Organic Dairy or GE nightmare?

Soil and Health pose an interesting argument about why Fonterra is trying to cripple the organic dairy industry.

Fonterra’s Gutting Of Organic Dairying Is The Next Step To GE Farms.

Fonterra has taken its next step towards genetically engineered pastures, with its announced scaling back of organic production by half, according to the Soil & Health Association of NZ.

Fonterra’s announcement yesterday of a 50% drop in support for organic dairy production, shows the dairy giant’s lack of support for good environmental practice or consumer health, and marks the next step to genetically engineered (GE) farmlands, according to the Soil & Health Association of NZ.

“Fonterra has never really been committed to organic production, although aiming for 200 farms and a 140% increase in production from 2005. Just 200 farms was a very limited vision. Organic production across all New Zealand’s dairy herd should have been in any long term vision for clean green 100% Pure NZ,” said Soil & Health – Organic NZ spokesperson Steffan Browning.

“Organic production has been identified as the main obstacle to introducing GE grasses and crops into New Zealand in a Ministry of Research Science and Technology (MoRST, now Science and Innovation) report written by Terri Dunahay, an international biotechnology policy specialist with the United States Department of Agriculture.”

“Government also stopped real support for the organic sector following a briefing to the Agriculture Minister by Dunahay in 2009, yet Dunahay was duplicitous in every presentation I observed her. The misrepresentation of GE internationally, was appalling when Dunahay presented to Dairy NZ and the Institute of Public Administration New Zealand,” said Mr Browning.

“Dunahay and other United States lobbyists, along with New Zealand based pro-GE scientists fail to mention the significant GE contamination of non-GE farms, the loss of markets, the massive increase in herbicide use, the new resistant weeds and disease problems, higher seed and production costs, loss of biodiversity, or the human and animal health problems associated with genetic engineering (GE).”

Yesterday’s shock presentation to organic farmers in Taranaki and the Manawatu that their organically certified milk wasn’t wanted by Fonterra, because of reduced international demand, also included comment that organics caused “conventional” dairy production to be questioned as to its quality.

Best practice organics has improved soil structure and climate resilience, 43% more earthworm counts, 28% higher soil carbon sequestration, improved animal welfare, 33% less energy use, and a massive 58% reduction of nitrate leaching, yet is not valued well by Fonterra, because Fonterra’s conventional farming’s  dirty environmental footprint, might be questioned more.

“The KPMG Agribusiness Agenda 2011 released in June, highlighted the potential lost opportunity of high net worth customers globally by New Zealand if support for organic market and production research is allowed to languish.”

Organic dairy exports from New Zealand grew 400% between 2005-2009. Organic product sales in the USA grew 7.7% compared with total food sales increase of less than 1% in 2010, yet the New Zealand government is allowed funding for Organics Aotearoa New Zealand (OANZ) to stop this June, and had already long stopped support for the Green Party initiated Organics Advisory Service that had assisted significant growth in organic certification.

“Fonterra missed retailing organic butter in New Zealand, and has failed to market its organic products well. Where was the Fonterra brands organic butter in New Zealand super market shelves? It wasn’t to be found. Blaming reduced markets when there has been continued growth in organic consumption internationally shows a lack of organic marketing commitment by Fonterra, not a lack of customers.”

“Fonterra and the government have spent millions of dollars on GE rye grass development, while support has been stalled for the organic sector.”

“Most of Europe and Scandinavia and many other countries have targets for farm production conversion to organics, because the environmental and social benefits are well recognised, but in New Zealand there appears to be a blind adherence to short term economic benefit including GE, even when non-GE alternatives are proven.”

“When I asked on Friday, why the government had spent tens of millions on GE grasses, but had effectively stopped spending money on organics, Environment Minister Nick Smith told me, “We didn’t think there was any money in it,” “said Mr Browning.

“The planting of 336 GE pine trees by Scion and ArborGen at their Rotorua field trial site last week adds to the sadness of spirit New Zealand is suffering through short term financial aims by giant agribusiness, while it ignores the environmental and social health of Aotearoa New Zealand.”

Soil & Health wishes to express its support for the organic farmers whose livelihoods, dedication and dreams have been shaken by yesterday’s Fonterra announcement.

“Support by Federated Farmers to resist the drive for GE production in New Zealand, a requirement of the Trans Pacific Partnership Agreement (TPPA), could reignite Fonterra’s interest in organics. The New Zealand environment and consumers of the world will say thanks.”

