PRINT Strong demand spurs organic dairying in Virginia, the South

Strong demand spurs organic dairying in Virginia, the South
Despite a lack of experienced organic dairy farmers, holistic veterinary backup and experience with certification, organic dairy companies are competing to build supply.

By Rocky Womack

The road to certification

Here are the broad steps to certify a farm under the National Organic Program (NOP), according to the National Center for Appropriate Technology’s national sustainable agriculture information service:

• Choose a suitable certifier. A list of certifiers and explanation of the NOP standards are located at www.ams.usda.gov/nop (To see descriptive profiles of 65 US certifiers, check The New Farm Guide to US Organic Certifiers)
• Submit an application to the certifier
• Review of your organic farm plan by the certifier
• Complete an on-farm inspection
• Go through a final review

Once the certifying agency approves the certification, a farmer can start marketing his product as being organic. For more in-depth information on these steps, visit www.attra.ncat.org.

Horizon farmer says organic transition worth the effort

The dairy operation of Ephrata, Pa., farmer John Lapp became certified organic four years ago. He had complied with organic regulations for three years before an organic milk company contracted with him. Market demand was not as prevalent as it is today.

Lapp, who now contracts with Horizon Organic, said the biggest concerns of dairy producers when they consider going organic are usually higher feed costs and the lengthy time requirement for certification.

For him, the time in transition was just part of a positive process.“Nobody should let themselves be troubled with four years,” Lapp said.

He believes the rewards of going organic far outweigh the rigors of the regulation process. He supports the standards that call for the elimination of all but organically approved pesticides used on the land and antibiotics used on the animals. Society benefits from a better food product because of these rules, Lapp says. Besides, he believes conventional dairy farming has peaked out in deriving benefit from traditional farming practices such as constant chemical use.

“The ground is so heavily chemicalized,” he said. “The land no longer works as it should.”

State ag officials bullish on organics

Tom Sleight, director of the Division of Marketing with the Virginia Department of Agriculture and Consumer Services (VDACS) believes Virginia is well-suited to expand the production of organic meat, milk and eggs. VDACS also recognizes the need for organic grain and soybean production to supply the livestock sectors.

As an incentive, VDACS offers dairy farmers a cost-share program for those looking to transition to organic. Once they become certified, they are eligible for reimbursement of 75 percent of their costs or up to $500, whichever is greater, “at least as long as the funds holdout,” says Catherine Cash, an organic dairy inspector currently working with VDACS to assist farmers transition to organic. In Virginia, she says the average cost of certification seems to fall within the $350 to $700 range, depending on the certifier.

From 1996 to 2002, VDACS handled the state’s organic certification process before the U.S. Department of Agriculture established the standards under the National Organic Program (NOP), Sleight says. Since then, the department’s focus has been marketing.

Donald Ayers, director of VDACS’ Office of Commodity Services says, “We try to bring buyer and seller together to develop markets for the organic products, the same as we do for conventional.”

Sleight says Virginia farmers need somewhere definitive, such as one agency or organization, to turn to for questions on organic certification.

“VDACS recognizes the need for prospective organic farmers to gain advice and counsel on preparing for certification,” he says, “and VDACS will work with Virginia Tech, Virginia State University and the various Virginia organic associations, companies and certifying organizations on how best to provide this service.”

He sees a future for farmers who want to transition. “We see current growth trends in the organic industry continuing into the foreseeable future, i.e. seven to 10 years. VDACS is committed to providing marketing assistance, whether that be with direct marketing, Community Supported Agriculture organizations, farmers' markets, restaurateurs, specialty food stores, grocery chains, wholesalers and/or international customers.”

Study shows potential and risks in intensive grass-based dairying

Going from conventional nutrition management to a grass-based feed program can reduce costs but can also reduce overall profits if a dairyman does not look closely at control of variable and capital or fixed costs, suggests Gordon Groover, Extension economist of farm management with Virginia Tech in Blacksburg, Va.

“When you go from a conventional to a grass-based herd, production drops,” he says. “The cost of producing feed to that cow has to drop from that of a total mixed ration” he says. “You also have to reduce the capital cost of producing that feed, milking cows and everything else. If you don’t reduce total fixed costs, you could become worse off because you lose milk production.”

Groover recently finished a systems modeling study comparing several pasture-based systems with varying levels of confinement feeding using total mixed rations. While organic dairy farmers moving to organic would save on capital costs and may benefit from the organic premiums he says they also would pay higher prices for organic feed. Feed sourcing becomes especially critical in the fourth year of transition when all feed has to be certifiable under organic rules.. “More organic livestock farms will mean higher prices for organic feeds,” Groover says.

