Organic In Trouble?
Yes, big trouble--if it's grain or oilseed-based organic, such as the dairy, poultry and cereals goods segments, which happen to have been among the fastest growing (and more prosperous) markets in the industry.
As I told Andy Martin for his April 18 piece (with Kim Severson) on organic in the NYT ("Sticker Shock in the Organic Aisles"), we could be seeing a contraction in the organic industry for the fist time in over a decade as a result of an acute shortage, and extremely high prices, for organic corn, small grains, and soybeans.
An insider in the organic grain and oilseed trade told me last week we're now importing upwards of 40 percent of our organic soybeans from China, along with a good deal of our organic livestock meal. Food companies are wondering if they should discontinue product lines not just because commodity inputs are pricing them out of the market, but because they just can't find the grains and oilseeds they need.
The pressure on organic was a major theme of my talk last Tuesday at Canlis, a fantastic restaurant in Seattle, at a wonderful evening event sponsored by our friends at Organic Valley Family of Farms.
As I've been noting the past year, the organic grain and oilseed industry in this country was shockingly small before the run up in prices for ag commodities. How small? Probably about one- or two-tenths of one percent of grain and oilseed acreage is certified organic. Bear in mind, for the organic industry as a whole, we're looking at about 4 million certified acres for crops and livestock out of about 800 million acres nationally--or about one-half of one percent.
Now the organic grain/oilseed base is probably shrinking further in both absolute and percentage terms. This same trader told me several big organic grain growers for the company shifted, with regret, to conventional recently, drawn by the higher profits. Recruitment of conventional grain farmers to go organic has become essentially impossible.
What's more, organic growers had hoped that if land now in the federal Conservation Reserve Program were to come back into crop use, it could provide a ready source of acreage for expansion of organic grain and oilseed production. Proper management that avoided chemical weed control in the last three years of the 10-year contracts would make CRP ground eligible immediately for organic certification, without the need for conventional farmers to absorb the income hit common during the 3-year transition to higher organic prices.
But land coming out of CRP now is going into conventional production instead.
The problem in the grain belt isn't big organic. It's no organic. Or almost no organic.
Martin and Severson reported the same phenomenon at work with dairy farmers (and I've spoken to organic dairy farmers who've told me the same thing):
Doug Hartkopf, a dairy farmer in Albion, Me., said the high feed costs forced him to stop farming organically in December.“Instead of paying $3,000 a month, I was paying $7,000,” he said. “It was a very tough decision. It was something we had to do.”
In all, at least 25 dairy farmers in the Northeast have retired early or stopped farming organically in the last six months, said Ed Maltby, executive director of the Northeast Organic Dairy Producers Alliance. He predicted that the shifts would continue unless farmers received a price increase of about 25 percent from milk processors.
The high grain prices are squeezing more than just organic dairy farmers.
“In the last three months or four months, everyone along the chain in organic food is not making their margins,” said Bob Eberly, president of Eberly Poultry in Stevens, Pa. The cost of raising poultry has increased 16 percent in the last six months, but he said his prices had increased only 7 percent.
“In the next month or so, our customers are going to see a significant price increase,” he said. “We just have to do it.”
And let's hope consumers stick with organic through the sticker shock. I think it's worth it--but as my friend Phil Landrigan, an organic enthusiast, once said, "Organic is private school for food." Great if you can find it, great if you can afford it. But the ranks of those who can't find or afford it will be expanding in the months ahead.
Organic has long seemed isolated from the rest of agriculture by virtue of its distinctive practices and the higher price structure for organics at every level. Now we see the sector is not so isolated from forces like the ethanol boom, and that, in fact, organic in this country is highly vulnerable to the food price conditions we now face.
Also apparent is the cost of Congress' consistent failure, repeated again in the 2008 farm bill, to dramatically increase investments in the organic research, development, and marketing infrastructure needed to grow the sector. For all the potency of its cultural and commercial imprint, at its current scale organic still occupies a small fraction of the U.S. agricultural landscape, still contributes modestly to our public health.
Our fear at EWG is that this small, hopeful part of the U.S. food and agriculture system may get smaller over the next few years. That's not the direction organic should be headed in.
Comments
Thank you for bringing this important and disturbing trend to our attention.
The following statement does not make sense to me:
"Now the organic grain/oilseed base is probably shrinking further in both absolute and percentage terms. This same trader told me several big organic grain growers for the company shifted, with regret, to conventional recently, drawn by the higher profits. Recruitment of conventional grain farmers to go organic has become essentially impossible."
