Central Alberta dairies drop organic milk production
Three Central Alberta dairies have pulled the plug on organic milk production because of low prices that they say are insufficient to cover the cost of their operations.
Clearview Organic Dairy near Springbrook, A.K.A. Dairy Ltd. of Lacombe and Simply Organic Dairy of Condor have all decided to switch from organic to conventional milk production. Clearview and A.K.A., with 100 and 200 cows respectively, made the change effective March 1, while Simply Organic, with 40 head, will be about a month later.
Bill Wyntjes of Clearview and Phil Tenbrinke of A.K.A. said the problem is the premium that dairies receive for organic milk.
When the industry was developed in 2007, prospective participants were told they would receive a 30-cent per litre premium for organic milk. But the figure has been about 18 cents.
“The premium promised was more than adequate,” said Tenbrinke.
Wyntjes said he and his son Dustin were also enticed by the lucrative premium. Six years later, they’re leaving frustrated.
Mike Southwood, general manager of dairy industry association Alberta Milk, said the proposed premium was based on the numbers being paid in British Columbia.
Unfortunately for Alberta producers, much of the organic milk sold here comes from British Columbia. That’s limited the feedstock required by Saputo Inc., Alberta’s main organic milk processor.
The organic premium is now set at 26 cents, but that only applies to a fixed volume, which is less than total production in the province. Alberta’s organic dairies spread the premium across their combined output, effectively reducing the per-litre incentive they receive, said Southwood.
“There’s a dilution factor there,” he said, adding that Alberta Milk has actually been subsidizing the premium paid to keep it at 18 cents.
The situation has become worse with high feed costs brought about by the recent drought in the United States. That’s proven to be the last straw for some.
Tenbrinke expressed frustration with the large volume of organic milk flowing from British Columbia to Alberta.
“Why do we need to bring it in over the Rockies? I’ve never understood that.”
Southwood said interprovincial trade agreements allow for the free movement of dairy products. And processors gain efficiencies by operating big plants and shipping to distant markets.
If Alberta consumers generated enough demand for organic milk, processors would produce it here, he said.
“I’m going to say it’s more of a consumer-demand than it is a processor story.”
Southwood noted that some retailers are now labelling made-in-Alberta products, which could prompt shoppers to choose them over out-of-province alternatives.
Wyntjes believes the high price of organic milk, relative to conventional alternatives, is also discouraging consumption. He thinks organic goods receive a bigger mark-up than other products.
“It’s too high in the store.”
The departure of the three Central Alberta dairies from the organic market should have a positive impact on those that remain, said Southwood. He estimates that Alberta’s annual organic milk production of about 8.9 million liters will drop by about three million litres, which should in turn increase the organic premium by several cents.
Another positive is the addition of another organic milk processor, in the form of Rock Ridge Dairy Ltd. between Lacombe and Ponoka.
“We have great hopes for Rock Ridge, even though it’s small,” said Southwood.
Becky Lipton, executive director of Organic Alberta, is optimistic about the future for organic milk production in this province.
“I don’t think it’s a question of demand,” she said.
“It’s just about having organic consumers identify which products come from Alberta — which ones are the local organic — and having them choose those products.”