ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Friday, January 7, 2022

Horizon and Organic Milk Contracts

As the New York Times reported yesterday. Horizon Organic gave notice to 89 small dairies in the Northeast that it would be discontinuing its contracts with them.  Horizon then granted the small dairies a reprieve, extending the contract until February 2023 and also agreeing to pay them more for their milk.  

MilkingOrganic dairy farming is a niche, and Horizon plays a key role in that niche.  Low milk prices threatened to drive small dairies out of business at the start of the century.  Organic milk made it possible for small farms to survive if they could get certified.  Organic milk fetches a higher price and enables small dairy farms to stay afloat.  But now the organic milk market is also flooded (sorry) with milk from Western farms.  Dairy used to be a local or regional business.  But with ultra-pasteurization, the industry has gone national, making it harder for small dairies to compete.  One sentence from the Times report sums up the problem:

One company, Aurora Organic, has 27,000 dairy cows on four farms in Colorado and Texas, according to its website — the equivalent of about 500 small New England farms. 

The Northeastern farmers claim that these "factory farms," effectively the Wal*Marts of the organic dairy industry, are skirting federal regulations for organic certification.  The regulations relate to giving the cows access to pasture and to the cows' "heritage."  There are limits on the conversion of conventional diary cows for use on organic farms. Compliance with these regulations is costly, and so the Northeastern farmers claim unfair competition.  Appeals to the Biden Administration's Secretary of Agriculture, Tom Vilsack, have followed.

The story ends on a grim note.  One farming couple with thirty cows had been selling their milk to horizon.  Ms. Smith is 68; her husband is 77.  They were hoping to transfer the farm to their forty-year-old son.  Instead, given the uncertainty, they sold the herd.

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