Cream of the CROPP
Demand outstripping supply as CROPP
organic dairy products go prime time
By Dan Campbell, editor
ravis Forgues, who with
his father runs an 80-cow
dairy farm near Alburg,
Vt., can still recall the
dire warnings they heard
after deciding to have their farm certified
organic in 1997. Too many dairy
producers were going organic, and the
market would soon crumble, they were
told.
But the Forgues were undeterred,
having been virtually organic since
1991 anyway. “‘Trav,’ my dad said, ‘we
are going to get on this mule and ride
it until it’s done.’ Well, we’re not riding
a mule anymore; now we’re on one
of those big Budweiser Clydesdales,
and we’re enjoying the ride,” Forgues
says. “The market is screaming for
more organic milk.”
Indeed, with an annual industry
growth rate of 20 percent, organic
dairy foods seem to be on the verge of
busting out of niche-market status.
There were maybe 30 organic dairy
farmers in the state when they went
organic, vs. about 100 today.
The Forgues belong to the nation’s
largest organic co-op, CROPP
(Cooperative Regions of Organic
Producer Pools), which outpaced the
category’s envious growth rate, with its
sales surging 36 percent last year.
Overall sales of the co-op’s Organic
Valley Family of Foods label are projected
to hit $265 million for 2005, up
from $204 million for 2004.
About 85 percent of CROPP’s sales
are fluid milk, although it also markets
other dairy products, eggs, orange
juice, produce and meat. The LaFarge,
Wis.-based co-op owns only one plant,
a butter factory in Chase-burg, Wis.,
which produces an unsalted, Swissstyle
butter. Otherwise, it co-packs
with other dairy co-ops and companies
around the nation and contracts
with them for milk hauling and related
services.
Nationally, CROPP has more than
500 dairy producer-members who
belong to one of 24 milk pools nationally.
It added two new pools in the past
year. In December, it opened for business
in the Fort Collins, Colo., area
and in April started its first pool in
Texas (see below).
Economics and philosophy
contribute to going organic
The Forgues’ motivation for going
organic was “probably driven 75 percent
by economics, 25 percent by the
philosophy of it,” Travis recalls. He
was 23 at the time, just out of college,
“and the idea of owning our own
brand of organic milk was really cool.”
The biggest attraction was that they
were guaranteed a stable price of $18
per hundredweight (cwt) for two years.
“That was really exciting — to not
have to worry about the hills and valleys
of milk pay prices.” That remains
the main selling point helping CROPP
recruit about 100 dairy farmers per
year.
“Our claim to fame as a co-op is
stable milk prices,” says CROPP Chief
Marketing Director Theresa Marquez.
“When farmers started the co-op in
1988 that was the goal, and stable pricing
remains a steadfast rule today. It
was unheard of at that time, but it has
worked.”
CROPP started out offering $2 or
$3 per cwt more than the market for
conventional milk and has been gradually
pushing up the differential ever
since.
This year, Forgues averaged $24 per
cwt for his milk vs. $15 for conventional
milk. That was earned on a $22
base price in Vermont, plus about $2
per cwt in various incentives.
The biggest downside to producing
organic milk is that for those farmers
who have to buy feed, the cost of
organic grain is much higher — about
double the cost of conventionally
grown grain in Vermont, Forgues says.
Drought in portions of the Midwest
and some other regions this year drove
up organic grain prices. “Producers
who don’t grow most of their feed
have been hurting a bit,”
Marquez says.
Less stress boosts
herd health
Forgues does not push his cattle to
try to squeeze every last drop of milk
out of them. Keeping them under less
stress helps keep the herd healthier, he
believes. That is doubly important on
an organic farm, since antibiotics cannot
be used (unless an
animal’s life is threatened
by sickness; if
treated with drugs, the
cow then has to be
moved to a conventional
dairy farm and cannot
return).
This approach also
keeps cows in production
longer than on
most conventional
dairy farms. His annual
cull rate is only about 8
percent of the herd vs.
an industry average of
close to 30 percent, he
says.
The average cow on
his dairy is six years
old, and he has a number of cows still
in production that are 10 or older.
“And no, we don’t wait for them to
become a broken-down animal that is
all used up before we cull them,”
Forgues says, although he admits that
the older cows require a bit more
patience.
This approach makes good economic
sense, he says. “When you figure out
the cost of replacement cattle, it’s pretty
darn expensive to cull cows after
two or less lactations.”
Forgues’ herd average is about 40
pounds (of milk per cow per day), the
same as before the family went organic.
“There are other organic producers
around us averaging 70 pounds. It all
depends on how you want to run your
farm; we like a low-input approach and
we’re very happy with what we are
earning.”
