15 March 2002

Organic converts must seek realistic premium

By Marianne Curtis

organic dairy producers are being urged to stick with it if you are in, but stay out if you are not.

The advice comes as the milk price comes under pressure, but industry experts agree that there is still room for more organic finishers whose premium expectations are realistic.

SAC senior organic farming specialist David Younie says dairy producers phoning his helpline are concerned by recent reports of supermarket price cuts (Business, Mar 8). "I am not encouraging dairy producers to convert to organic at the moment."

With half organic milk going into conventional markets, when Dorset producer Will Frost completes organic conversion of his 220-cow dairy herd on Apr 1 he expects to receive 21p/litre. "This will not quite cover costs. We need an extra 4p/litre over the conventional price to achieve the same margin."

Based on prices of 29p/litre before the organic milk surplus, on 1.6m litres of milk a year, Mr Frosts returns will be about £100,000 lower than anticipated.

"It is not looking too clever. Yield is 7000 litres/cow and we must decide whether to continue feeding for this or cut concentrates and accept a drop in yield.

At the moment, our organic pig enterprise is propping up the dairy business." Organic pig prices have remained relatively stable at £2/kg deadweight, possibly because there has not been the same rush to convert seen in the cattle and sheep sectors, he believes.

"Unlike dairy and sheep, you cant simply swap over. A lot of money is tied up getting in." And unlike ruminants, pigs rely entirely on concentrates which cost £240/t.

The picture is less clear for organic beef and sheep producers. An imbalance between store producers and finishers is a key issue and marketing difficulties further down the supply chain remain to be resolved, says Mr Younie.

"About 70-80% of organic beef and lamb is being sold into the organic market, which is not bad."

But considerable numbers of store lambs from organic hill farms and, to a lesser extent, store cattle are finished on conventional units because there is a shortage of lowland organic farms, he says.

"Mixed lowland farms should give serious consideration to conversion. Organic cereal prices remain strong and there is a need for more organic finishers."

Mr Younie is also upset that supermarkets continue to import organic beef. "It is ridiculous that they are importing organic meat, particularly from Sweden and Austria, when UK farmers are producing enough."

But Tesco still struggles to source UK-produced organic beef, according to its category manager for meat Matt Simister.

"There is not enough available at a price we can sell it, so we are importing from Austria and Australia. However, we prefer to source British meat and all our organic lamb is now British."

Organic meat is sold in 340 of the supermarkets 650 stores, but 20% wastage means it has scaled back retail prices in the last year to boost demand, says Mr Simister. "Since cutting prices, organic meat waste has halved."

There will continue to be a sustainable premium market for organic meat, he believes. "But not at the premiums we see at the moment. The premium will stabilise at about 15-20% above conventional meat prices, which should allow everyone to make a decent profit." &#42

&#8226 Dairy concerns.

&#8226 Meat premium 15-20%.

&#8226 More finishers needed.