The sluggish economy and lower farmer pay prices for conventional milk are taking a toll on the demand for organic milk, as consumers gravitate toward the lower-priced conventional milk. But some cooperatives are finding creative ways to respond to the sour news. Instead of cutting its own dairy farmer pay prices, or reducing membership, Wisconsin-based Organic Valley is requiring its cooperative of more than 1,300 organic farmers to reduce its organic milk supply by 7 percent beginning July 1.

Notified this week, farmer members will have an opportunity to appeal the requirement. But in a statement released last Wednesday, Organic Valley Family of Farms organizers said the reduction allows farmers to continue receiving current prices for their organic products, which could save them from having to go back to conventional production at a time when conventional milk prices have dropped dramatically.

"The cooperative agreed that requiring the farmers to lower their active base of milk output, while still paying them the current organic price, best serves our mission to preserve family farms and safeguard our cooperative," George Siemon, Organic Valley's chief executive officer, said in a prepared statement.

Company officials also claim the move will ultimately enhance the quality of the milk produced because farmers will focus more on top-quality producing cows, will increase pasturing and decrease grain feeding, which results in less production and better quality.

Siemon said some of his competitors in the organic milk business are responding with farmer pay cuts, "artificially deflating their retail price at the expense of the farmer, or dropping the farmer off the truck altogether."

Horizon Organic officials say their membership is growing and they aren't cutting pay prices. But the Colorado-based cooperative of 485 farmers is responding to the drop in demand by cutting its market adjustment premium by a dollar, said spokeswoman Sara Loveday.

Since 2004, Horizon Organic has offered this adjustment in response to a number of market forces, so it doesn't consider the recent move to cut a dollar as a price cut for farmers.

"Over the last eight years, we've increased pay prices," she said. "The growth of the organic category has slowed, but we're continuing to do some of the things we do, like exploring different channels to expand our distribution … and expand our presence in quick-serve and casual dining."

Horizon now distributes its products in Corner Bakery and Panera Bread restaurants.