For many years, organic milk has been the belle of the dairy case as consumers have flocked toward organic options. However, that trend appears to be stalling as organic milk sales through the first 10 months of 2017 were just 0.5 percent higher than 2016. As a point of reference, 2016 sales were 5.5 percent higher than 2015.

Nielson data, reported in The Wall Street Journal, shows that organic milk sales in 2017 fell both in volume and dollars for the first time since 2013.

The Wall Street Journal reported last week that consumers were moving on from organic milk options to other alternatives as that market continues to not only grow but also get more crowded. The article shared that grocery stores are shrinking shelf space as they make more space for nondairy and plant-based alternatives.

As all of this is taking place in the dairy case, more organic farms have come into organic production. USDA reports show that the organic dairy herd grew 10 percent from 2014 to 2016 reaching 267,523 head at the end of 2016. That has left organic dairy producers with more milk and small market growth.

The result has been a drop of nearly a third in farmgate organic milk prices in 2017 with Rabobank analysis showing milk prices of around $27 in the last part of the year.

Organic feed ingredients are expensive, and the low milk prices make for tight margins on farms. Until demand and supply even out, 2018 might prove to witness tight margins on these dairy operations.

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(c) Hoard's Dairyman Intel 2018
January 8, 2018
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