28 Comments Posted

  1. Now that the comments have eased. The organic producers entered and were encouraged by Fonterra, to within a couple of months of the shock announcement, for a range of motivations, some for a price premium and some for ‘doing the right thing’ and some for both. Fonterra actively cranking up farmers to join into the organic pool right up to pulling the rug is grossly unethical. The belief by some in this discussion that what Fonterra also said about markets was 100% correct is disturbing. The level of short term profit Fonterra wants and its future market strategy is the issue. The market for organic milk products continues to rise, internationally at least and in most supermarkets here. Fonterra want volume more than local farmers profitability and this shows by their purchasing milk almost anywhere globally. A revamp within Fonterra management and a vision that is integrated with a clean green 100% Pure Aotearoa New Zealand would assist getting government recognition for organics in NZ / or vice versa. There is currently a short to medium at best strategy by Fonterra and the NACT led government. No real vision. Check out what happened in the UK compared to other EU states when they didnt support organics, very similar thinking in the UK govt as here, neither dealing with the real externalities of conventional production.
    Very interesting graphs in the Lazy Man of Europe link at this site;
    Fonterra’s dominance in the NZ economy means that government should be involved more closely in correcting its shortcomings and setting a clear and genuine vision that gives NZ agriculture a sustainable (in all ways) future.

  2. The main problem is money, and peoples attempt to make everything have an economic value. I have little time with the endless nonsense around the cost of things (to make choices). I pay an extra $1-2 per week for each bottle of milk, organic and raw, delivered to my door. I choose to spend the extra money, and spend less somewhere else.

    If your mates chose organics to become rich side show bob, then they chose the organics for the wrong reasons. But I imagine you are just ranting, and they chose organics for the right reasons, and the market collapsed because fonterra chose not to brand itself in that way, and they didnt make themselves RICH..

    Peace, and gratitude.

  3. The point is the long-term sustainability of soils, ecosystems and ultimately, the earth itself. If the true costs of the energy, toxins in the soil and water, costs to the animals and plants involved were counted in, we couldn’t afford to pay for conventional farming.

  4. Insider said: “What is the premium as a percentage over the standard equivalent? Perhaps it stays relatively similar all the way through.”

    Not according to my math – but calculate it yourself and see.

    “I suspect the end cost is about branding and scale.”

    Scale makes some sense, but for the premium to increase as it does the relative cost of processing (organic versus standard) has to be greater than the relative cost of farm production (I doubt other middle people, such as truckers, can justify charging more to carry a pallet of organic milk compared to a pallet of standard milk). Which I find difficult to understand as I would have thought the greatest cost differential would have been at the farm. Which suggests someone is adding a mark-up that’s not filtering through to the farmer.

    Branding might make some sense, but I don’t see any sign of the costs of branding, like Anchor’s TV ads etc., for organic milk.

  5. If you go into organic farming or gardening for the perceived short-term profits, then you are missing the point. The point is the long-term sustainability of soils, ecosystems and ultimately, the earth itself. If the true costs of the energy, toxins in the soil and water, costs to the animals and plants involved were counted in, we couldn’t afford to pay for conventional farming. In fact, we don’t pay money for it now, our descendants will pay in the future.

  6. The dairy industry is much more friendly to conventional farming. From DairyNZ to semen companies and obviously Fonterra.
    E.g. cows have been bred to make lots of milk (probably too much for a grass based diet which relies on Mother Nature) and to milk out quickly. This has resulted in cows who leak milk from their udders before they calve and thus the open teat canal allows bugs up and cows, and even HEIFERS, come in with mastitis.
    Ryegrasses have been bred to grow so quickly that no other species of forage is worth sowing (in the eyes of many) and so there are no tap root species to suck up minerals and moisture. Many farmers seem to forget even clover and prefer to buy their N. Having a monoculture pasture means that all the plants die at the same time when it gets dry leaving lots of leaf litter for Facial Eczema fungus.
    Indeed, SSB, the easiest path into dairy, with the most support from drug companies, vets, DairyNZ, Fonterra, farm advisers, farm discussion groups and the internet is likely conventional.
    Of course, as James said, if farmes were to be charged for degrading the commons, then organics would likely be given an incentive.

  7. SSB,
    I’m truly sorry about your mates failure with organic dairy. I do wonder whether Jimmy may be right here. You can’t just stop deworming, and expect worms not to be a problem. The change must start from the soil up. ‘Organic clover’ you mention sounds like they were at least more switched on than some cockies.
    To be honest, I reckon once a farm has it right, from the soil up, no premium is required for the farm to be profitable. The reduced production (I use that term to mean litres of milk/kg MS – apparently economists have a different meaning that includes efficiencies) would be more than made up for by better reproductive performance and fewer inputs like zinc for FE and antibiotics, anthelmintics and fert.

