After a period of steady growth and relatively stable prices, the organic sector is starting to send out mixed messages.  Against a background of a sector growth across Europe up 6.4% in 2016-17, the UK managed a meagre 1.5% growth in the same period.   OMSCo have reintroduced individual members allocation which will result in reductions in milk price of up to 4.00 ppl for most members.  In contrast, Arla have been seeking conversion and increased supply from its membership with the aim of growing supply by more than 20% in 2020.

OMSCo are encouraging members to move towards 100% antibiotic free production over the next three years.  This will enable access to a much wider world market as trade in organic milk is carried out in compliance with USDA organic standards which require antibiotic free production.  Antibiotic free production will be a challenge for many producers but as a number of organic farmers are already able to do this without serious downside, it should be possible.

Arla have an increasing dominance in the domestic liquid market where consolidation continues.  The purchase of the Yeo Valley Liquid milk business last year by Arla was a step change for the processor, and Rachel’s withdrawal from the liquid sector has further consolidated Arla’s position.  Arla are moving producers to comply with Compassion in World Farming Livestock Standards.

On the other side, the rising cost and lack of availability of organic feed is a concern arising for a number of reasons, not least a change in inspection and certification regulations imposed by the EU.  This has had a serious impact on the supply of a number of important raw materials from Romania and the Balkan area.  Combining this with strong demand from both EU countries and the US, this has driven up prices with wheat currently trading above £300/tonne and peas and beans closer to £400/tonne.

For more detail on the organic dairy markets, contact William at w.waterfield@fcgagric.com or your local FCG office.