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Renita Jablonski: Surging grain prices are sending shock waves across the entire food economy, as everyone from bakers to livestock producers feel the pinch of higher costs. That's especially pronounced in the organic food industry, where some are predicting an all-out contraction. From the Marketplace Sustainability Desk, Sam Eaton reports.
Sam Eaton: There's some simple math when it comes to milk production. The more grain you feed your cows, the more milk you get. The problem is not going broke in the process.
Tony Azevedo: That pile of grain is pretty dismal.
Tony Azevedo is an organic dairy farmer in California's San Joaquin Valley:
Azevedo: There's only about 10 or 15 tons of grain where usually we would keep about 40 to 50 tons of grain. But because of the cost we just keep very little on hand.
Azevedo says his feed costs have surged more than 40 percent in the last few months, pushing his operation into the red.
Azevedo: We don't have an option. We can't say, OK, we're not going to buy anything this year. These animals eat every day.
Organic dairy farmers aren't the only ones feeling the pinch of high feed costs. But they are among the most vulnerable. Organic milk, eggs, and meat are at the top of the chemical fertilizer and pesticide-free food chain. That means all the grain these animals eat is also organic. The problem is there isn't enough of it to go around.
Dan Basse is an economist with Ag Resources in Chicago:
Dan Basse: The landscape for agriculture has changed rather dramatically.
Basse says a few years ago, organic grains like corn could be sold at a healthy premium over conventional crops, more than making up for the added costs and labor. But biofuels have reversed that equation. Ethanol's appetite for corn of any kind has driven up the price of conventional grains faster than organics, all but erasing the premium.
Basse: The reason they moved over to organics to begin with was because of the extra money. That extra money isn't there, they're back to conventional farming because it is a much easier way of life.
Basse says this is bad news for organic dairy producers. Midwest farmers are abandoning organic grain production at a time when organic milk is experiencing a glut. That oversupply has delayed any severe jumps in the cost of organic milk -- at least for now.
But as feed costs force dozens of organic dairies go out of business, Basse says it's only a matter of time before consumers are left holding the tab.
Basse: I think anybody consuming organic products has got to get ready for sticker shock and probably an escalation in price of 30 to 40 percent over the next couple of years.
The question, he says, is just how loyal organic consumers will be once milk tops eight dollars a gallon.
In Los Angeles, I'm Sam Eaton for Marketplace.