  8. SSB your mates may have approached this organic enterprise with the wrong mind-set…..a committment to the principles of clean food production and a knowledge that they were contributing to sustainable farming practice instead of a belief that they would become rich may have seen them through initial planning and implementation stages with more realistic goals.

    Your story though, does show another side of Fonterra – one that we seldom see in the media. Thanks

  9. Perhaps I should clear something up. Many here see Fonterra as the great ogre. Nothing could be further from the truth. My mates redeemed their shares in fonterra, brought an old dairy factor and spent around 6 million to set it up for organic standards, Fonterra had nothing to do with their business, they believed they would be rolling in organic clover, it was organic all the way. It all went belly up when the markets were not willing to pay for the product and the suppliers in organic milk could not be paid a payment that was to be greater then Fonterra’s payout . If it wasn’t for Fonterra these guys would be drawing the dole now. Fonterra offered to take these suppliers back and gave them 5? years to pay for their shareholding, most have to pay before the beginning of the season, Fonterra could have told them to get stuffed. They jumped ship in a belief they would be rich, not so. But what upsets me about this whole post is the attempt by the Greens to rally the peasants on totally false pretenses, it’s got nothing to do with GE or any other such lies. It’s about the reality of the world today, not the made up propaganda of the green movement.

  10. What is the premium as a percentage over the standard equivalent? Perhaps it stays relatively similar all the way through. You’d expect organic milk farmers would want returns similar to standard farmers to cover lower production and potentially higher costs.

    I suspect the end cost is about branding and scale. The relatively low volumes of organic milk might require overcapitalisation in plant, so more dollars are spread across fewer litres. But brand also will come into it, same way we pay more for premium Coca Cola than we do for Budget cola, or Anchor milk over Pams.

  11. Some poster commented on the cost of petrol. Petrol is still dirt cheap, even at $2/litre.

    petroleum companies haver to find the oil (which aint easy) dig it up (which aint easy) refine it (which aint easy) and ship it half way around the world (which aint easy) and then distribute this volitile compound locally (which aint easy, either).

    And they do so for less than the cost of cocacola.

    Given than a litre of petol means you can move 10km in about 6 minutes, people just dont know how cheap it is. How long would it take you ro bike that 10km? Walk it? And what is that biking/walking time worth.

  12. dbuckly notes that “we on principle buy the relatively expensive stuff where the pigs have had better living condition, but it takes bacon into a more luxurious and thus infrequent purchase”.

    The ‘organic’ vension I have sitting in my fridge was free but for the cost of petrol, some dehydrated meals, my time, and bullet(s). We shot two deer on DoC lands (that haven’t been 1080ed recently) and that is about as organic as you get! 🙂

  13. …but otherwise I can’t see why the PREMIUM increases so much.

    Many people believe that business works on a cost plus model, and as a baseline, its a reasonable model, but very few businesses work that way. The model more widely used is “what the market will bear”.

  14. @Owen, yes but no-one is saying here that adding costs are a rip off. The question is whether the differential between organic and non-organic milk justifies the percentage increase in the premium from farmer to supermarket. I can see that processing organics might be marginally more expensive (if there has to be a separate supply chain), but why would labelling and bottling be more expensive? Possibly there is some expense unique to organic milk I haven’t thought of that must be added at some step in the supply chain, but otherwise I can’t see why the PREMIUM increases so much.

  15. The farmer produces bulk milk which is poured into a tanker. Most farmers do not drink their own milk.

    Many remote farmers buy milk powder in bulk because it is the most cost effective and convenient for them.
    So the tanker then drives to the milk processing plant where it is checked and pasturised etc.
    Then it goes to a bottling and labelling plant.
    Finally, it is delivered to a distribution centre and then to the individual outlets such as dairies and supermarkets.
    These are all costs of production and distribution and are not “mark-ups”.
    Don’t any members of the Green party have any idea of the costs of business?
    Why do you assume a cost is a mark-up, or a profit or a rip-off.
    Try making something yourselves. Oh, and I forgot all the taxes and the GST added at each step in the value added chain.

  16. from my rough math, if each step is adding 8%, you need at least 12 steps from the farmer to the supermarket to accrue to a premium at the supermarket of 20%, which might be on the low side. So unless there really are 10 middle persons, someone is adding a lot more than 8%. Question is, is the cost of processing, packaging or transporting organic milk that much higher than ordinary milk, and proportionatley higher than the the farmers’ increased cost of producing organic milk?

