Spiralling costs stop organic switch

Western Morning News - UK

10:00 - 06-August-2008

WESTCOUNTRY dairy farmers are thinking twice about converting to organic production in the face of spiralling costs, say industry leaders.

Many organic milk producers have reported trading at a loss because organic feed, most of it imported, has rocketed in price by at least half as much again compared to last year's prices.

At the same time, consumers are switching to buying newly launched regionally-produced milk rather than organic brands, which have previously enjoyed buoyant demand.

The trend for conventional dairy farmers to abandon plans to go organic was revealed by Richard Hampton, of the Somerset-based organic milk co-operative OMSCo, which accounts for about 70 per cent of the UK's annual production of 450 million organic litres and which has 300 members.

Mr Hampton said: “The costs being incurred by organic producers are rising much faster than for conventional production.

“The price we get currently for organic milk is not high enough to cover the cost of production. There will have to be an increase in the price that producers receive.

“We are seeing producers who are undergoing organic conversion exiting that process. If just 30 of our larger organic farms revert to non-organic production, we'll lose 10 per cent of our supplies.”

The cost of feed – organic grain and soya and much of it imported – now stands at about £400 per tonne. The 36p per litre, on average, that an organic farmer receives for milk no longer meets outgoing expenses and they are seeking 40p per litre to receive a working profit.

It is a role reversal situation, as conventional dairy farmers, who suffered for years from very poor payments, are now getting around 28p per litre, giving sufficient profit to allow them to re-invest.

David Denning, who farms at Probus, near Truro, milks 700 dairy cows, and has been organic since 2000, said he had seen peaks and troughs in the organic market before, but never anything as serious as the current situation.

He said: “If we don't get a better price before winter I can foresee a mass exit from organic dairying. To exit from organic production takes one day, but to reconvert would take years.”

Mr Denning, chairman of the Dairy Crest Direct suppliers' organisation, said he was receiving a steady flow of inquiries from farmers asking advice about leaving the organic system.

“Dairy Crest recognises they will have to increase payments to their suppliers, but getting the supermarkets to co-operate won't be easy,” he said. “This country still imports organic milk, so we know there is a demand.”

Martin Davis, of Organic South West, said buyers were switching from organic milk to locally produced and suitably branded supermarket milk. He said: “It's cheaper – and it ticks their environmental boxes, if they are not totally committed to the organic concept.”

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