Good news for UK organic milk survivors -- but not until 2006

The market for organic milk will stabilise in 2006, with supply being balanced by demand, according to a survey by Organic Monitor.

The survey said oversupply was already easing in the UK which, since 2001, has seen more than a third of organic milk go into the non-organic market.

Although demand was rising, thanks to consumers' growing belief in the milk's health properties, supplies were falling because there were fewer organic dairy farmers, said Organic Monitor.

It predicted that the decline would accelerate in 2005 when the five-year organic conversion grants for many farmers end, leaving them free to exit the market. At the same time a European Union (EU) derogation on organic feeds expires, forcing farmers to source 100% organic feed, which will increase production costs. According to a Soil Association report, "significant numbers" of organic dairy farmers may exit the market at the end of their five-year conversion as most use the non-organic feed allowance.

It predicted that the average farmer currently using a 50:50 mix of organic and non-organic feed would see costs increase by over £80 per cow, which means an extra 1.5-2p to produce a litre of organic milk.