Organic milk not sustainable

Fonterra’s organic milk operation is another casualty of the GFC:

Fonterra’s Group Director Supplier and External Relations Kelvin Wickham says the co-operative remains committed to the organics market but as growth in this market has significantly slowed since the global financial crisis, Fonterra needs to make changes to its organic operations.

Organic milk attracted a premium for producers but enough consumers aren’t willing to pay extra for it.

Mr Wickham says the organics market was hit hard by the global financial crisis and market indications are it will not recover to previous levels.

“All categories felt the effects but particularly the category in which we sell – packaged dairy foods – where prices and volumes are still below 2008 levels.

“Research shows people are now less willing to pay the premium for organic products. In addition, consumers are gaining more confidence that everyday products are being produced more sustainably and are more acceptable so they no longer see the need to pay the premium for most organic products.

When budgets tighten luxury products are the first to go and organic milk is in that category.

A lot of the support for organic products is based on emotion rather than science and if consumers think or feel that ordinary food they buy is being produced in a safe and sustainable way they don’t need to spend more on speciality organic produce.

Fonterra is meeting suppliers this week to tell them its plan which includes:

Concentrating Fonterra’s North Island organic suppliers in one hub around its key certified organic processing site – Hautapu. This will reduce the number of Fonterra’s organic suppliers.
Reducing the amount of product processed at Fonterra’s other two certified organic sites – Waitoa and Morrinsville.
Prioritising the organic product range to focus on cheese which provides the best returns.
Focusing on emerging Asian and Australasian organics markets where there are stronger returns and growth potential.

Mr Wickham says the first two points will mean considerable transport and manufacturing cost savings for Fonterra’s organic business.

“Our organic farmers are currently spread right across the North Island. This means substantial transport costs for the business.

“In addition, focusing most of our organic product through a single site will mean we are able to create efficiencies of scale in processing the milk.

Carting milk the length and breadth of the North Island hardly fits the sustainable model. It’s a waste of fuel and adds substantially to costs.

“We understand the big commitment many of our farmers have made to the organics programme and that this transition will not be an easy one to make. The decision to reduce our organics operation was not taken lightly but we need to get the business back into a break-even situation.

“We will honour all of our organic contracts through to their formal termination dates, which in some cases are four-five years away and we will work with our farmers as they make the transition out of the organics programme.”

This decision will be hard for the farmers who’ve gone to the trouble and cost of changing to organic production but it will be better for the co-operative if the organic operation stops losing money.

It could also provide opportunities for boutique dairy producers who might be able to buy the organic milk and use it as a point of difference in markets which are less price sensitive.

 

 

13 Responses to Organic milk not sustainable

  1. robertguyton says:

    Meh.
    The organic farming fraternity is slowing down progress on genetically engineering grasses and livestock.
    Destroy it.

  2. gravedodger says:

    Whatever Robert now tell us how you propose to advance the sum of food to meet the worlds needs.

  3. robertguyton says:

    Retire the meat growing. Use the land efficiently and effectively. Grow edible plants.
    It’s not rocket-science GD.
    Raising ungulates for food is very inefficient land-use.

  4. homepaddock says:

    Robert – a lot of country which suits pastoral farming wouldn’t grow edible plants.

  5. robertguyton says:

    Where for example Ele?
    By the same token, a lot of country under pastoral farming does suit growing edible plants.

  6. homepaddock says:

    Robert – I don’t think you’d grow much in the way of edible plants in a commercially viable way on much of our hill and high country, nor on a lot of the North Otago down lands.

  7. robertguyton says:

    Not with cattle roaming the hills Ele, I’m sure you’re right!
    There are edible plants for almost every situation. If grass can grow, so can cereals. Tree crops, especially nuts grow in a wide range of situations. Do you have anything edible growing in your home garden? Those might give you a clue.

  8. homepaddock says:

    There are edible plants in all sorts of places, including my garden, but not enough to feed people the way pastoral farming does.

  9. robertguyton says:

    You don’t know Ele. You haven’t tried. The most efficient and effective and environmentally sustainable forms of food production are predominately planted landscapes, with some animals. Hooved animals are the worst on all counts and yet that’s where we are putting our confidence here in New Zealand.
    Very short-sighted, in my view.
    If it weren’t for huge in-puts via the fossil fuel industry, we’d be sunk.

  10. mort says:

    the solution then Robert is to stack the farm animals in layers to grow them more land efficiently then

  11. homepaddock says:

    Sustainability is supposed to balance economic and social considerations as well as environmental ones.

  12. robertguyton says:

    mort – that’s a puzzling proposal – are you thinking something like the Bremen musicians?

    http://en.wikipedia.org/wiki/Town_Musicians_of_Bremen

    Ele – is it? By whose definition? Even so, economic and social health will suffer from a farming system that is less than optimal and hoofed-mammal farming falls well short of that standard.
    Localise, diversify, and grow plants predominately.
    Come on!

  13. homepaddock says:

    By whose definition?

    Google has a zillion pages on sustainability defined. This one – http://www.sustainablemeasures.com/node/35 says: There may be as many definitions of sustainability and sustainable development as there are groups trying to define it. All the definitions have to do with: •Living within the limits
    •Understanding the interconnections among economy, society, and environment
    •Equitable distribution of resources and opportunities.

    This one – http://www.arch.wsu.edu/09%20publications/sustain/defnsust.htm – says:
    The most popular definition of sustainability can be traced to a 1987 UN conference. It defined sustainable developments as those that “meet present needs without compromising the ability of future generations to meet their needs”(WECD, 1987). Robert Gillman, editor of the In Context magazine, extends this goal oriented definition by stating “sustainability refers to a very old and simple concept (The Golden Rule)…do onto future generations as you would have them do onto you.”

    Meeting present and future needs must take into account economic and social considerations not just environmental ones.

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