Sonoma County's dairy community, the 11th largest in the state and a major supplier of organic milk, is buzzing about a split between Clover Stornetta Farms and 10 of its 15 local producers.
The breakup appears to center around milk prices paid to the farmers, and a difference in how fast both sides want to grow, according to sources familiar with the situation.
Starting Aug. 1, the 10 dairy farms will send their milk to regional processing facilities owned by Organic Valley, a large organic co-op headquartered in Wisconsin. The dairy farmers believe the national organization will better insulate them from price fluctuations due to its larger size and also allow them to grow faster by providing access to a larger market, dairy insiders said Thursday.
The farmers joining Organic Valley declined comment.
"All 10 of us producers talked about it, and we decided not to comment," said George McClelland, who owns a dairy near Petaluma. "Come back and talk to us in six months when all the dust has settled."
Clover Stornetta Farms, which is the largest producer in the North Bay shipping about 70,000 gallons of milk a day, had cut its prices last April by 16 percent and asked farmers to limit growth as a result of the recession and a glut of organic milk in the market, according to sources.
"We had to react. Had we not made price concessions to the market, we would have lost access to the retailers," said Marcus Benedetti, president of Petaluma-based Clover Stornetta. "We certainly understood the farmers frustration during that time."
Doug Beretta, owner of Beretta Dairy on Llano Road in Santa Rosa, said his processor, Wallaby Yogurt in American Canyon, dropped how much they paid, too.
"During the recession, people went back to drinking traditional milk," Beretta said. "It was the first time we started to see these decreases in organic milk prices."
Since January, Clover Stornetta has raised the amount it pays farmers by more than 20 percent and expects to grow 10 percent this year, Benedetti said.
But the damage to the relationship had already been done, according to sources.
Price fluctuations are tough on farmers, who often receive loans to expand or replace equipment based on historic milk prices. Around January, the 10 producers decided not to renew their contracts with Clover Stornetta and signed with Organic Valley last week, according to sources.
John Taylor, owner of Bivalve Dairy in Point Reyes Station, decided to stay with Clover Stornetta.
"Nobody does it better than Clover," Taylor said. "They have the toughest, tightest milk quality standards in the industry."
Clover Stornetta was an early pioneer in organic milk, which now accounts for about half its total dairy processing.
Gage Stueve, who owns a dairy in Oakdale, joined Organic Valley in 1997 and has benefitted from the price stability, he said.
"We've only had a couple small down ticks since we joined," he said. "Price stability has been good for us, and that's something that is really important."
Clover Stornetta will continue in the short run to get its organic milk from North Coast suppliers, perhaps even from those joining Organic Valley, Benedetti said. However, it is working to add new local organic producers and help its remaining farmers expand.