By Brandy Harrison
PARKHILL — When Chris Vander Vloet got wind that Organic Meadow was having money trouble last fall, the Parkhill dairy farmer reluctantly ran the numbers on the cost of pulling the plug on his organic herd.
“We might be further ahead keeping the crops organic and shipping milk conventionally. We don’t want to but we may be forced to. It’s about paying the bills,” says Vander Vloet.
On April 2, Organic Meadow Co-operative Inc. filed for creditor protection to avoid bankruptcy while it restructures. The Guelph-based co-op represents 53 organic dairy farms that account for more than 70 per cent of Ontario’s organic milk pool.
Co-op mentorship kept hope alive for Vander Vloet during the 2005 to 2009 transition to organic where the farm lost 40 heifer calves to sickness multiple years in a row.
“We’ve been to hell and back. Going organic is no party. It’s the hardest thing I’ve ever done but probably the best too,” he says, lamenting they finally had the bugs out and were excited about a bright future.
The stakes are high. Six of he and his wife Barb’s 13 children are farm shareholders and they’ve invested tens of thousands of dollars in the co-op. The farm needs the co-op to offset steep costs for organic soybean meal, hay, and minerals, says Vander Vloet. “We’re farming our equity away for what?”
Organic Meadow filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, giving it 30 days of creditor protection to restructure and make a debt repayment proposal.
For co-op farmers, it’s business as usual — they’ll keep shipping milk and getting paid, says Organic Meadow’s CEO, Don Rees.
At issue is the co-op’s access to its own milk, he says.
Organic Meadow managed its own milk until 2007-2008, when demand stepped up and more processors got into the game. The Dairy Farmers of Ontario (DFO) took over the organic pool.
Rees says the co-op negotiated base allocation entitlements to its farmers’ milk and opened its Guelph processing plant in 2010 on the back of that agreement. It’s not being honoured, he says.
It came to a head just before Christmas, when Organic Meadow didn’t have enough class 2 milk to make cultured products like yogurt and sour cream, says Rees. Yogurt sales dropped 60 per cent in February.
“That was a major tipping point. It put us in a precarious position with consumers and our retailers,” he says.
Since September, provincial organic milk supply has come up short, says Graham Lloyd, DFO’s director of communications. Demand now outstrips supply by approximately 800,000 litres every month.
The DFO is working on supply, says Lloyd. Organic farmers have five to six incentive days per month until next March, had a six per cent quota increase in the last six months, and got a three cent premium increase in February with another four cents as of June 1 when the processor premium is transferred to farmers.
For Organic Meadow, the final straw was new milk shipment payment terms from the DFO. A two-week payment window became cash on delivery, says Rees, emphasizing they want to work with the DFO.
The DFO does not discuss agreements with individual processors publicly, says Lloyd, adding that Organic Meadow owed it more than $800,000 for milk at the time of filing.
To cope in a highly-competitive and consolidating market, Organic Meadow already began restructuring last fall, says Rees. It cut back conventional processing to focus on organic and dropped direct-store delivery.
It’s also trying to make better use of the plant, considering leasing space or finding a partner, says Ted Minten, a Watford organic dairy farmer and vice-chair of the co-op’s board.
“We weren’t getting the milk to go through the plant and it was draining our funds,” he says, adding that the balance sheet had been improving.
It doesn’t bode well for organic milk supply or the DFO if Organic Meadow flounders, says Vander Vloet.
“It concerns me that the DFO might be the scapegoat. If this sours, who is going to want to get into organic dairy production?”
