Got Milk? High prices spurring organic milk shortages Supermarkets and grocers across the U.S. are working with procurement consultants as they intensify their "milk sourcing" efforts, as a shortage of the product is driving up prices and causing headaches for store executives.

The prices of many food products have surged over the past few years, as global demand has soared, eroding stockpiles and straining producers. While organic milk once filled a niche in a specialty market, it has grown increasingly popular. At the same time, organic dairy farmers have scaled back production, further depressing supplies.

The New York Times reports that higher costs of both organic grain and hay have eroded profit margins for many farmers. Organic milk, once a cash cow for many agriculturalists, has become such a costly endeavor that many farmers have all but abandoned the market. In states stretching across the U.S., many grocery stores have been unable to find reliable sources from which to buy it.

Moreover, farmers continuing to produce organic milk are not generating as much as they did in the past. In an effort to implement cost reduction measures, many farmers are purchasing less grain and hay. Feeding cows less, however, only results in a drop in milk production, which has exacerbated the problem. This phenomenon has also prompted fewer farmers to enter the market, further reducing organic milk supplies.

Cropp chief executive George L. Siemon asserted the industry is at a crossroads. He noted it is paradoxical that as organic milk has become more popular and sales have increased, fewer farmers have entered the sector. Normally, economic theory states that profits attract entry, but the added costs in the organic milk industry are scaring away potential producers.

"It's a double whammy to have higher sales than you expect and less milk," he said. "We're sweating bullets over it."

All the while, demand from consumers shows no signs of slowing down. In 2011, demand for organic milk jumped by as much as 10 percent, according to the Northeast Organic Dairy Producers Association. NPR reports that a growing number of farmers are petitioning outside organizations to prop up the industry, but it is unclear whether such lobbying efforts will prove fruitful. Some organic milk producers are also urging grocery stores to lower their markup on the product, which they contend would help drive sales.

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