  17. National radio this morning, premium farmers get on organic milk is 8 cents, however the cost premium in the supermarkets is > $1 over normal milk.

    Someone is being ripped off here,

    No they’re not, that’s just the way the supply chain works. A tiny difference at one end of the chain has margin applied all the way along the chain, and the end consumer gets to pay the tiny difference plus all the margins.

    So, when the Russel calls for “putting a price on irrigation water” as part of the Clean Water Initiative, the organic situation illustrates exactly what happens: everyone along the supply chain adds their margin and the consumer gets walloped.

    And, as the commerce commission noted, the retailers don’t feel the need to compete aggressively, they are all happy in their cozy duopoly. So they put a big margin on, and get away with it.

  18. National radio this morning, premium farmers get on organic milk is 8 cents, however the cost premium in the supermarkets is > $1 over normal milk.

    Someone is being ripped off here, could be a good reason why sales are down in this country.

    I would suggest all organic producers of milk dump bully boy Fonterra and sign up to their own marketing and collection coop. Sell it direct to the public, bypassing the rip off supermarkets, at a reasonable price, people will buy it especially if it undercuts the supermarkets who seem to be making most of the profits here instead of the farmers.

  19. So is Russel and Metiria still going to cut deals with National? or they going to persue a solution in nationalizing Fonterra? And stopping further farm sales to China?

    I mean it’s hardly a level playing field for the the organic dairy farmers is it.

    You can’t clean the teeth of the dragon, St.George had to slay them!

  20. Fonterra are required to make a percentage of their milk available to local buyers at a reasonable price to pervent a local monopoly. If this is a no brainer business, then surely Steffan Browning should front up with the cash to Fonterra asking for the organic element and will make a mint. Until then it is more ‘do as I say’ rather than ‘do as I do’, and let’s all ignore reality.

  21. Um, you know that cows fed with palm kernel supplement reduce methane emissions?
    Not that it matters.

  22. You should be more worried that bottled water costs more than both milk and petrol.

    I have long suspected that those who think modern mild should be dirt cheap have no idea of the costs of running a productive dairy farm. By comparison turning oil into petrol is a doddle.

    Go and work on a farm for a week and then go and work in a refinery for a week.
    Quite a shock.

  23. Is it not time that Fonterra started paying its way? As they can’t be bothered to invest in decent modes of production as well as rorting the kiwi consumer with their astronomical prices they should be made to pay in full for the water they extract, the pollution they cause (i.e. Manawatu) and also for the emissions. I’m sick of paying subsidies so that this bunch of avaricious vandals can live above their means.

  24. There is now a niche available for anyone looking to invest in organic dairy farming and Fonterra will no longer be a competitor – the thing will be will such an operator be able to block GE if Fonterra goes down on this path (in part) to take out a growing local organic milk competitor?

    And of course organic milk that did not result from palm feed products and came from clean water standard farms would take on the appeal of cage free egg and free range production etc and stopping this development may be a factor.

    Price is a red herring, there is a market and the only thing higher prices do is reduce the size of the market. Some buy free range eggs, some buy cage free barn eggs and they come at a significant premium to cage eggs.

  25. So what we need is for conventional milk to take into account all the costs associated with its method of farming; that means dairy farmers paying for the mess they’re making.

  26. In Bob’s rant there is a nugget:

    It’s about people unable and unwilling to pay the higher prices for organic product.

    That is almost certainly true for milk.

    It is for bacon: we on principle buy the relatively expensive stuff where the pigs have had better living condition, but it takes bacon into a more luxurious and thus infrequent purchase.

    Most Kiwi’s are are just looking for the lowest cost goods, purely on an affordability basis. We certainly buy the cheaper makes of milk. Still bugs the pants of me that even the cheap stuff still costs more than petrol.

  27. Again more crap. I have mates who have lost millions of dollars because they decided to go down the organic path. Farmers taking up the organic challenge have been losing money hand over fist, to put it in simpler terms it isn’t profitable. The writing was on the wall several years ago when the organic European market began to collapse, with organic farms in Ireland going broke, the European market was suppose to be the golden goose. Also the rules dictating the organic milk market in NZ are totally retarded with many farmers struggling to meet “requirements” let alone pay the bills. It has nothing to do with GE or any other such rubbish. It’s about people unable and unwilling to pay the higher prices for organic product. Perhaps the world isn’t infested with as many rich people as the greens would have you believe. I wonder how many in NZ are willing to pay more for their milk, oh that’s right we are suppose to subsidize the extra price.

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