Fonterra, the large NZ dairy farmer owned milk processor and exporter, recently announced their organic price forecast for season 2016/17 at $9.20/KgMS. This is an astonishing 236% above the conventional forecast for 15/16 of $3.90/KgMS. Even with the increase in the conventional forecast for 16/17 to $4.25/KgMS, the premium for organic is still three figures in percentage terms.
The difference at the farm gate in practical terms is between significant loss making and ahead of the curve profit making.
We have consistently conveyed the story of organic market superiority over the last few EI issues in various articles. Fonterra’s recent announcement articulates that reality in very clear numerical form. Further to this, although Fonterra only collect organic milk in the North Island officially (not strictly speaking the case as in reality they collect organic milk from a small number of suppliers in the South Island) a major processor in the South Island has made it clear to AE that they will at least match the Fonterra organic price. The point being that the organic option is available in both islands.
While $9.20/KgMS is impressive the underlying price story is even better than it appears. Through our connections in the organic dairy sector we are aware that the price has been deliberately set at a very conservative level and it is therefore likely to move higher over the course of the season. $9.20/KgMS sounds great but by the end of the season it may be even better.
The consistency of organic price/demand performance over the last three years in particular, allied with current and projected growth provides high levels of confidence in the on-going success of organic dairy.
For those rushing out to become instant organic/ecological production experts however, there is reason to be cautious. Organic production systems are demanding of knowledge and understanding. If you do not have the required expertise and experience of conversion it can be an extremely unforgiving process. The consequence of this being significant drawn out financial underperformance and worse. If you get the transformation process wrong it can be a very painful experience.
Having been involved with literally hundreds of conversions and working alongside similarly experienced people I am fully aware of the practical realities. There are no shortcuts and ‘learning on the job’ is neither quick nor easy, nor particularly financially rewarding either and certainly not viable in the context of generating returns back to investors.
The right mind-set and an intellectual appreciation of ecological systems and how they function is mandatory.
If the mind-set is wrong it does not matter how much conventional farming experience you have, you are lost before you begin. In general, the understanding of agro-ecological systems development amongst the conventional ‘establishment’ is poor to non-existent and the perception of what organic production is, is often woefully wide of reality. This ‘classic’ view, if utilised in attempting to convert to organic management, (and it does happen) is guaranteed to generate poor performance at best and disaster at worst. What is truly ‘classic’ is that it is almost always exactly the same view across people and years.
Seldom has the advantage of knowledge been so clearly illustrated.
“Organic is good. Organic is right. Organic works. Organic clarifies, cuts through and captures the essence of the evolutionary spirit”.
With apologies to Gordon Gekko.