Organic Milk Prices Surge Amid Capacity Constraints in Dairy Sector

The organic dairy industry is currently experiencing a period of strong milk prices, attributed to ongoing undersupply in the market. Industry forecasts predict a 1–2% annual growth in demand for organic milk. However, the limited processing capacity necessitates careful management of overall milk volumes, especially with the upcoming spring flush.

Recent years have seen contraction in the organic sector due to rising costs and adverse weather conditions, which have impacted profit margins. Presently, with improved prices and supplies not yet back to peak levels, the focus is on how farmers can respond without destabilizing the market.

ForFarmers, a prominent feed supplier, is advising producers to review their feeding strategies to ensure any increase in output aligns with buyer requirements. Ben Trott, organics product manager at ForFarmers, noted, "Forage will always be the cornerstone of organic milk production, and that won’t change." Organic standards mandate that at least 60% of dry matter intake must come from forage, emphasizing the importance of forage quality and utilization.

Despite some favorable grazing periods last year, unpredictable growing seasons have challenged farms in maintaining feed consistency and value. Trott added, "It’s essential to use forage effectively by supporting it with the right supplementary feeding, rather than asking it to do too much and yields suffering as a consequence."

Higher milk prices have improved profit margins, allowing producers to reassess concentrate use. In organic systems, up to 40% of dry matter can come from concentrates, but this must be carefully balanced for profitability. Trott further explained, "In organic system, up to 40% of dry matter can come from concentrates, and that portion of the diet needs to work hard."

With limited processing capacity, the risk of overproduction is a concern. Rapid increases in supply could pressure prices if demand does not keep pace. Feed volatility also poses challenges, as organic producers lack access to synthetic amino acids and other nutritional tools available in conventional systems, making efficient ration formulation crucial.

As the spring flush approaches, producers face the challenge of leveraging improved returns while ensuring disciplined production growth in line with market capacity.