This essay is the latest installment in a debate between Ed Maltby and Gary Hirshberg, CE-Yo of Stonyfield Farm. Maltby opened the debate with this post; Hirshberg responded here; Maltby’s response follows below. We are airing the debate at length because we think our readers should know that our organic dairy farmers have reached a crisis point — squeezed by production costs that are rising much faster than the price they receive in the market.
I want to thank Gary Hirshberg for replying so quickly to some of the points that we have been raising for the last six months. Gary and Nancy Hirshberg and the many employees of Stonyfield have been pioneers in the organic movement, along with folks like George Siemon of Organic Valley and Mark Retzloff of Aurora Organic Dairy.
Gary has long been a leader of the organic community and has helped shape the way in which the industry has expanded. In answering some of Gary’s points, I’d like to widen the discussion and move away from sound bites and platitudes that are the bane of our society, and share some of the difficulties of organic dairy that we all struggle with day after day.
Payment of Dairy Farmers
Stonyfield Farm does not pay farmers directly. Stonyfield buys milk for its yogurt from Organic Valley, a cooperative owned by farmers. The price that Organic Valley farmers are paid for their milk has gone up 20 percent in the last five years. If Organic Valley has increased its price by 34 percent, then Gary needs to go back to Organic Valley and find out why.
Gary is right to say that the price that farmers receive for their milk has not gone down — but it also hasn’t increased in response to increased costs over a two-year period. The increase that Organic Valley (not Stonyfield) gave its farmers in January was 8 cents per gallon, or a 3.7 percent increase — the first increase in two years.
A Fair Price
Gary and Nancy Hirshberg exert great influence on how the organic dairy industry develops. They are working with Organic Valley, their main supplier, to ensure that their farmers are paid a price that reflects the cost of production for family farms.
In the retail packaged-milk market, Stonyfield licenses its name to the large conventional dairy processor HP Hood, which uses the Stonyfield name and Gary’s words on the carton for its organic line. Gary should insist that HP Hood pays its organic farmers a fair price, or withdraw his name and support for a product that doesn’t meet the high ethical standards we have come to expect from the Stonyfield brand.
Gary and Nancy’s Support for Organic
It is great that Stonyfield, Organic Valley, Aurora Dairy, and Horizon Organic have donated so much money to organic education and research. In the absence of USDA support for research and education on organic dairy farming, the companies have taken responsibility for providing that necessary support by investing their profits in programs coordinated by universities, nonprofits, and farmer groups. Making claims on websites and packaging that Stonyfield supports farmers does great things for the marketing of organic products, but it only helps farmers if it’s true.
Gary should be proud that Stonyfield has enough of a profit that it can donate 10 percent of its profits to environmental groups. Unfortunately, in 2007 organic dairy farmers did not have any profit and could only pay themselves an average of $6 an hour. This is despite the fact that these farmers maximize their production from their pastures with intensive rotational grazing and produce as much of their winter feed as possible.
Unfortunately, farmers have no control over other costs that are spiraling out of control. There is no incentive for young farmers or the next generation of family farmers to enter organic dairy when they will be paid a price for their milk that doesn’t cover the cost of production. All of Gary’s good work will be wasted unless existing farmers receive a price for their milk that allows them to pay their bills and support their families.
Realistic Price Increases
Farmers understand that the organic milk market is complicated and that everyone needs to tighten their belts. Organic dairy farmers predicted this deteriorating situation six months ago and have been attempting to work with processors to anticipate the problem and provide long-term solutions.
All of our meetings, phone calls, letters, and emails have been met by this response: “We are working on it ourselves; be patient.” If we had started the price correction six months ago, it could have been done in small steps. Now farmers have been forced to use more radical methods.
I wonder how many processors and their employees have had to cancel their health insurance and cash in their IRAs and retirement funds to keep the company going? How many company owners are laying off employees and adding more hours to their work day? That is what family farmers are being forced to do.
Oversupply of Organic Milk
The “significant” oversupply lasted six months and happened at a time when the price for conventional milk was as high as organic milk. The larger companies and manufacturers were able to sell that excess milk into the conventional market or increase their production of organic butter, milk powder, and ice cream, so they did not suffer large losses. The smaller cooperatives and manufacturers were hit the hardest.
Reasons Behind the Price Squeeze
The argument that farmers hear from the processors is that Stonyfield Farm’s brand of organic milk, packaged and marketed by HP Hood, entered the market and caused an increase in competition for shelf space and sales between all of the brands, which resulted in the lowering of wholesale prices for packaged organic milk.
There was also an increase in competition from store-brand milk, which is packaged for stores — like Whole Foods, Trader Joe’s, Stop & Shop, etc. — by Organic Valley, Horizon Organic, HP Hood, Aurora Dairy, and Dairy Farmers of America.
Competition Between Brands
Do any of these companies go back to their supplier of gas and diesel and say “Because we have increased competition in our market, we are only going to pay you 80 percent of what it cost you to produce the oil”? Building market share has to be funded by the owners and shareholders of the marketing companies who will receive the eventual profit, not by farmers who do not have the deep pockets of Dean Foods, HP Hood, or Danone (aka Dannon, the European yogurt giant that is now a majority owner of Stonyfield).
A Sustainable Solution
Gary has improved the efficiency of the Stonyfield plant, and organic dairy farmers are very innovative, independent, and efficient. Perhaps the real cost of a truly organic and sustainable product produced in a way that truly cares for family farmers is just more expensive. As organic dairy production grows, we need to ensure that family farms are able to grow with it.
I would welcome Gary to tour organic dairy family farms with me so he can see this suffering firsthand. Unless we rapidly address this problem by paying a fair price to family farmers who produce organic milk, the only farms that will be able to afford to do it will be the large corporate farms in the Midwest and the West.
I challenge Gary to use his great knowledge and influence to work with us to provide a better future for organic dairy farmers. Let’s all step away from platitudes and rhetoric, admit that organic dairy family farms are not being paid enough for their milk, and commit to working together to find a sustainable solution.