Local Dairy Farmers Seek Stability With Move to Midwestern Farm Cooperative

This week’s announcement that 10 Petaluma-area dairies will leave Clover Stornetta has shaken the local dairy industry and brought to light the challenges facing California farmers as they struggle to compete in a market flooded by cheap out of state milk.

The dairies, which include Triple C, McClelland and DeBernardi among others, will sell their milk to Organic Valley, a 1,000 plus farmer cooperative based in Wisconsin, effective August 1.

The reason? Organic Valley, which sells at Costco, Walmart as well as smaller stores such as Petaluma Market, has much larger market share than , a wider range of products including powdered milk, cheeses and yogurt, and can offer more stable prices to local dairies.

“We have the most stable price in the system and farmers are attracted to that,” said Theresa Marquez, chief marketing executive for Organic Valley, which has been in discussions with local organic farmers over the past eight months over the move. “As they say in the industry, the worst thing about being a dairy farmer is walking to the mailbox and seeing what your check is, because you never know what you’re going to be paid.”

Clover Stornetta pays $26.84 per hundred weight, the standard measurement used in the industry which equals roughly 12 gallons, which translates to $2.23 per gallon of milk. Meanwhile, Organic Valley pays $23.57 or $1.96 per gallon. But because they distribute to stores all over the country, they need much more product than Clover, creating a stable supply chain.

Despite moving to Organic Valley, milk from Petaluma-area organic dairies will still be processed locally and some of it may even be sold back to Clover Stornetta to help the company meet the demand from local buyers, Marquez said.

In addition, Organic Valley will process milk into powder at a facility in Petaluma, which has yet to be selected.

Milk that is not turned into powdered products will be trucked up to Humboldt County for pasteurizing and then be bottled at the HT Hood Creamery in Sacramento.

Marquez said she and her team would be visiting Petaluma over the next month to meet with farmers. “It’s a big deal for us to support the farmers and the communities they are from,” she said.

Meanwhile, local dairy farmers have remained mum on the decision, not returning numerous messages left over the past couple of days. Industry insiders say they don’t want to rock the boat and want to preserve a good working relationship with Clover Stornetta, which goes back to the 1920s when Clover was founded.

According to sources, who spoke on background only, a group of dairy farmers had approached Clover and asked to buy from them as a cooperative, but Clover refused, saying it wouldn’t make economic sense for them.

Marcus Benedetti, president and CEO of Clover Stornetta, said he was saddened by the impending departure of 10 out of 15 organic dairies from the company, but understood the decision. He said it came down to an oversupply of organic milk from local farms, especially following the bankruptcy of Humboldt Creamery last year, which had been purchasing milk from local farms.

“Over time they made the decision to go 100 percent organic…and the issue for them was to grow their output (because organic milk pays more than conventional),” Benedetti said, “It was something we could not accommodate overnight.”

He said Clover’s organic milk market grew by 10 percent last year and is expected to grow more robustly this year, but was still not enough to meet the needs of local farms.

“We’ve been fortunate to have growth, but not in the way they needed,” he said.

The move leaves Clover Stornetta with five organic milk suppliers and seven conventional suppliers. About 40 percent of the company’s milk sales are organic.

“At the end of the day, they’re really good folks, they are good families and good business people,” Benedetti said. “The producers that left feel that their decision bodes best for their future and Clover has never felt better about our future and what that future holds for our existing dairies.”

The dairy farms that will be leaving Clover Stornetta include Ocean Breeze, Del Mar Farms, Walter Stornetta, DeBernardi, Bordessa, Camozzi, George McClelland, Robert McClelland, J.L.T. Ranch and Gillian's.