RENEE MONTAGNE, HOST:
Sales of organic milk were up 15 percent last year over 2010. Apparently people like the taste and perceived health benefits from milk that comes from cows free of artificial hormones and that are not fed grains exposed to pesticides. Still, your next carton may be more expensive - and in some areas harder to find.
Grace Hood from member station KUNC explains.
GRACE HOOD, BYLINE: Lately, more grocery shoppers like Lisa Viviani have been reaching for organic dairy.
LISA VIVIANI: You got it?
LILY: Yeah.
VIVIANI: Good job.
HOOD: Viviani is standing in a Fort Collins, Colorado, Natural Grocers. She hands over organic half-and-half to her small daughter, Lily, who puts it into their shopping cart.
VIVIANI: I just don't want any of the other chemicals and hormones that go into the other milk.
HOOD: At the Natural Grocers chain, sales are even higher than the national rate. And store manager Emily Krawczuk says that's translated into issues with one supplier.
EMILY KRAWCZUK: They are still able to provide us with a product, but not nearly the volume that we were seeing in previous times.
HOOD: So far the shortage has been most pronounced on the East Coast and in the southeastern grocery chain Publix, which started posting signs in dairy cases explaining: Where's My Organic Milk? Processors are having a hard time ramping up supply to meet demand.
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HOOD: And it's all because organic dairymen like Arden Nelson are getting pinched by the high cost of organic grain and hay.
ARDEN NELSON: What happens when you can't pay your bills, is you look at the most expensive thing and you say we're going to have to do with less of that. And when dairymen feed less grain, cows give less milk.
HOOD: Nelson is standing in a narrow florescent-lit milking parlor - a small building on the edge of his Northern Colorado farm. Gray metal machines and clear tubes obscure the six cows on either side. In December, feed costs were so high that the Western Organic Dairy Producers Alliance wrote a letter to a dozen major milk processors asking for a 20 percent raise - that's five dollars more per hundred pounds of milk.
NELSON: But that's only to get to break even. That's not to have enough of a living to have health insurance, and there's not enough money to even fix broken equipment.
HOOD: So far the response from processors to the Alliance's letter has been lukewarm. Just one cooperative, Organic Valley, has offered a two dollar per hundred weight increase for its farmers, starting in March – three dollars less than what was requested.
GEORGE SIEMON: The conversation about a fair price can become very difficult.
HOOD: Organic Valley CEO George Siemon cites limits in the amount and speed at which his co-op can offer farmers raises.
SIEMON: There are so many farm models out there and so many different debt levels, and droughts, non-droughts.
HOOD: Siemon says that some of the increase Organic Valley pays farmers will get passed along to consumers. He estimates, in the next month, shoppers could see as much as a 50 cent increase for a half gallon of organic milk. Ultimately, he says the goal is to adjust what farmers are paid so that new organic dairymen will want to enter the business. But that takes time - one year to transition a herd to organic feed, and up to three to transition land.
BILL WAILES: Everybody has to work together.
HOOD: Bill Wailes is a professor of Animal Sciences at Colorado State University. He says that while many organic dairy farmers are losing money, retailers and processors are profiting. The issue is that organic dairymen have little control over what they're paid.
WAILES: That's where the dairy farmers are caught because they actually know what their costs are but they can't control their costs and they take the price that the processor's given them.
HOOD: Despite the challenging business model, Organic Valley estimates it has 180 new farmers that will start producing milk next year.
For NPR News, I'm Grace Hood in Fort Collins, Colorado.