Sunday, February 3, 2008
This rather dry piece is part of my Masters Thesis, but I did most of the research for my undergrad thesis. All of the pictures are from southwestern Wisconsin, fall 2005.
The organic dairy world is one of the most important sectors of the organic industry as a whole. In 2003, its sales totaled $1.4 billion. People seem to associate milk with health and childhood, which perhaps convinces them to accept premiums for organic milk. Indeed, in the 1990s, the organic dairying grew the fastest of any sector of the organic industry (Greene, 2001).
The National Organic Programs (NOP) rules governing organic dairy cattle mention access to pasture, but they do not specify what access entails. Thus it is possible to feed dairy cattle organic grain while confining them on large dairy farms, sometimes called Concentrated Animal Feeding Operations (CAFOs). The debate over what access entails has played out in the competition between the two of the largest organic dairy operations in the country—Horizon Organics and Organic Valley—which approach organic milk production in markedly different ways.
Both companies were founded as cooperatives around the same time—Organic Valley in 1988, Horizon in 1992—and both were originally located in rural Wisconsin. Their rise roughly mirrored the explosion of the entire organic industry. After initial difficulty in finding their market niche, both companies settled on dairy products. However, while Organic Valley continued as a cooperative, buying milk only from member farms, Horizon, while continuing to purchase from its member farms, also bought its own large dairy farm in Idaho in 1994, which holds 8,000 cows, followed in 1997 by another in eastern Maryland, which houses a comparable number (Brady, 2006). Growth continued, and in 2003, as major food corporations began taking notice of the growing profits in the organic sector, Dean Foods purchased Horizon—now based in Boulder, Colorado—for $216 million (Pressler, 2003). Presently, the subsidiary works with 515 farms, and according to its website, 80% of its milk comes from members rather than its own operations in Idaho and Maryland (horizonorganic.com, 2008).
Nonetheless, Horizon has received considerable criticism from consumers groups. The Organic Consumers Association is leading a boycott of Horizon (as well as Aurora Organic, supplier to Wal-Mart, Safeway, Costco, and Target) because of the lack of access to pasture for cows on the large dairy farms. Logistically, bringing several thousand cows out to pasture is a daunting challenge when the cows also need to be milked twice daily. Practically, this means that the cows generally see pasture for two to three months per year, at the end of their lactation cycle. Since the USDA organic standards are vague, such conditions are legal as long as the cows are fed organic grains. The abundance of fecal waste and irrigation at large dairy farms—the Idaho farm was essentially created out of a desert—are also cited as reasons for the boycott (Brady, 2006). While major supermarket chains have not dropped Horizon or Aurora, the OCA has made some headway among natural food stores and coops.
Organic Valley, a giant in its own right with over 1300 member farms, has pursued a less controversial but also less lucrative strategy, at least in the short term. While diversifying into citrus and meat production, it has resisted using large dairy farms, however, instead relying entirely on small producers. Such a strategy has thus far proved healthy for the cooperative’s image, but the limits to supply come at a price.
In 2004, Organic Valley’s third largest customer was Wal-Mart. Executives at Organic Valley credit Wal-Mart with improving the cooperative’s efficiency and timing. Nonetheless, when a case of Mad Cow Disease was found in Washington State in 2004, consumers began switching to organic milk in such droves that the demand quickly outstripped supply. A shortage in organic grain for feed exacerbated the problem. Organic Valley was forced to shortchange its smaller customers in favor of Wal-Mart. The specter of competition with Horizon Organic, which was selling milk at 15 cents less per gallon than Organic Valley, convinced Organic Valley executives to drop the Wal-Mart account, despite the fact that the giant retailer had not asked for a price cut. Instead, Organic Valley focused on supplying its natural food store and co-op customers, avoiding vulnerability by maintaining a diverse set of clients. Though in 2006 Horizon sold $339 million worth of milk to Organic Valley’s $232 million, Organic Valley’s business with small distributors is growing. It is betting that the innovative nature of these businesses and the awareness of its consumers will endow it with long-term viability (Pattison, 2007).
Meanwhile, the bad publicity from the OCA boycott is beginning to take effect. Like Horizon, Aurora owns a pair of large dairy farms in Colorado, which separately hold 4,000 and 3,200 cows, and one in Texas, with 3,300 cows. When John Mackey, the vegan chief executive of Whole Foods visited the smaller of the two Colorado facilities, he deemed its conditions poor enough to preclude his grocery chain from carrying Aurora milk (Warner, 2006). Under threat of losing its organic certification, Aurora agreed with the USDA to decrease its herd size and buy more pasture, but it now faces several class action lawsuits (Martin, 2007). Horizon has not generated as much opposition as Aurora, but it was still compelled to issue its “Standards of Care,” which details how its raises its cows (horizonorganic.com).
Thus in the dairy industry, the controversy over pasture access, generated by the vague language of the NOP rules, tends to boil down to tension between corporate dairy companies and smaller, independent or cooperative producers. The influence consumer activism has borne on company behavior is worthy of note, and whether comparable activity will occur in regard to organic beef deserves attention.
Pictures: Cows on Mike Sebion's farm in Viroqua; the co-op in downtown Viroqua; a retail outlet for Organic Valley in La Farge; and Mike Sebion on his farm.
Posted by Andrew Riely at 8:57 AM