Dairy's battle reflects conflicting views on organic: 'Locavore' movement gains ground.

• Author: Taylor, Mike
• Position: [PLANET-PROFIT REPORT] ORGANICS VS. LOCAL

FORTY MILES NORTH OF DENVER where residential real estate has yet to completely overrun agriculture, Mark Retzloff shows a visitor around his 400-acre Platteville facility. It's the hub of Aurora Organic Dairy's operations even though only about 1,000 of the company's more than 12,000 milking cows are here.

"This is a landlocked farm," the Aurora Organic chairman says, referring to encroaching residential construction in the distance. "They're not growing crops here anymore. They're growing houses."

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Retzloff founded Aurora Organic along with CEO Marc Peperzak in 2003. Retzloff is a self-described organic expansionist: Larger organic enterprises, he believes, allow for greater economies of scale, making organic foods affordable for more people and prompting more pesticide-and fertilizer-riddled farmland to be converted to organic.

Not everyone sees it this way, least of all Mark Kastel, the head of a family-farm nonprofit advocacy group in Wisconsin that has dogged Aurora Organic since the day Retzloff launched the dairy five years ago.

Based in Boulder, Aurora Organic Dairy boasts a $50 million state-of-the-art milk plant about 30 miles northeast of its head-quarters, on its Platteville farm. Milk from some 11,000 cows on four other farms--two near Kersey, Colo., and two in Texas--arrives daily in 5,000-gallon insulated tanks. After pasteurizing and homogenizing, two computerized machines squirt the milk at a rate of 300 half-gallons per minute into private-label cartons that eventually make their way to Costco, Target, Safeway, Wal-Mart and roughly a dozen other retailers in all 50 states.

Retzloff is one of the pioneers of Boulder's natural-foods industry, having co-founded the natural-foods store Alfalfa's in 1983 and Horizon Organic Dairy in 1991. Both were bought out--Alfalfa's by Wild Oats (which Whole Foods acquired last year), and Horizon by Dean Foods in 2003.

But Retzloff's natural-foods exploits predate his arrival in Boulder. As a student at the University of Michigan majoring in conservation and resource planning in the late 1960s, Retzloff and his two roommates launched a co-op called Eden Foods with an initial supply order of $200. They traveled the Michigan countryside to find farmers who might be interested in becoming organic suppliers. The natural-food company is still in business today outside of Ann Arbor, Mich.

"I was a really big environmental activist," the 60-year-old Retzloff says of his college days. "The number one single point for environmental degradation in the United States at that time and still today, was agriculture: soil erosion, the types of chemical fertilizers they were putting in the sprays. My goal was to change what we were doing with agriculture. It didn't matter to me if it was one acre at a time or 10,000 acres at a time."

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The subject has come up on this cloudless July morning because Retzloff's latest undertaking, the largest private-label organic milk producer in the country with annual revenues of $100 million, has come under fire from organic regulators and lawsuits alleging consumer fraud.

In April last year following complaints by the Cornucopia Institute--Kastel's family-farm advocacy group in Wisconsin--the U.S. Department of Agriculture issued Aurora Organic a "notice of proposed revocation" of its organic certification for "willful" violations of federal organic standards. Ironically, Retzloff had lobbied for and helped draft proposed rules for the Organic Foods Production Act of 1990 years earlier.

The USDA listed 14 violations, among them that Aurora Organic had entered conventional cows into milk production before the required one-year period of continuous organic management, and had failed to establish and maintain cows' access to pasture at its Platteville facility.

The fallout extended beyond Aurora Organic, to the Colorado Department of Agriculture, one of 95 certifying agents under the National Organic Program. The USDA reviewed that agency's role as Aurora's certifier and mandated that the agency increase its training and hire additional personnel, presumably to do a better job of monitoring organic operations in the future.

Aurora Organic settled with the USDA in August 2007, agreeing among other things to reduce the size of its herd at the Platteville farm from 4,200 to...