Dive Brief:
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In a report on the dairy industry released last week, organic industry watchdog Cornucopia Institute said many of today's factory farms are cheating customers by flooding the market with milk that's not truly organic — driving out family businesses and harming rural areas in the process.
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A scorecard accompanying the report rated nearly 160 organic dairy brands and private-label products on authenticity and production quality. Small operations in Idaho, Pennsylvania, New York, Washington and other states got top marks. In the middle were 365 Organic, which is part of Whole Foods; Wegmans; Wallaby, owned by Danone's WhiteWave; and Earth's Best, part of Hain Celestial Group. Receiving a zero rating were 46 dairies — including some well-known names including Alta Dena, part of Dean Foods; and Horizon, owned by Danone.
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"With the USDA’s failure to protect ethical industry participants and consumers from outright fraud, using our Organic Dairy Scorecard is a way for organic stakeholders to take the law into their own hands," Mark A. Kastel, the institute's co-director and senior farm policy analyst, said in a release. "In every market and product category, consumers can vote in front of the dairy case to economically support authentic organic farmers while simultaneously protecting their families."
Dive Insight:
Production of organic milk has exceeded demand, resulting in a glut of the dairy product. According to U.S. Department of Agriculture figures quoted by The Cornucopia Institute, organic milk production jumped 18.5% in 2016 alone. Consequently, wholesale purchasers of raw organic milk have slashed prices paid to farmers, and some buyers have set quotas requiring production cuts, further impacting cash flow for dairy operations.
Big food companies have pushed into organic milk production because of the favorable price differential with conventionally processed milk. According to the Agricultural Marketing Research Center, the annual average advertised price for organic milk in 2016 was $3.97 per half gallon, compared to $1.88 for the same amount of conventional milk. And despite the laborious process to become a certified organic dairy operation — which can take one to three years — the financial advantage remains, but only if supplies are low and prices stay up.
The USDA Organic seal has come under increasing scrutiny following moves by the agency to withdraw the organic livestock and poultry practices rule and last fall's National Organic Standards Board vote to let hydroponic and aquaponic farms earn organic certification. As a result, new organic certification schemes have surfaced, purporting to hold to stronger organic standards than the USDA.
This matters because U.S. consumers want to be sure foods and beverages labeled as organic really are. They don't want to purchase brands and find out the company behind the product isn't transparent about how it was produced, how animals are treated or other environmental concerns. Consumers are also willing to pay more for organic certification, so dairy or store brands that are disingenuous with their organic labels and prices could lose consumer trust and, eventually, market share.
The biggest threat is that the overall reputation of organic foods and beverages will be damaged, which clearly wouldn't help producers, retailers or consumers who want labels to mean exactly what they say.
Whether this situation can be resolved in the foreseeable future is anyone's guess. It may take other labeling schemes separate from the USDA to maintain meaningful organic standards. The oversupply of organic milk isn't going to go down until enough diversified dairy products make their way to the market, prices drop, and dairy herds are reduced.