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Organic Dairies Watch the Good Times Turn Bad

[Editor's Note: Take action on this issue here: Tell HP Hood Not to Cut Family Farmers' Contracts!]

RANDOLPH CENTER, Vt. - When Ken Preston went organic on his dairy farm here in 2005, he figured that doing so would guarantee him what had long been elusive: a stable, high price for the milk from his cows.

Sure enough, his income soared 20 percent, and he could finally afford a Chevy Silverado pickup to help out. The dairy conglomerate that distributed his milk wanted everything Mr. Preston could supply. Supermarket orders were skyrocketing.

But soon the price of organic feed shot up. Then the recession hit, and families looking to save on groceries found organic milk easy to do without. Ultimately the conglomerate, with a glut of product, said it would not renew his contract next month, leaving him with nowhere to sell his milk, a victim of trends that are crippling many organic dairy farmers from coast to coast.

For those farmers, the promises of going organic - a steady paycheck and salvation for small family farms - have collapsed in the last six months. As the trend toward organic food consumption slows after years of explosive growth, no sector is in direr shape than the $1.3 billion organic milk industry. Farmers nationwide have been told to cut milk production by as much as 20 percent, and many are talking of shutting down.

"I probably wouldn't have gone organic if I knew it would end this way," said Mr. Preston, 53.

Here in New England, where dairy farms are as much a part of the landscape as whitewashed churches and rocky beaches, organic dairy farmers are bearing the brunt of the nationwide slowdown, in part because of the cost of transporting feed from the Midwest. The contracts of 10 of Maine's 65 organic dairies will not be renewed by HP Hood, one of the region's three large processors. In Vermont, 32 dairy farms have closed since Dec. 1, significantly altering the face of New England's dairy industry.

"We expect to lose a lot more farms this year," said Roger Allbee, Vermont's secretary of agriculture.

Hood and the two other big processors, Horizon Organic and Organic Valley, say cutting contracts, pay and production are necessary to absorb overproduction and offset softening demand. Organic Valley, a nationwide cooperative, told Maine organic dairy farmers last month that its sales growth had dropped to near zero from about 20 percent six months ago.

"Our inventory is overstocked," said John B. Cleary, the cooperative's New England regional pool coordinator.

For many farmers, the changes coincide with crushing debt resulting from the cost of turning organic, which can run hundreds of thousands of dollars. In addition, the price of organic feed has doubled in the last year. Credit has dried up for some, and others say it is nearly impossible to sell cows and so thin their herds.

And while processors project growth of about 6 percent in organic milk sales this year (a decline from the 12.7 percent reported for 2008 by the Organic Trade Association), some analysts say that forecast is far too optimistic. The United States Department of Agriculture says sales of organic whole milk in February were 2.5 percent lower than in February last year, with sales of organic reduced-fat milk 15 percent lower.

"We're in big trouble," said Craig Russell, an organic dairy farmer in Brookfield, Vt., who owes $500,000, mostly from converting his farm to organic in 2006.

Mr. Russell quit a day job as an accountant to farm full time last year. "I made more money in six months than in five years of conventional farming," he said, but his farm is now barely hanging on. The price he receives from the distributor dropped another $1 per hundredweight on May 1, just when he most needed money to prepare for the summer grazing season.

"It's going to cost me more to make milk than sell milk," he said.

In an effort to provide a safety net, Vermont last month expanded a low-interest loan program for farmers.

While most conventional farmers are accustomed to withstanding price volatility, "organic hasn't weathered this kind of storm," said Mr. Allbee, the state's agriculture secretary. Farmers are finding that organic food is not for every consumer, he said, "and doesn't guarantee that you will have a market forever."

Some farmers are considering selling their organic milk on the conventional market just to make some quick money. Others are looking to sell raw, or unpasteurized, milk directly to the public. The Vermont House of Representatives passed a bill this month to increase the amount of raw milk a farmer can sell that way.

At the annual meeting of the Maine Organic Milk Producers last month in Waterville, farmers debated whether they could tap into the locavore movement, marketing their milk as local food. Russell Libby, the organization's executive director, wondered, "Is it possible to produce a product with a Maine label on it?"

Right now it is not, because some Maine milk is processed out of state. But farmers like Aaron Bell, whose contract with Hood will not be renewed when it expires, thinks the idea will save their farms.

"We're so remote, we're high and dry otherwise," said Mr. Bell, whose farm is in Maine's easternmost reaches. "Unless we find our own market."

Back in 2006, Mr. Bell carried the banner for organic dairy farming, appearing with his wife on Martha Stewart's show to promote small family farms. He still believes in organic food, but not so much in the business model.

"They say it's heaven for the small farmer," he said, "but the small farmer is the one screaming the loudest right now."

Bruce Drinkman, who milks 60 cows on his organic farm in Glenwood City, Wis., has seen his income drop 40 percent since Jan. 1. To keep the farm going, he has dipped into his retirement savings and dropped his health insurance. But without a loan, his wife has had to draw money from her I.R.A. to help out.

"Our Plan B is if we don't have a decent year, we're done," said Mr. Drinkman, who has farmed for 30 years.

"I'm 46," he said. "I wonder what I will do if I can't farm anymore."    

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