The Organic Milk Market Update

The recent Organic Market report reveals that sales of organic food increased by 6% in 2017.  This compares to an increase of 2.4% for food in general.  This is the sixth year of growth for the sector.  Dairy continues to be the leading segment with a number of strong brands attracting loyal support and leading growth.

Despite this continued growth in the value of the organic food sales, the area under organic management has continued to fall in the UK, down 17% since 2012.  This is at odds with the rest of Europe where between 2012 and 2016, the area under organic management increased by 18.7%, with France up 49%, Italy 53.9% and Belgium 31%.

Milk price volatility in the conventional sector seems set to stay with the trough to peak in milk prices now less than two years.  Compared to the organic sector where, over the last four years, the organic market has delivered a more stable price despite some strong seasonality profiles.

Summary Milk Prices

Chart 1 Comparison of milk prices

Somewhat surprisingly the number of dairy farms in conversion has remained fairly low with milk buyers being cautious to ensure that they have a market for the product and that the milk fields remain economic.

Two recent announcements in the trade indicate that our major processors are perhaps at last waking up to the strength of the organic sector.  Firstly, last summer Wyke Farm and OMSCO announced a tie up to grow their organic cheese production, mainly for export.  Recently, Arla agreed a licencing agreement with Yeo Valley which will enable the Co-op to grow the premium brand.

In the longer term, government policy is leading to a greater awareness of the impact of agriculture on the environment and payments seem likely to follow environmental protection or as the jargon has it Public Goods or Natural Capital.  It may be too early to hope that this will mean enhanced support for the organic sector but the direction of travel seems clear and conversion payment under the current Countryside Stewardship scheme will continue for the full five years.

If you would like to discuss organic conversion, please contact William at wwaterfield@fcgagric.com or your local FCG office.

 

 

Posted in Andover, Business Management, Dairy & Forage, Organic.