Grocery store prices for organic milk were facing heavy upward pressure, as consumer demand was outpacing supply in many regions of the country at the beginning of 2012.

The shortfall was due to sharp increases in the price of animal feed, and comes at a time when more and more shoppers are seeking out organic milk. Since inputs like hay and grains cost more, organic farmers have been forced to buy less of it, which, in turn, cuts into the milk productivity seen from dairy cows. To reverse the trend, one farmer claims that the price paid to organic farmers must increase by $5 per 100 pounds of milk (“hundredweight” or “cwt”).

Other factors influencing the decline in organic milk production, as cited by industry companies, include lost acreage and the lingering effects of the economic recession. Last year’s organic standards revision, requiring at least some open-field grazing for cows if milk is to be labeled organic, may also have had an impact. Also not helping the situation is the fact that the rate of farmers converting from conventional to organic dairy production has slowed recently.

Organic brand and farmer cooperative Organic Valley announced an increase of $2/cwt to its farmers beginning in March, to help offset increased production costs. “It’s important as we start 2012 to support our farmers during these difficult supply times by increasing our farmer pay price. We recognize the challenge of high feed costs and it is a major issue,” said George Siemon, CEO and founding farmer of Organic Valley in a statement. Though the problem is national, organic milk shortages may be worse along the East Coast. According to reporting by The New York Times, national stores like Target have had trouble keeping milk on the shelves, and eastern supermarket chain Wegmans has seen shortages of milk from major producer Horizon Organic Dairy.

“Balancing supply and demand in the organic dairy industry is very complex, so it’s difficult to predict when there will be a better balance of the two. The good news is that consumer demand for organic dairy continues to grow while more and more new consumers enter the category, which is positive for farmers, processors and retailers alike,” says Ronald D. Schnur, vice president of Horizon dairy supply and operations. He cites several factors that have influenced the situation, from rising input costs to weather conditions occurring in the second half of 2011 including unprecedented heat, humidity, rain and flooding. Active measures Horizon is taking to address matters include keeping an eye on farmer compensation, which has meant a short-term pay increase for their dairy farmers; growing its milk supply network; and monitoring seasonal issues like increased production in the Spring, when cows are out to pasture.

“Certainly, bringing on more organic dairy farmers of all sizes, in key areas of the country, is one way to help meet consumer demand for organic milk. At Horizon, we currently have 75 farmers transitioning to organic who will soon join the 555 family farmer partners currently supplying our milk,” says Schnur. Addressing what place pricing at the retail level holds amidst these concerns, he continued, “Horizon is committed to an ongoing dialogue with retailers about ensuring organic dairy prices are at a threshold where consumers can and will still buy them, and farmers are also able to earn a fair and competitive wage.”

Published in WholeFoods Magazine, March 2012