OMSCo, the leading organic milk suppliers co-operative has announced a 50% increase in demand for organic liquid milk over the last six months, but warns that further increases cannot be met without an increase in farm gate prices.
The increase follows the recognition of the nutritional benefits of drinking organic milk, in particular that organic milk contains higher levels of naturally occurring Omega 3 than conventional milk, along with brand innovations and a general increase in consumer demand for organic products.
Nicholas Saphir, Chairman of OMSCo said:
"OMSCo will meet contracted demand for this coming winter, but there won't be sufficient organic milk available to meet unplanned and increasing demand. The current increases in demand and the uneconomically low farm gate prices will lead to a shortage of organic milk throughout 2006 unless farm gate prices increase immediately by at least 2 to 3 ppl.
"A sustainable supply chain, has to start with sustainable retail prices - during the last 4 years conventional milk prices at retail level have increased by as much as 27%, organic milk prices have fallen by up to 8%, resulting in a massive decline of the on-shelf premium from around 45% to nearer 15%. As such it represents one of the lowest organic premiums in any category.
"Current farm gate prices will not deliver the production increases needed to supply existing demand growth, which is expected to increase by over 30% next year. There is a certain amount of latent capacity available, but to encourage the necessary increase in production, retail prices will have to go up and stay up to trigger the expansion needed.
"At this point, timing is a crucial factor. Decisions on next year's production levels will need to be made on-farm during the Autumn. To avoid a long-term shortage, price increases therefore need to be made now."
