Just two years ago, U.S. farmers couldn’t keep up with consumer demand for organic milk. Now, production has outpaced the need.

An organic milk surplus of 50 million gallons is anticipated for 2017, according to the most recent USDA Organic Dairy Market News report. This means some organic milk will be sold on the conventional market at conventional prices.

The demand for organic dairy is still there. Organic milk made up 5.2 percent of all fluid milk sales last year, which was more than double its 1.9 percent share from a decade earlier.

It is this growing demand that helped push the organic milk price upward. Through November 2016, the average pay price was more than $36 per hundredweight, almost $20 more per hundredweight than conventional prices.

Meanwhile, additional milk on the organic market has brought down retail prices. Last year, a gallon of organic milk averaged $6.99. The current average price is $5.82 per gallon.

Demand for organic foods, including dairy, is expected to continue expanding. Further down the road, this surplus of organic milk is likely to be eaten up as new processing plants and sales outlets are developed to meet future need. In the short term, though, the organic milk market is overflowing. This may stall organic dairy growth and force some processors and dairy producers to take conventional prices for their niche product.

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(c) Hoard's Dairyman Intel 2017
May 15, 2017

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