Groover’s research showed that 100- and 200-cow pasture-based seasonal dairying was the most profitable of all systems, while intensive pasture-based year-round systems are least profitable. Farms that would supplement pasture-based nutrition with up to 25 percent of ration dry matter with a partial mixed ration were more profitable, in general, than the same sized, confinement dairy farm modeled.

August 16, 2005: The US organic dairy industry wrestles with an unusual dilemma for American agriculture — how to keep up with the growing consumer demand for its high-priced product.

With demand outpacing supply month after month, representatives of organic dairy companies and cooperatives have taken to the road to sign up more dairy producers ready to transition to organic management. They look for clusters of farms to create a support network for the farmers and make milk pickup efficient.

The Shenandoah Valley area of Virginia, lying on both sides of I-81 in the west central part of the state, is one of those hot spots. Farmers and others were welcomed to an information session last month in Stuarts Draft on organic dairying production and marketing. Sponsored by the Virginia Department of Agriculture and Consumers Services (VDACS) in Richmond, Va., the event featured presentations by competing organic heavyweights: Horizon Organic, the leading U.S. organic foods corporation of Boulder, Colo., and Organic Valley, an organic marketing cooperative of La Farge, Wis.

“The dairy part is new for us in that these two companies here today have come to Virginia looking for additional suppliers of organic milk, or additional milk producers to [convert to] produce organic milk,” said Donald Ayers, director of VDACS’ Office of Commodity Services.

Ayers told the dairy farmers that VDACS was not there to make recommendations, but to help them with the marketing their milk. Part of that assistance meant introducing them to two dairy companies, who both desperately need organic dairy farmers in the Southeast. Horizon Organic now hauls milk from Pennsylvania, Idaho and the Midwest to fulfill its demand in the Southeast.

“We’re doing that because we don’t have a milk supply here,” said Jule Taylor, director of milk supply for Horizon Organic. The Horizon milk is hauled to its processing plant in Mt. Crawford, Va., a few miles up the interstate from where the dairy farmers were attending the workshop.

“There is an opportunity out there today,” Taylor said, but she cautioned. “Organic is not for everybody. This is one option for you.”

Why transition?

Horizon Organic offers certified dairy farmers a base price of $22 per hundredweight, said Cindy Masterman, producer relations manager. Farmers receive a bonus if they sign up within six months, and they receive $1 per hundredweight extra during the final 12 months of the four-year certifying process. She says Horizon Organic also offers two-year contracts with automatic one-year renewals.

Organic Valley, a farmer-owned cooperative, offers its certified organic dairy farmers a base component of $18.70 with a regional premium of $3.20 for a $21.90 total base, said Peter Miller, east region pool coordinator for Organic Valley. The co-op also offers transitioning dairy farmers a $2 per hundredweight premium payment. He says Organic Valley works with farmers on an agreement basis. The basic agreement is for farmers to give the company a 180-day notice in writing in case they decide to go to another organic marketplace. If they need to leave organic farming, Organic Valley prefers a two-month notice. If their farmers leave organic dairying, the company stops accepting their cows’ milk.

These base prices and premiums perk up the ears of Virginia’s dairy farmers, who have recently received prices of about $14 per hundredweight, and about $2 more offered by the Virginia Milk Commission, said Alan Grove, Extension agent in Rockingham County, Va.

Price and stability drive the movement to organics. “I’ve been in dairying since I was a kid,” Grove said. “It used to be you had a steady price. In the last five to ten years, we’ve seen more price fluctuations” due to supply and demand variability in the conventional milk marketplace.

Steady base payments versus price fluctuations may sound good to dairy farmers who struggle with budgeting from one year to the next. “These organic companies will give [certified organic dairy farmers] a guaranteed minimum price for a specific time period,” Grove said. “They know in the next 12 to 24 months what their milk is worth. The regular dairy farmer has a general idea what the price will be, but there are no guarantees.”

Farms in transition

Interest is developing in Virginia to try organic dairy farming, said Tom Sleight, director of VDACS’ Division of Marketing. It is growing from a small organic livestock base. The single certified organic dairy farm in the state is in Marshall, Va., said Catherine Cash, an organic dairy inspector and currently working with VDACS to assist farmers with transitioning from conventional to organic dairying. “Sooner or later, it will be happening here [in Rockingham and Augusta counties],” she said.

