One question I have had was whether the coming glut of organic milk will lead to lower prices for consumers. Well, the company that owns Horizon Organic, the largest organic milk company in the nation, thinks the answer is yes and that admission sent the stock of parent Dean Foods down nearly 10 percent today.
According to a report in Bloomberg News:
Dean Chief Executive Officer Gregg Engles said organic milk output may surge 40 percent this year, creating ``a wall'' of supplies that will prompt rivals to try ``to stimulate demand through lower prices." Dean Foods, the biggest organic milk producer in the U.S., will counter with increased investment in Horizon Organic, its most profitable brand, Engles said.
What is less clear is whether organic dairy farmers will take a hit and suffer lower prices at the farm-gate. I've heard that Organic Valley is holding the line on prices and have also seen other anecdotal reports that processors are trying to hold back supplies. ''We don't want to harm the viability of organics and the price point that farmers need to make a decent living,'' Organic Valley CEO George Siemon told the New York Times.
Why are supplies jumping 40 percent in a year? Because farmers had until last June to begin the year-long conversion to organic production before more stringent rules took effect. As a result, many jumped into the market at the same time and now all those supplies are starting to come on line.
- Samuel Fromartz