmers and creameries who still uphold their quality of product in the fact of extreme pressure.  It aint easy. 
    Like I said, cheap oil is rapidly coming to an end.  Everything will change, Albert.  The world will change...and not for the better I am afraid.  But what you produce will be in HUGE demand, namely, excellent qualilty...safe....dairy products. 
    I salute you.  Hang in there please.  If you can.  Or just keep your best stock and a few people. 
    I assure you the wait will not be long. 
    Aloha,  Tom Beach in Hawaii  (Formerly of Sebastopol and before that Ellis, Kansas.  Yup, I was a farmer and a dairy man for years. )
    It is not easy.