Organic milk becoming a cash cow in Maine

DEXTER – The organic milk that Mark McKusick produces in Dexter used to be considered “alternative” milk, a second cousin to the mainstream dairy industry and one not really respected by processors as profitable.

Over the past several years, however, that picture has changed dramatically. With more than 15 percent of all Maine milk being produced organically, a bidding war is erupting between major milk players over this new cash cow.

“There’s going to be a new game in town,” said McKusick, who along with about 25 other organic producers and state agriculture officials recently met with procurement representatives of H.P. Hood of Massachusetts. Hood is looking to launch an organic milk line and will purchase milk from certified organic Maine farmers.

Hood officials have refused to discuss their upcoming business plans. Spokeswoman Lynn Bohan said Monday that the company would be making a formal announcement in about a month.

“This will mean a better price for the farmer, with a little competition,” McKusick said. “At one time, there was less than a 20-cent differential between organic and conventional.”

McKusick said the difference has to be greater because the costs to produce organic milk are greater.

The organic market is growing at a rate of 20 percent each year as more U.S. consumers demand food without antibiotics, hormones and synthetic pesticides.

There are 62 organic milk farms in Maine. A few process their own milk and market directly to consumers, but 22 ship to Horizon Organic Dairy and the remainder supply CROPP, a farmer-owned cooperative in the Midwest.

Hood actually has been processing the organic milk for Horizon already, McKusick explained Thursday. “Hood owned the Organic Cow and sold it to Horizon. They said it was the biggest mistake they ever made.”

In the complicated milk industry, H.P. Hood competes head-to-head with Horizon, which recently was purchased by Dean Foods. Dean Foods Co. Dairy Group division is the largest processor and distributor of milk and other dairy products in the country. Its Horizon Organic subsidiary also is the nation’s leading manufacturer of organic milk.

One of Dean Foods’ 120 milk processing plants is the former Grant’s Dairy in Bangor, now operating under the Garelick trade name, which processes conventional milk.

Starting this fall, it is expected that Dean Foods will be processing its Horizon organic milk at the Bangor plant, which has excess capacity.

“Hood is trying to position itself to compete with Dean Foods across the nation,” Russ Libby, executive director of the Maine Organic Farmers and Gardeners, said Monday.

Realizing the profitability in the ever-growing organic market, Hood is planning on adding a competitive organic milk line.

Meanwhile, McKusick said he met with the board of directors of CROPP this summer and they told him they really didn’t want to be in New England and would prefer to concentrate their procurement and marketing efforts in the mid-West.

“This leaves Maine wide open for Hood to enter into the organic market,” said McKusick.

“Having three competitors in Maine will be good for the farmers since now they will have three options to sell their milk,” Libby said.

The bidding war will be fueled by some producers’ dissatisfaction with their current contracts.

“Some companies pay different prices for different people,” which is pitting farmer against farmer, McKusick said. “If I ship the same quality product as my neighbor, I should get the same price. There are all kinds of contracts out there, and it just isn’t fair.”