While his herd is just slightly larger
than the co-op’s average of 65, the
co-op has members with as many as
500 cows.
Prior to Organic Valley, the
Forgues were members of St. Albans
Cooperative, which Travis calls “a
great cooperative.” He still considers
himself part of St. Albans, since
CROPP contracts with it to truck and
lab-test member milk. “They do our
paperwork and we still use the co-op
store,” he says.
Minn. organic dairy
was ahead of curve
CROPP’s stable milk pricing policy
is also what Pam and Jeff Riesgraf like
best about the co-op. The Riesgrafs
keep their 60 cows on 50 acres of pasture
most of the year, and also grow
corn and alfalfa near Jordan, Minn.
Their herd average is about 50 pounds,
but they too say their management
style is “to not push the cows too hard;
we believe they stay healthier when on
pasture and can get their own feed,”
Pam says.
The co-op’s base price in the Upper
Midwest is $19.20 but will soon bump
up to $20. With various incentives, the
Riesgrafs earned $23 per cwt this year.
“With stable pricing, we can set a
pretty accurate budget,” she says. And
with the farm supporting a family of
five (her eldest son recently got married
and moved to Florida), that’s
important.
“CROPP re-evaluates pay price at
the end of every year,” says Riesgraf,
one of the co-op’s seven board members.
“The farmer always has a voice in
what pay price is going to be,” she
adds.
The farm has been organic since
her father-in-law bought it about 1950.
“My father-in-law didn’t even know
what “organic” meant. It was just the
way he farmed because
he didn’t believe in farming
with chemicals. He
instilled that in Jeff, and
we’ve carried on that tradition,”
Riesgraf says.
Most of those years,
the farm’s milk netted no
more than conventional
milk. “It wasn’t until the
late 1980s that we even
realized there was a market
out there that would
pay us more for our
milk,” says Riesgraf.
The Riesgrafs grow
most of their own feed,
but their farm was
impacted by drought this
year, forcing them to buy
more organic alfalfa hay at inflated
prices. Organic corn and soybean
prices were also up sharply this year.
In addition to drought, more organic
beef and poultry is being raised in the
Midwest, which further increases competition
for organic feed grains.
“High-cost feed grain definitely
puts a dent in your paycheck,” Riesgraf
says. If there is a bright side to the feed
situation, she says, it is that it may trigger
more interest among grain farmers
in converting acres to organic. “I think
we’ll see corresponding growth in the
organic grain industry.”
Another type of growth Riesgraf is
less fond of is the urban growth coming
their way. “We’re starting to get
crunched from two sides,” Riesgraf
says. “The city [Jordan] sent out a
notice three years ago that city limits
will be moving out to the back of our
farm by 2015. We hope we can hang
on to the farm for the kids if they want
to farm [and it appears that at least
some do, she says]. If not here, hopefully
we can set them up somewhere
else.”
Under a program of the Minnesota
Dept. of Transportation, the Riesgrafs
have set aside 18 acres of the farm as
wetland wildlife habitat, which is
home to ducks, geese and other wetland
critters.
“The best thing about farming is
what it offers our kids — a chance to
be outdoors, to explore and
enjoy the environment and
spend time with the animals.
Most kids do not have that
opportunity.”
Co-op mentoring program
The Riesgrafs participate
in CROPP’s farmer-tofarmer
mentoring program
to help conventional farmers
transition to organic. “Jeff
and I have been mentors, not
just to help Organic Valley
farmers, but any farmers who
want to transition to organic.”
The co-op encourages
farmers interested in organic
farming to talk to producers
who have already made the
transition.
“This helps them better
understand what organic
dairy farming is all about and
its economic and environmental
benefits, says
Riesgraf. “Any farmer can do it if the
desire is there. The best thing they can
do prior to making the transition is
educate themselves about USDA
organic standards, (for more information
on USDA’s organic marketing
programs, visit:
http://www.ams.usda.gov/nop/ProdHa
ndlers/ProdHandhome.html).
Transition rules include adhering to
a three-year period with no pesticide
applications on crops or pasture, no
use of antibiotics or hormones in the
herd for one year, compiling a log of
all farm invoices and related records
for the previous five years, and developing
an organic farm plan. There’s
also an annual inspection to verify
organic standards are being adhered to.
If a cow is organic from birth, it can
be sold for organic meat when culled.
But if it was transitioned into organic,
it cannot be sold as organic.
Organic Valley is marketing organic
beef, with a 1-pound pack of its branded
hamburger now available in most
Safeway stores. Marquez calls beef the
toughest market to crack for organics.
