There was plenty of news to share at the Organic Valley Annual Meeting held at the LaCrosse Center last Thursday.
During a press conference prior to the meeting, Organic Valley CEO George Siemon confirmed the cooperative increased its average midwest pay price for organic milk on March 1 to $35/cwt. Even a nodding acquaintance with the current conventional pay price, would let you know how shocking that price really is. The current Class III conventional milk price is just above $15/cwt.
Siemon said the co-op’s board decided to make the move in light of the higher prices farmers must pay to buy or rent land and so much more. Organic Valley raised the price about $3/cwt. on March 1 to the $35/cwt. level. That makes the organic premium OV is paying a whopping $20/cwt. The premium for organic milk now exceeds the conventional milk pay price.
It’s a turnaround from the previous year when conventional prices went to $25/cwt. and the organic premium shrunk to $7 or $8/cwt. However, that’s the norm in the milk market, conventional pay prices vary wildly, while the organic pay price stabilizes on the high end. That’s especially true for Organic Valley farmers, where a co-operative board of producers is looking out for their welfare.
The reason for the higher prices is essentially based in the current insatiable demand for organic milk and organic butterfat, according to Siemon. The long-serving CEO characterized the most recent demand as “a market surge similar to others experienced several times in the life of the co-op.”
One of the big drivers in the increasing consumer demand is the big chain stores, like Wal-Mart, who have decided to go all in with organic food offerings, after toying with the products in the past few years.
Ironically, Organic Valley was oversupplied with milk in the first half of 2013 and actually used a quota system to slow supply. At the time the co-op decided to pay lower prices for all production past a farm’s quota, which was largely created by its production history. OV may have been long on milk supplies in the first half of 2013, but they were short in the second half of that year and have been short ever since.
It’s a vexing problem for Siemon and the rest of the management team at OV. On the one hand, the increasing sales based on the demand are great, but Siemon called it “very tortuous” to not be able to satisfy the customers because of a constantly short supply.
There was more big news to share at the annual meeting. The co-op’s total sales, including dairy, meat, eggs, vegetables and more added up to almost a billion dollars in sales in 2014. Yes, Organic Valley, headquartered in LaFarge, Wisconsin, had sales of $971 million in 2014. Vice President of Cooperative Affairs Jerry McGeorge put the increased sales and profits in perspective at the press conference last Thursday.
The $971 million dollars of sales in 2014 represented a more than 4.6 percent increase over the $921 million of sales in 2013. More impressive was the $14.5 million in profit in 2014, which resulted in an almost three-fold increase over the $5 million profit in 2013.
However, CEO George Siemon and Jerry McGeorge weren’t the only ones happy about the success of the Organic Valley Co-operative at the press conference last Thursday. Emily and Tim Zweber, a farming couple in their early thirties from Elko, Minnesota were plenty happy with their choice to convert to organics in 2008 and signing up with Organic Valley Cooperative.
Tim represents the fourth generation of dairy farmers on the 249-acre farm near the Twin Cities. The Zwebers are among those referred to in Organic Valley parlance as Gen-O farmers. That’s short for Generation Organic a reference to the co-op’s younger producers.
Tim explained he rejoined his mother and father on the farm in 2006 and the only way to support two families would have been to double the amount of land being farmed and double the operation, which was not actually a possibility. The other option was to convert to organic and collect a higher pay price.
Going organic wasn't as hard for the Zwebers as for some producers. Tim explained the herd essentially grazed and were fed hay, so the diet was already organic. For the Zwebers, the transition meant essentially quitting the use of “a few antibiotics and a lot of fly spray.”
The Zwebers described the first Organic Valley Annual Meeting as feeling like they had come to a family reunion. It was a stark difference from the gloomy forecasts at their conventional milk cooperative’s annual meetings.
“Bad numbers, here's your door prize and it’s time to go home.” Tim said describing the meetings he had attended as a conventional producer.
“The culture keeps us here,” Elizabeth said of being with Organic Valley.
Tim called it “a positive attitude.”
After joining the cooperative, the Zwebers were quickly called upon by Organic Valley to host farm tours and promote Organic Valley products to the nearby consumers from the Twin Cities.
“It’s really neat to promote your own product, others don't know where there milk goes,” Tim noted.
The Zwebers milk 90 cows and are more than happy to stick with Organic Valley. The average size of an OV dairy herd is 77 cows.
Not everyone in the co-op was as satisfied as the Zwebers and there was a little more than a three-percent decline in membership in 2014, despite many new members joining. Naturally, there are a variety of reasons for that decline and while organic valley’s management team hardly seemed panicked by the loss of membership, it was something they noted in the press conference. There are currently 1,800 members of the cooperative and more than 1,400 of them are dairy producers. More than 500 members attended the annual meeting.
Lots of farmers make up the membership of the co-operative, but over 42 percent of the members are Amish or Mennonite.
In response to a question about what the attraction of Organic Valley was for the Amish and Mennonites, Siemon said the organic dairy and small-scale farming was a good fit for the Amish and Mennonites and they seemed to enjoy the culture of how the business was run.
One thing Organic Valley stresses is a well-rounded approach to farming, hence there is an emphasis on sustainability.
The co-operative runs its fleet of vehicles on bio-diesel and has gone so far as to source some non-food grade organic corn to create at least a portion of the biodiesel fuels. The co-op also helps member’s farms fulfill needs for electricity with solar and wind alternatives with advice and help in getting grants.
As the press conference wound down, it was once again obvious that Organic Valley had taken another step down the path of success that started from some pretty humble beginnings in March of 1988 in LaFarge, Wisconsin.
Next year, it’s quite possible Organic Valley will reach one billion dollars worth of sales. They should also have there expanded office construction completed in Cashton and will consolidate their operations center in those offices from the variety of rented spaces they have been using for the past few years. Cashton’s proximity to LaCrosse may help with access to more employees, Siemon noted. Nevertheless, the building in LaFarge, now totally recovered from the devastating fire two years ago, will remain the co-operative’s headquarters Siemon said.