A large rise in organic milk production in North America is easing the global supply shortage.
A flood of organic milk is coming into the US as a large number of dairy farmers complete their conversion period. Changes in organic farming regulations have been responsible; the Harvey ruling requires organic milk producers to use 100% organic feeds from June onwards.
Many dairy farmers rushed to complete their conversion period before the new standard goes into effect. A surplus of organic milk in North America market is leading to a flurry of new product development. For instance, Whitewave Foods has developed the first-ever omega acids fortified organic milk. Horizon Organic Milk Plus DHA contains omega acids that originate from marine sources. Many new organic yoghurts, ice-creams, and cheeses are likely to come into this market this year as manufacturers focus on product innovations.
Whilst North American dairies find new uses for organic milk, European dairies continue to struggle to find adequate supply. A number of European countries are experiencing organic milk shortages. The UK and German markets have been the most adversely affected with processors importing significant volume from neighbouring countries. The launch of organic dairy products by German discounters has been a factor behind demand surging since 2005.
Undersupply in the UK market is leading one leading British retailer to market ‘transitional organic milk’, which is collected from dairy herds that have yet to complete their organic conversion period. Whole Foods Market, which will open its inaugural organic superstore in June, is sourcing organic dairy products from mainland Europe because it was unable to find suppliers in the UK.
Organic milk supply, or rather the lack of it, is becoming a major concern for European milk processors and retailers. Some are extending fixed contracts to dairy farmers to encourage them to convert, whilst others are offering to pay for inspection & certification costs. Shortage of organic milk is stunting product innovations with manufacturers focusing efforts on finding new sources rather than developing products.
Supply was a reason behind the American organic yoghurt producer Stonyfield Farm to acquire an Irish organic dairy last year. The company is using Irish organic milk to produce its Stony organic yoghurts, which will be launched with the strapline ‘Yoghurt on a Mission’ in the UK next month.
Stonyfield could possibly use Australasian organic milk for its European operations. Some North American dairies have been using organic milk from New Zealand to make organic dairy products. With the American market no longer requiring imports, New Zealand and Australian producers could start meeting the shortfall in European production. The two countries are already established exporters of organic dairy products to Asia.
Imports maybe necessary in the European organic dairy market, however in the long-term greater regional production is required especially as consumers become more sophisticated in their purchasing habits; domestic sourcing and food miles are becoming just as important as the organic production method. The organic food industry may have become global, however consumers are increasingly thinking local.
Related report: #7002-40 The Global Market for Organic Food & Drink
Posted: May 30th 2007
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