Organic Valley products are made
in 60 plants, including 10 cheesemaking
plants in Wisconsin. “Our business
is keeping a lot of small cheese plants
operating, which in turn is important
to the economies of many rural
towns,” Marquez says. “That too fulfills
our mission, which is about far
more than organic food — it’s about
keeping rural communities healthy and
keeping more families on their farms.”
Produce sales totaled just under $1
million last year, but that was double
the year before, and sales are expected
to double again this year. Marquez says
some exploratory talks are underway
about a possible produce-marketing
federation with a Central American coop
to supply year-round produce.
But fluid milk remains CROPP’s
main engine. There are two lines of
Organic Valley fluid milk: ultra pasteurized
(52 percent of all sales) and
high temperature, slow time (or
HTST) pasteurized, which is 12 percent
of its business. Cheese and butter
represent 10 percent of sales and eggs
6 percent. About 13 percent of its business
is private label.
Organic Valley last year introduced
a soy beverage. It is just a blip on the
radar screen at this point — sales are
only 0.2 percent of the co-op’s total.
But interest is growing. “We’re not
looking for a huge market share with
our soy milk, but we offer it as a compliment
to organic milk for lactose
intolerant people.” Soy beverage cartons
have a code on them that can be
typed onto a Web page, which will
then pull up a page about the farmer
who grew the beans it was made from.
Competition welcomed
One sign of the health of the organic
dairy market is the rising interest of
large dairy foods corporations in it,
Marquez notes. Dean
Foods has acquired the
Horizon organic brand,
and HP Hood has the
Stonyfield brand.
“This has pluses and minuses for
us,” Marquez says. It is obviously harder
to set the category price with more
players. “But you need players to make
a category. So it’s nice to see some big
firms entering it — it shows that you
have arrived as a real category that is
here to stay.
“Our competition is probably outspending
us 10-1,” Marquez says. “But
we view competition as healthy. It’s
reality and it’s the American way. If
you can’t get in there and duke it out
with the best of them, then you probably
shouldn’t be in business.”
Right now, the biggest competition
is for farmers. All organic brands are
looking for more milk, Marquez says.
“This is the first time demand has outstripped
our ability to convert farmers.
It’s an unprecedented time for us —
we’ve never hit up against a wall this
hard before. We took on 100 more
farmers last year but can’t convert
them fast enough to meet demand.”
CROPP is in the design stage of
building a 100,000-square-foot distribution
center, with occupancy targeted
for January 2007. The same site may
also become the home of a fluid milk
bottling operation in 2010.
It also has a brand new headquarters
in LaFarge, which USDA Rural
Development helped provide financing
for (see “Inside Rural Development”
column, page 43).
Offering farmers &
consumers an option
Forgues makes one trip a month
promoting the co-op and its products
as a member of Cropp’s farmer ambassador
team. “I love bringing more
farmers into the co-op,” he says.
The fact that organic producers can
make a living on smaller farms helps
keep more farms in business and supports
more rural communities, Forgues
says. “We’re giving more farm kids —
and I’m one myself — a chance to
come back to farm who might not otherwise
be able to. We’re offering them
an opportunity.”
At this point, rather than growing
his herd, Forgues says there is much he
and his father can do to improve their
herd average by trying different forages,
etc. “That’s the fun part of farming
— trying different things and seeing
how the cows respond.
“I don’t feel pressure to have to
grow the farm. I’d get out of farming
before I’d go down the road of industrial
farming; it just wouldn’t be worth
it. When Dad and I can’t do the work,
or if our children don’t want to do this,
we’re not going to bring in labor. Do
that, and then you’ve got to milk an
extra 50 cows to pay the labor. And
then you need a bigger parlor —
there’s another $200,000 loan. That’s
the trap — they got you.
“I feel very happy and blessed to be
in the position we are, being paid like
we are, in a market that is growing
with stable farm prices.”
Executive committees key to CROPP governance
CROPP is directed by a seven-member board, all of
whom are farmer-members elected at large. Elections are
strictly one member, one vote.
Key to the co-op’s functioning are eight executive committees
(ECs), one for each of the primary commodities
CROPP handles (dairy, eggs, beef, pork, poultry, soy, juice
and produce). The ECs in turn make recommendations to
the board. Representation on the ECs is by region, based on
(in the case of dairy) being in one of 24 regional milk pools.
Each dairy pool averages 30 farmers. Their milk is loaded
onto the same truck and delivered to the same plant.
CROPP’s Dairy EC holds monthly conference calls and meets
face-to-face at least annually, sometimes twice each year.
They discuss everything from farm pay price, to feed
cost, to herd health issues, to proposed changes to national
organic standards. Co-op Marketing Director Theresa Marquez
says it is unusual for the board to reject an EC recommendation.
