Slowdown in Once-Booming Organics Troubles Farmers
Westby, Wisc. - The organic dairy industry was thriving when Allen and Jean Moody bought a 200-acre Wisconsin dairy farm in 2006 and joined the ranks of farmers churning out milk raised without growth hormones, pesticides or other chemicals.
Three years later, the good days are gone and the Moodys aren't alone in wanting out.
A growing number of farmers who went all-natural in the years when organic food sales were growing at a double-digit pace are giving up their organic certifications. Organic farming is costly and labor-intensive, and many consumers are no longer willing to pay the price in a recession.
Sales in the U.S. of organic foods sold mostly at supermarkets are expected to drop 1.1 percent to $5.07 billion this year, according to the Chicago-based research firm Mintel. While the drop is small, it is the first in an industry that has seen annual growth of 12 percent to 23 percent since 2003.
The organic dairy industry has been the hardest hit, with farmers squeezed by soaring feed costs and plummeting milk prices.
The soured market has been particularly bad news for Moody, 53, and his 51-year-old wife, who put their farm in La Farge, Wis., up for sale last summer after deciding that running a dairy was too much work at their age. The credit crunch has left a string of would-be buyers unable to seal the deal even as the Moodys' milk buyer has cut his rate roughly 10 percent.
"We're kind of in limbo land right now. It's just really tough - I told my wife we may be here another two or three more years before things turn around and the money supply loosens up," Moody said.
The recession and credit crisis also have made times uncertain for George Mears, who raises organic corn, buckwheat, wheat and soybeans on 140 acres near Delphi, Ind. Much of it becomes feed for livestock that produce organic eggs, milk and beef.
Some buyers are no longer willing to purchase grain on contract because of uncertainty about the economy. And one company that buys Mears' grain has been slow to pay - Mears suspects because it can't get credit to buy grain up front.
"We're usually smaller farmers and you send a semi load or two of grain and that's like a quarter of your income for the year," he said. "You just don't drop a fourth of your income on the farm without some hardship."
A growing number of farmers are losing their certifications in the nation's two top organic states, California and Wisconsin.
In a typical year, the California Certified Organic Farmers, one of the nation's largest certifying groups, sees about 20 farms among its roughly 2,000 certified farms and processors lose their certification because of nonpayment of fees.
But two weeks ago, letters went out to 100 farms warning that their organic status would be revoked because of nonpayment, said Peggy Miars, the group's executive director. She blames weak sales and the state's lingering drought.
Bonnie Wideman, director of the Midwest Organic Services Association, expects about 80 of the group's roughly 1,200 certified organic farms in Wisconsin and several Midwestern states to surrender their certifications this year, up from about 60 in years past.
Still, the California and Wisconsin groups said interest in organics remains strong because the industry is not as bad off as others.
"In this depressed economy, when you're looking at bankruptcies and layoffs - we're just not seeing that in organics. Even though it's slowed down, there continues to be strong demand," Miars said.
Wideman's group issued 200 new organic certifications this year, mostly to vegetable, corn and soybean farmers. Some believe organics still have a greater potential for profit than conventional farming, she said. Others are simply committed to chemical-free farming.
That's the case for Jeff Evard, who once maintained golf courses heavily reliant on chemicals to stay green. He now raises tomatoes, onions, eggplant, broccoli and other crops on a 10-acre organic farm in south-central Indiana.
Half of his produce goes to about 65 families who pay up front for a season's worth of fresh vegetables and fruit. The rest heads to farmers' markets in Bloomington, Ind., about 30 miles away or is sold to organic wholesale stores.
Mindful of the recession, the farm's business manager recently lowered the price of the farm's top spring seller - cherry tomatoes - from $4 to $3.50 a pint to stave off a drop in demand. That seems to have done the trick.
"I've sold out of tomatoes every week for the past three or four weeks," the 36-year-old Evard said recently.
Consumers concerned about food quality have kept demand for organic vegetables and meat strong even as they've sacrificed organic snacks and other less nutritional items, said Marcia Mogelonsky, a senior research analyst for Mintel.
That should give the Moodys reason for hope. Committed to natural farming, they plan to buy a small organic beef farm whenever their dairy finally sells.