A Dean Foods Co. shareholder questioned the practice of relying on "factory farms" to produce organic milk at the dairy producer's annual shareholder meeting Friday.

Mark Kastel, a senior farm policy analyst at the Cornucopia Institute - which promotes family farms - said using farms where as many as 10,000 cows are milked has contributed to an oversupply of organic milk that is now threatening the company's profits. Dean Foods (nyse: DF - news - people )' own farms aren't that big - its largest company-owned farm has 4,000 cows.

That farm supplies milk for Dean Foods' organic milk brand, Horizon, which is part of the company's organic subsidiary White Wave Foods. Although demand for organic foods has been strong in recent years, supply is set to overtake demand in 20007. At the meeting Friday, Chief Executive Gregg Engles said the supply of organic milk is expected to grow by 40 percent in 2007 while demand is only expected to rise about 25 percent.

Engles told investors earlier this month that its profit for the second quarter and the year would only be at the low-end of its prior guidance, due partially to an oversupply. The company's share price has dropped 11 percent since then.

Kastel blames the supply issues and the share price drop on Dean's company-owned farms.

"Horizon and Dean foods created a monster," Kastel said during a question-and-answer session at the meeting. "This surplus is a direct result from that." He also said that the farms are a far cry from the image consumers expect from an organic milk producer. Organic consumers, he said "not only think they're doing something for their families but they feel like they're doing something good for society" by buying the milk.

Chief Executive Engles, though, responded that the company already buys milk from about 350 family owned farms.

"We have not stopped our support for family farmers," he said, adding that the company also uses milk from two large company owned farms in Maryland and Idaho. At those farms, the company manages several 300-cow herds.

The 650,000-member Organic Consumers Association has boycotted Horizon because of those farms. The association's national director Ronnie Cummins (nyse: CMI - news - people ) said the group is attempting to "tarnish the brand equity" of Horizon through the boycott.

But Dean Foods spokeswoman Marguerite Copel said the company hasn't seen much effect from the boycott. She said the company has talked to retailers who pulled the product from their shelves because of the boycott and that once the retailers talk with the company, they generally begin selling Horizon again.

U.S. Department of Agriculture standards don't limit the size of farms, so farms of all sizes are allowed to participate in organic farming as long as they follow the government's regulations. The department is now, however, reviewing whether factory farms where cows are not typically pasture-fed or have little access to pasture can be used to produce organic foods.

Dean Foods shares gained 24 cents to $32.14 Friday.

Copyright 2007 Associated Press.

For more information on this topic or related issues you can search the thousands of archived articles on the OCA website using keywords:

Become an OCA Member! Sign up below:

First Name
Last Name
Email
Email Preference	HTML EmailText Email
Phone
Street
Street 2
City
State	Select One... Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware D.C. Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Other
Zip
Country	United StatesAfghanistanAlbaniaAlgeriaAndorraAngolaAntigua and BarbudaArgentinaArmeniaAustraliaAustriaAzerbaijanBahamasBahrainBangladeshBarbadosBelarusBelgiumBelizeBeninBhutanBoliviaBosnia and HerzegovinaBotswanaBrazilBruneiBulgariaBurkina FasoBurundiCambodiaCameroonCanadaCape VerdeCentral African RepublicChadChileChinaColombiaComorosCongoCongDemocratic Republic of theCosta RicaCroatiaCubaCyprusCzech RepublicIvory CoastDenmarkDjiboutiDominicaDominican RepublicEast TimorEcuadorEgyptEl SalvadorEquatorial GuineaEritreaEstoniaEthiopiaFijiFinlandFranceGabonGambiTheGeorgiaGermanyGhanaGreeceGrenadaGuatemalaGuineaGuinea-BissauGuyanaHaitiHondurasHungaryIcelandIndiaIndonesiaIranIraqIrelandIsraelItalyJamaicaJapanJordanKazakhstanKenyaKiribatiKoreNorthKoreSouthKuwaitKyrgyzstanLaosLatviaLebanonLesothoLiberiaLibyaLiechtensteinLithuaniaLuxembourgMacedoniFormer Yugoslav Republic ofMadagascarMalawiMalaysiaMaldivesMaliMaltaMarshall IslandsMauritaniaMauritiusMexicoMicronesiFederated States ofMoldovaMonacoMongoliaMoroccoMozambiqueMyanmarNamibiaNauruNepalNetherlandsNew ZealandNicaraguaNigerNigeriaNorwayOmanPakistanPalauPanamaPapua New GuineaParaguayPeruPhilippinesPolandPortugalQatarRomaniaRussiaRwandaSaint Kitts and NevisSaint LuciaSaint Vincent and The GrenadinesSamoaSan MarinoSao Tome and PrincipeSaudi ArabiaSenegalSerbia and MontenegroSeychellesSierra LeoneSingaporeSlovakiaSloveniaSolomon IslandsSomaliaSouth AfricaSpainSri LankaSudanSurinameSwazilandSwedenSwitzerlandSyriaTaiwanTajikistanTanzaniaThailandTogoTongaTrinidad and TobagoTunisiaTurkeyTurkmenistanTuvaluUgandaUkraineUnited Arab EmiratesUnited KingdomUruguayUzbekistanVanuatuVatican CityVenezuelaVietnamWestern SaharaYemenZambiaZimbabwe