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."
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.
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.
No related posts.