HALF & HASSLE

WORKING WITH HIS DAUGHTER AND SON-IN-LAW on a dairy farm that's been in his family for four generations, Hans Kroll is exactly the type of farmer that many shoppers envision when they purchase organic milk. He employs sustainable farming practices such as rotational grazing, and guarantees through a certifier that he never uses pesticides, chemical fertilizers or treats his cows with antibiotics and

WORKING WITH HIS DAUGHTER AND SON-IN-LAW on a dairy farm that's been in his family for four generations, Hans Kroll is exactly the type of farmer that many shoppers envision when they purchase organic milk. He employs sustainable farming practices such as rotational grazing, and guarantees through a certifier that he never uses pesticides, chemical fertilizers or treats his cows with antibiotics and artificial hormones. For those assurances, his 32-cow herd in Long Prairie, Minn., is paid a significant premium for its milk, which helps the farm support two families.

Yet Kroll's buyer, Horizon Organic, is facing sustained criticism from organic activists, as well as an ongoing boycott that has led dozens independent natural food stores and cooperatives — including the influential, 40,000 member Puget Consumer's Co-op in Seattle — to discontinue their brand.

“There's a conflict within the movement, and it reflects poorly on the industry,” said Kroll, who disagrees with the boycotts and noted that he had remained loyal to Horizon partly because they had helped smooth his farm's transition. In fact, they were the only dairy making organic pickups in his area when his farm became certified organic.

Horizon sources between 60% and 80% of its milk from about 340 small and medium-sized independent farms like his, and they are currently providing financial and educational support for an additional 240 family farms in various stages of transition. But the controversy isn't here. It's with the other sources of milk.

Activist groups led by the Cornucopia Institute and the Organic Consumers Association say that the rest of Horizon's milk is produced at confinement operations with thousands of cows, and argue that it is virtually impossible for these dairies to meet fundamental organic standards by allowing their cows enough time to forage in pasture each day. Skirting these rules, they claim, compromises the substance of the U.S. Department of Agriculture's organic label, and if these practices go unchecked, they will eventually create unfair competition for small farmers and potentially leave the entire organic dairy industry open to attack. The boycott was recently extended to Aurora Organic Dairy, supplier to many private-label brands, due to similar accusations.

“You can't logistically move thousands of cattle three times per day [for milking] and still allow them to get a substantial proportion of their diet from pasture,” argues Mark Kastel, co-founder of the Cornucopia Institute, an advocacy group for small farmers. “It's unfortunate that we're having to play this role as a corporate watchdog. We want to make sure that there's something behind this [USDA Organic] label and that it's not just a marketing facade.”

During the past year, this issue has become a touchstone for a larger, ongoing debate among food activists, organic farmers, organic suppliers and natural food retailers: How big is too big?

While all corners of the industry are undoubtedly pleased with the enthusiastic welcome they've received from food retailers and consumers during the past few years, rapid growth has generated several problematic questions. If something is grown in Costa Rica, processed in California and sold in Iowa, can it be described as sustainably produced? If an agribusiness operation qualifies thousands of acres as organic and pesticide-free, introducing thousands of new consumers to the category, but doesn't follow practices essential to small farmers like crop rotation, is it a success or a failure for the movement?

The debate has gotten especially thorny for the organic dairy industry. Producers such as Horizon, and its parent company Dean Foods, have helped create a substantial portion of the infrastructure needed to source milk and cheese from small farms and get it into stores. Also, the company's size and national scope built awareness of organics among consumers and credibility among small farmers years before the USDA seal emerged.

Horizon has not built a new corporate dairy since 1998, and current growth plans involve converting more family farms. And Kelly Shea, vice president of industry relations and organic stewardship, claims that these operations have offered opportunities for research into new grazing methods, ecological farm management techniques and organic rule-compliant veterinary medicine — information that ultimately benefits small farms.

“Our main goal right now is to find conventional farmers that are willing to make the change, and invest our time and money into partnering with them as they make that change to organic,” Shea said.

Meanwhile, the company's corporate dairy in Idaho has transitioned several thousand acres of pasture to organic and split the herd there in two to make it easier to fulfill pasture requirements. The company also recently began retaining calves born at the dairy, rather than following the less expensive process of selling calves to other farms and transitioning mature, conventional cows to organic production.

“We really believe that grazing is the line that separates organic dairy and conventional dairy,” Shea said. “We're on public record supporting changes to National Organic Program regulations that would require all organic cattle to be grazed throughout the growing season. The majority of organic dairy farmers have been working together to get these regulations strengthened and clarified.”

Kastel argued that Horizon is merely doing these things now that they are receiving negative attention from the press and core consumers. Shea countered that the changes are the culmination of a five-year program which the company began shortly after NOP regulations were established in 2002.

Either way, most natural food retailers are familiar with the history of the company and its contributions to the movement, but pressure from their shoppers is difficult to ignore. And other business realities illustrate how precarious a company's relationship with this sector of the industry can become when it gets big and goes mainstream.

