The growth of the organic milk market is under threat because rising animal feed prices are eroding profitability and dissuading farmers from going organic.
Feed accounts for a bigger part of the farmgate price of organic milk than ever before, according to Edward Lott, consultant at Kite, and high returns for conventional milk have discouraged conversions. The current organic price is about 34ppl, while standard milk fetches up to 27ppl.
"In the worst case scenario, this would mean no new organic milk coming on stream in 2010," said Lott. "There needs to be a 10ppl premium to encourage conversions, which equates to a price of at least 40ppl."
An estimated 100 million litres of new milk are in the organic pipeline for 2008, but the Organic Milk Suppliers' Co-operative said a significant volume would be delayed until the autumn.
Just 45 million litres will come on stream in 2009, potentially leaving the market 30 million litres short.