“But it does happen. Then they go back and
forth.”
“It’s like our own House of Representatives,” says Travis
Forgues, a former Dairy EC member from Vermont. “We talk
things out every month. It really is the voice of the farmers
that makes this co-op run.”
Having both a CEO (George Siemon ) and board chairman
(Wayne Peters) who are active farmers helps build
trust and understanding between headquarters and the
members, Forgues says. “George came to Vermont and
helped get our first milk on the truck,”says Forgues.
Members’ equity investment in the co-op is one month of
their estimated annual sales, or 8.3 percent of projected
annual income. “That investment goes into a CD, with the
initial investment earning 8 percent interest,” Marquez
says. Equity is paid to members upon retirement or upon
leaving the co-op.
With few physical assets to maintain, the co-op business
philosophy is based on paying the best upfront milk
and crop prices it can, Marquez says. Patronage is thus
less than with many co-ops.
At the end of each year, 1.25 percent of co-op income
goes back into the co-op to cover debt service, inventory,
etc. Between 1.25 and 2 percent of income goes into patronage
and profit sharing, allotted: 45 percent to farmers, 45
percent to staff and 10 percent to the community. Local
scholarships and county fairs have benefited from these
community investments, and more than a million dollars has
been donated to children’s health organizations.
Texas dairy farmer ‘puts joy into his work’
Editor’s note: This article is
reprinted courtesy Organic Valley
Family of Farms.
When Organic Valley dairy
farmer Harry Lewis tells the story
of how his family’s 287-acre Texas
dairy farm came to be, it’s clear
why he’s so passionate about preserving
it today.
It started with a stroke of luck
in 1940. The United States government
had purchased about 1,575
acres of farmland near Sulphur
Springs for nine African-American
families, who would produce food
for World War II troops.
Harry’s father, a newlywed looking
to get his own start in farming,
happened to be plowing his family’s
land when government officials
drove up and offered him a farm.
“He got the land, the feed and
the dairy cows,” Harry recalls.
“The only thing he had to buy was sugar and flour. My
father and his farm were just as much a part of the war. It
was a service.”
One generation to the next
Harry’s family, including his brother, Robert, survived
the ups and downs of farming in the 1940s, 50s and 60s: a
war effort that provided income; larger, mechanized postwar
farms that started to squeeze out small family farmers;
and Texas drought.
Both Robert and Harry left the farm at different times to
pursue their own careers. Robert moved to California and
Harry attended Texas Southern University. But both men
eventually returned to the farm, where they worked
together. Harry also married his wife, Billye, and the couple
raised their children: Annette, Angela, Erica and Wynton.
Robert passed away in 2000.
By 2001, like many farmers in his community and
across the nation, Harry was frustrated by fluctuating
prices for the conventional milk produced by his 75-cow
herd, as well as the increasing role of large corporations
in agriculture, which he feels threatens farmers’ independence.
Eager to make a change that would keep his family’s
farm intact, Harry had his own stroke of luck.
Organic Valley: ensuring
the future
In 2002, representatives of
Organic Valley visited Texas
to recruit farmers to produce
and sell milk in the region.
Harry attended the presentation
and accidentally left
behind his tape recorder.
After he arrived home,
two men from Organic Valley
— CEO George Siemon and
Wayne Shaker — were
standing on his doorstep
with his recorder. They had
surveyed Harry’s beautiful
land, which for years, in
keeping with the practices of
his father, had been farmed
without herbicides or pesticides.
The men told Harry it
would be easy to transition
his farm to organic.
“Something in me said
‘this is it, this is the right thing to do,’” Harry recalls. “Then
they explained how I could do it. They didn’t lie, they didn’t
manipulate me, and I liked that.”
By Jan. 1, 2005, Harry’s herd and land were certified
organic. Since April, his cows’ milk has been sold under the
Texas Pastures™ label throughout most of Texas.
Organic ambassador
These days, Harry is a proud Organic Valley farmerowner
and organic “ambassador,” spreading the word
about the co-op, organics and its environmental benefits
among his community and the state of Texas.
“I’ll do whatever I possibly can to get organics in
Texas,” Harry says. “My county was once called the ‘Dairy
Capital of the State of Texas.’ My plan is to bring it back as
the ‘Organic Dairy Capital of the State of Texas.’”
Most importantly, Harry is happy knowing that he and
Wynton, 20, who will someday take over the farm, can
continue farming the way the family always has. “We put
in our work, but we also put in joy,” Harry says. “And
that’s what we receive — a rewarding, wholesome
organic lifestyle for my family and grandchildren, Joush
and Kandis.”
“We won’t make millions,” Harry continued, “but it’s a
great way of life.”