“We are owned by our 14,000 members, so their opinions are golden,” explained Lynn Olson, cooperative services manager for the Willy Street Co-op in Madison, Wis., which discontinued Horizon products this year. “And we had been getting an increasing amount of feedback from our members — questions about why we were carrying these products, saying they weren't truly organic.”

Olson said that she had long harbored her own reservations about the scale of Horizon's corporate dairies, but in the end, pressure from their members combined with a need to differentiate from large local competitors made the decision to discontinue the brand an obvious one.

“We weren't carrying that much of it anyway,” she said. “We couldn't compete on price. [Horizon's] products were being carried by our major competitors, including regular supermarkets, and they are able to buy in such volume that they were underselling us.” The co-op currently has an ongoing initiative to source products from local farmers whenever possible.

Similarly, in a summer post on his Internet blog, Whole Foods Chairman and Chief Executive John Mackey personally defended Horizon against its detractors, describing the company as “unfairly attacked” after visiting their Idaho farm. And, an internal company report, written after the visit by vice president of public affairs Margaret Wittenberg, stated that “The Horizon dairy includes grazing pasture, milking parlor, loafing sheds with exercise area, maternity/dry cow area (where cows getting ready to give birth are staged and monitored), heifer raising pastures, a large compost site, and cropland where they raise most of their forage crops that uses the compost developed on site. All Horizon cows have daily access to pasture.”

But, Whole Foods reportedly has been squeezing out Horizon SKUs in several regional markets as it expands its own private-label dairy line, which is sourced from the farmers' cooperative that produces Organic Valley, a direct competitor.

As a farmer-owned cooperative with pasture rules stricter and more specific than current USDA regulations, Organic Valley Family of Farms has managed to stay above the fray in this debate, even as farmer and CEO George Siemon remains openly enthusiastic about mainstream growth.

“There's been a lot of concern about organics succeeding too much,” Siemon said. “I think that's been nothing but good news, because it means that more customers have been getting access to it. The interest from [conventional] supermarkets has really made a big difference in a lot of farmers' lives and a lot of consumers' lives.”

The challenge, he said, lies in carefully managing the industry's growth. One of the key selling points that the cooperative brings to prospective new farmers is the promise of a stable, long-term price for their milk, relieving them from the wild fluctuations of the commodities market. Bring on too many farmers at once, and a supply spike could disrupt that balance. Bring on too few, and the brand is left open to competition through out-of-stocks.

“Supply and demand is like water running downhill,” Siemon said. “You can struggle with it, but it's the boss. All of the sudden, we have a lot of supermarkets that we supply growing this category 40% per year. And that's great, but you have to be able to project now 15 months down the road whether they're going to continue to grow that fast or whether they're going to grow 10% next year.”

Organic dairy is currently growing so quickly as a category that farmers are in no immediate danger of a price slump, and the supply situation is difficult enough that most of these issues are a moot point outside of the world of core consumers. But, for many independent farmers, oversupply is viewed as a looming threat if organic standards, such as the access to pasture rule, are not strictly interpreted and enforced.

“It's a concern, because if standards are such that they are easy to meet, and large-scale, thousands-of-cow dairies can achieve them, it has the potential to oversupply the market,” said Kathy Arnold, who supplies organic milk to H.P. Hood from her family's Truxton, N.Y., dairy. “As soon as there's even a tiny bit of oversupply, the price goes down. If the NOP does not come out with a good pasture standard, there may need to be work done on an additional label that would indicate family farm production.”

GOOD ADVICE

  • Contact Horizon with questions about the boycott. They've recently hosted dairy tours and conference calls for retailers.
  • Consider offering both national and local organic dairy brands to satisfy demand and suit different customer sensibilities.
  • Talk regularly with organic dairy suppliers to help them project anticipated category growth.

The Other White Milk

Another wildcard now facing the industry is the recent decision by dairies such as Dean Foods and H.P. Hood in the Northeast, as well as Schepps Dairy in Texas, to discontinue using artificial growth hormones and subtherapeutic antibiotics on their cows. The use of these hormones on conventional dairy cattle is usually one of the main concerns cited by new converts to organic milk.

Kathy Arnold, an organic milk supplier to Hood, pointed out that conventional farmers would still use reproductive hormones to bring cows into heat or to dissolve ovarian cysts, and that unlike the organic certification process, there is little or no oversight given to farmers who are now claiming not to use rBGH or rBST, the genetically engineered milk-boosting hormones in question.

Mark Kastel, co-founder of the Cornucopia Institute, a small farm advocacy group, is equally skeptical, noting that the introduction of rBGH onto the market in 1994 caused a spike in supply and a crash in the price of conventional milk. Now, he said, conventional dairies seem to be inventing a new competitor to organics simply by getting rid of something that consumers and farmers never wanted in the first place.

Conventional dairies also need to be careful with what they say on their labels. In 2003, the Food and Drug Administration sent warning letters to four dairies saying that the terms “hormone free” and “no hormones” were false claims, since there are naturally occurring hormones in cow's milk.
— ME