Organic dairy: battered, bruised, but back on the up
19th August 2024
Organic dairying has had a torrid time over the last two years, with soaring costs and unsustainable farmgate milk prices combining with the cost-of-living crisis that has seen organic shoppers trade down or across from organic brands.
Now it is potentially at a turning point with better times seemingly ahead for suppliers, amid reports of demand increasing again and food price inflation falling. Milk prices are rising on the back of this, which are restoring organic milk premiums over conventional, back to near their historical levels.
However, the farmers that are left in organic are in it for the long haul, and need to be profitable to be able to invest in the infrastructure, technology and training that are required for future proofing. Their profitability is borderline at the moment, and many will need at least a year at profitable price levels to backfill the fiscal black holes created over the last few years.
There may be question marks over whether long-term damage has been done, and whether organic might get back to where it was before. This report considers the many and varied challenges organic dairy faces, while recognising that processors including Arla, Müller Milk & Ingredients, Organic Herd (formerly Omsco) and Calon Wen, alongside retailers such as Waitrose and McDonalds, remain committed to what is an extremely important sector for the UK dairy industry.
What is clear is that there are some fundamental structural issues that have to be faced, and which will undermine the sector if left unchecked – not least over seasonality of supply. Currently the organic milk market is faced with too much milk production in the peak months, and not enough in the trough months. This is important, especially when consumer demand for organic milk is relatively static.
Meanwhile the rise of regenerative agriculture can be seen as both an opportunity but also an additional challenge to the organic sector. While the exact specifics of regen have yet to be enshrined in official standards, as organic’s are, it is likely to have a simpler message that consumers will potentially adopt more readily. Embracing and helping to drive what regen actually looks like, can therefore potentially be to organic’s advantage.
While organic is strictly defined and enshrined in stone, regen can mean many things to different people, even within the farming sector. With organic brands already developing regen milk pools, it is crucial that organic dairying is a part of this journey, by better describing itself and its merits, and providing a narrative that consumers understand and buy into.
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This report provides a “sit-rep” summary of where the organic sector is now, and offers some solutions as to how it might mitigate the current challenges and evolve for the future.
Rob Daykin, Daykin Partnership
Chris Walkland, Walkland Partnership
August 2024
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