Organic Milk Oversupply Forecast

VANCOUVER - May 31/07 - SNS -- Organic milk output in the United States could exceed market needs by 24.5 million gallons this year.

According to Reuters, after remaining undersupply for years, organic milk is projected to come in large supplies in the US market due to a change in regulation and high profit margins that are motivating more farmers to adopt organic milk production. Dairy processors and distributors in US are quite happy with the news as it gives them an opportunity to expand their market and offer more products based on organic milk.

The regulation was changed in 2006 when a farmer, Arthur Harvey, from Maine, US, filed a suit demanding more stringent rules to govern the production of organic milk. The 'Harvey Rule' that will come into effect in June 2007, needs farmers to give 100% organic grain to their livestock, as against the earlier 80% organic and 20% conventional grain standard.

Some estimates say that dairy industry is poised to see an increment of at least 40% in supply of organic milk in 2007 from last year's 20%, leaving around 24.5 million gallon as excess supply.

Organic powdered milk, cheese, yogurt, and ice creams are projected to occupy more shelve space as dairy processors look to use the excess supply. However, organic milk's consumer prices are not likely to fall as the industry anticipates the oversupply as a short-term phenomenon.