The CEO for Organic Valley says he’s concerned about potential impacts of a “pending recession” on organic dairy, though the conventional dairy market has been hit much harder by the pandemic so far.
During a recent webinar hosted by WEDC chief Missy Hughes, Bob Kirchoff noted that organic dairy is considered a premium product, and that could cause issues for the industry if consumer preferences shift due to the economic downturn.
“Our farmers, we pay so they can make a sustainable living milking 72 cows on the dairy side,” Kirchhoff said. “They have a different economic platform than those large industrial farmers — who are our neighbors and our friends.”
Some conventional dairy farmers in Wisconsin have been asked by producers to dump their milk, as demand has fallen sharply with the closure of schools and restaurants. According to Kirchoff, “we haven’t seen any of that on the organic dairy side.”
He explained most of the milk being dumped was likely destined to be processed into food service items like bulk cheese — “things like that, that are heavy-use.” He noted 38 percent of all meals are typically eaten outside of the home, so producers of products like these have faced a sudden lack of buyers during the pandemic.
“From that point, the conventional sector has suffered, prices have fallen pretty hard,” he said.
The Wisconsin-based Edge Dairy Farmer Cooperative is urging USDA to take action to support dairy farmers affected by the pandemic, including direct financial help for farmers who’ve had to dump their milk. Edge is asking the agency to purchase dairy products for food banks, and for more flexibility in regulations for these programs so food can reach those who need it faster.
Organic Valley is one of the largest organic dairy cooperatives in the world, and has more than 400 dairy farmers in Wisconsin. Hughes previously worked for Organic Valley as the co-op’s general counsel. Kirchhoff chalks it up to “plain good fortune” that the La Farge-based co-op has little food-service business.
“Most of our business is either in retail or bulk milk supply, and the bulk milk supply largely goes to retail through private-label branding,” he said. “It’s been a pretty crazy last six weeks, quite frankly. We’re doing everything we can to keep up.”
Organic Valley owns four dairy producers but works with 80 others who make products that are sent around the country through distribution centers in all 50 states.
“The challenge of course has been, the farming needs to continue to take place, the dairy farmers need to continue to operate, and the supply chain needs to continue to run,” he said. “We’ve been very fortunate that, I think through good social distancing and other good general manufacturing practices, we have not seen any significant disruptions in our supply chain.”
He noted that administrative and office workers have been working from home for about four weeks, ahead of Gov. Tony Evers’ stay-at-home order. He noted employees have been practicing social distancing at facilities, adding that maintaining food preparation standards have helped mitigate risk.
“And when I say risk, I mean shut-down of the supply chain. And so far, so good,” Kirchoff said. “We’re not out of this yet … but the food system needs to run. It’s one thing to shut down certain parts of our economy, but we all have to eat.”
Hughes noted that food banks are “starting to become challenged” as more people are relying on these types of services. At the same time, Kirchoff said many dairy producers are being overwhelmed during the current crisis and may not be thinking about donating products as usual.
“My assumption would be, in those larger facilities, there’s been very little leftover to service those food shelves,” he said. “Secondly, the logistics of it start to become difficult, because of course we’re making priority to serve our customers, our consumers. And sometimes the food shelves can be overlooked.”
He said Organic Valley has been donating to food banks in recent weeks but added the current circumstances have complicated the process.
“It really takes that conscious effort, which in reality, it becomes a bit on autopilot for a lot of processors throughout the country, that they’re always contributing to food shelves,” he said. “And now you’ve got this once in a lifetime — hopefully — event that has shifted your thinking and priorities, and sometimes things fall between the cracks.”
–By Alex Moe