Organic milk may yet provide North Coast dairy farmers with the niche market they need to survive, but this year it won't protect them from the pain of overproduction amid a sluggish economy.
"The recession has caught up with the organic business," said George McClelland, a Two Rock dairy farmer who sells both organic and conventional milk to Clover Stornetta Farms.
Clover, the North Bay's largest dairy processor, on April 1 will cut the price it pays for organic milk by 16 percent compared with a year ago.
John Taylor, a dairy farmer near Point Reyes Station, said both Clover and its 17 organic farmers mutually agreed on the cut and a planned retail price drop as the best strategy to fight back against increased competition.
"We're in this for the long haul," he said, "and it's very tough for everybody right now."
The price cut marks a reversal for a young industry that has enjoyed double-digit annual sales growth for much of the past decade. Demand is down across the U.S., and the bankruptcy and subsequent sale of Fernbridge's Humboldt Creamery has exacerbated the downward pressure on organic prices in the region.
"I've seen figures that organic milk is oversupplied nationwide as much as 20 percent," said Clover Stornetta President Marcus Benedetti.
Processors, he said, contributed to the oversupply by seeking more milk to meet the expected demand, and many farmers switched from conventional operations because it offered the prospect of better profits.
But in the past year, California dairy processors report that organic sales have slipped 2 percent.
One reason is that penny-pinching consumers have scaled back their purchases of organic milk, which often costs much more than conventional milk.