Fonterra is cutting back on organic milk as the global financial crisis and changing consumer preferences depress demand for the product.
The dairy co-operative was meeting organic farmers this week to discuss a four-point plan aimed at turning the business from a loss-maker to one breaking even, said Fonterra group director of supplier and external relations Kelvin Wickham.
The organics market had been hit by the global financial crisis and market indications were it would not recover to previous levels, he said.
Research showed people were less willing to pay a premium for organic products.
"All categories felt the effects but particularly the category in which we sell, packaged dairy foods, where prices and volumes are still below 2008 levels.