Eight Shenandoah Valley dairy farms are currently exploring organics or in transition. “Three or four of those farms should be certified organic by September of next year,” Grove said.

One farm in Grove’s coverage area may become certified sooner, based on the farmer’s cultural practices. “I never gave a thought to organic,” said Steve Hord, a Middlebrook, Va., dairyman raising about 60 cows -- 45 in the milking herd and the rest dry cows. “I’ve been going to organic without realizing it.”

“I never gave a thought to organic. I’ve been going to organic without realizing it.”

--Steve Hord

He started establishing his pasture about 15 years ago. He has put up adequate fencing and installed water lines through a cost-share program with federal and state funds. About three years ago, his cows began grazing mostly on pasture and were fed grain and hay over winter. As the pasture matures in spring, he takes the cows off the grain, depending on weather and pasture conditions.

Hord, who is working on his certification paperwork, believes certifiers can approve his pastureland as organic by this fall and his cows by about mid-2006. He also believes, if his operation could become certified by the end of this year, the extra milk premium will offset the higher costs of organic feed.

Transitioning as a group

By early 2007, Augusta County, Va., dairy farmer James Wenger expects a certifier to approve his operation as organic. He and about five Rockingham County, Va., dairies expect to become certified at about the same time. They committed to the move several years ago. Back then, interested companies said they would buy the milk only if they could cost-effectively haul at least 40,000 pounds of milk from one region.

Wenger farms with his two sons, Nathan and David, and his wife, Lynn, on the land where he grew up. They milk about 84 cows. By following organic practices, Wenger believes his herd is healthier, and his cows last longer, because they are not under as much stress.

By following organic practices, Wenger believes his herd is healthier, and his cows last longer, because they are not under as much stress.

“We’re not pushing them as bad, and they are walking and getting exercise,” he said. “We’re milking about 14,000 pounds of milk, and everybody else is milking about 25,000 pounds.”

He sees his vet less often due to lower animal stress and better health, and he culls harder. Wenger no longer tolerates unproductive and unhealthy cows. “If a cow gives us a problem, we let her go,” Wenger said. “We sell her and get rid of the problem.”

To offset the higher costs of going organic, Wenger cut his fertilizer and equipment costs. He stopped growing corn to keep from replacing his worn-out equipment. He pocketed the money he would have spent on buying the heavy metal, as well as his labor to plant and harvest the corn. The decision freed up his time to concentrate on his management needs to obtain certification.

He figures high and low corn prices from year to year will average out to favor buying over growing his own. Once he becomes certified, Wenger says the premium milk prices will more than pay for the organic feed he must give his cows. Local feed suppliers have expressed interest in supplying him with organic feed, as well.

Horizon Organic and Organic Valley are courting Wenger to buy his certified milk when it comes. Wenger is still weighing his decision.

Plus – minus for organic dairy

From her experience as an organic inspector, VDAC’s Cash says organic dairy farming has its risks and rewards. Some of the rewards for a successful pasture-based operation include:

healthier cows
healthier soils
fewer veterinarian bills
lower cost for fertilizers and chemicals
more money for the farmer’s product
less overhead in machinery
a healthier work environment
possible extra income selling organic calves
fewer issues dealing with excess manure

Some of the negatives are:

more expensive organic feed
probable decrease in milk production during a farmer’s learning curve in grazing and organic feeds management
four-year transition period with no full premiums until certified
the need for precise and extensive recordkeeping

In considering whether to invest in transition, Extension Agent Grove advises farmers to first ask themselves if their operation fits the decision. What will transition cost, in terms of learning new management and in dollars? Do I have access to enough land for grazing? Will landowners I rent from agree to this transition? Will I need to haul organic feed in from the Midwest or can I work with a local supplier?

Grove urges farmers to figure on paper whether transition will be profitable in their situation. He advises them to talk with out-of-state organic dairy producers to learn what their costs are. (See sidebar: “Horizon farmer….”)

Farmers wonder where the demand for organic milk will be in five to 10 years. Is the health-conscious movement just a fad? Horizon’s Masterman doesn’t believe so. She said the personal health focus of Americans is here to stay and predicted organic demand will continue for years to come.

If the supply of organic milk in the Southeast eventually does catch up with demand, will the higher premiums level off or fall as fast as the rise in interest? Neither Taylor nor Miller could give an iron-clad answer. Miller said it will depend on how much the marketplace can bear.

Both said the two companies that they represent want to pay for high-quality organic milk. After the meeting, both continued their quest to find farmers willing to promise their Virginia milk to help meet surging regional markets.