If organic GRAIN prices are so high, and supply is so far short of demand, the potential profits in organic grain farming should be soaring accordingly, creating tremendous incentives for more farmers to get into organic grain and to convert their CRP land into organic grain. Organic dairies and beef farms will have strong incentives to go 100% grass fed; organic pork and poultry (animals which need some grain to be productive) will hurt until organic grain production comes up.
Can you explain why it is not profitable to produce organic grain when this commodity is so scarce and high priced - are there some constraints to its production that might be addressed so that new producers DO begin organic grain production?
MARK: You need 3 years to convert to organic from conventional (follow organic
practices with no chems for 3 years) and farmers often experience a per acre
yield drop (and with rotations, often a farm-level production drop) while in
that transition. The acreage to start with was small--and farmers now feel
they can make as much money with conventional as they can with organic
taking that into account.
Organic dairies often have contracts that locked in lower prices for their
products while they're squeezed by higher grain prices (lots of conventional
dairies also feeling that).
And even organic dairies invariably use some feed--it's not all grass fed.
Dear Ken,
Thank you for your prompt reply to my questions. I can see that it is an economic challenge to make the conversion from continuous conventional grain to organic grain with optimal crop rotations, unless the farmer is ready to diversify - e.g. organic grain / organic potatoes / organic green vegetables and then back to grain. And with the three year waiting period it is even harder. Though aren't some farmers blessed with unsprayed land coming out of CRP contracts?
As for organic dairies - are you familiar with Tom Trantham's "12 Aprils" system in South Carolina, and/or Joel Salatin's multispecies grazing system at Polyface Farm in Swoope, VA? Both give excellent presentations and training seminars on their systems for others to emulate. Both raise 100% grass fed cattle. Joel's hogs and poultry undoubtedly get some grain, though I believe he grows it all on the farm.
I understand that Polyface is not certified organic, and I am not sure about Tom Trantham's operation; however I sincerely doubt that either farm uses any materials or practices that would not pass USDA organic standards.
Overall, I agree that this is a serious situation, and I thank you for writing about it. I may even include a brief mention of this situation in my next VABFnewsletter with a link to your web site.
Sincerely,
Mark
Posted by: Mark Schonbeck | April 21, 2008 5:28 PM
Excellent article and comment.
I am posting on my OrganicAssistant website in the Industry Message Board.
Posted by: Graham Crisford | April 22, 2008 6:37 AM
Ken's comments are on target. In the organic dairy world we have been trying to work with organic leaders to look at the system in determining the price farmers receive. Organic Dairy farmers receive a lower % of the retail dollar than their conventional neighbors.
Until farmers are paid a price for their organic product that gives them a viable living wage, there will always be a shortage.
The price that farmers now receive for non-organic corn is not excessively high, but represents a realistic payment for the cost of family farms producing a quality product.
Its now time for farmers to be paid a price for their product that encourages the next generation to continue organic farming. To tell farmers to tighten their belts or that only those farmers "that don't know what they are doing" are leaving organic production, is irresponsible and does organic leaders no credit
Posted by: Ed Maltby | April 22, 2008 9:12 AM
I believe that the problem is not as simple. It's not just the organic sector that's having shortages, there is a growing scarcity in all grains because farmers find it's easier to grow grains for fuel. No need to worry about quality. My daughter's in-laws were growing potatoes, as well as corn for fuel. Other farmers saw that they could not keep up with the demand for corn and changed to corn. The in-laws then stopped growing corn, as they now have no competition for the potatoes, and increased the acreage by buying out other farms. I do agree that organics have problems because "...the cost of Congress' consistent failure... to dramatically increase investments in the organic research, development, and marketing infrastructure needed to grow the sector." I grow organics on a small scale and sell at a farmer's market half a mile from my home so I am not affected by the price of fuel. Huge organic farms may be in trouble but not the smaller ones that sell in their local economy and as a result reduce the impact on the Earth.
Posted by: Anonymous | April 26, 2008 8:04 AM
The subsidized energy costs are masking true costs of production. The consequence for the consumer is a false sense of the market. Watching price signals as a function of supply and demand is misleading.
Organic produce sitting next to conventional for the same price should out sell the latter.
Does anyone trust the use of the words China and organic in the same sentence?
People fail to understand that the farmer is a price taker in this economy. Hence those who control the market control the profit until the system collapses. As I understand it, this is called monopsony and is addressed by Thomas Pawlick in his book 'The end of Food'
We can't afford conventional agriculture as it is destroying the biosphere.
It is likely that losses to the honeybee's, butterflies and bumblebee's are from the use of g.m.o. soyabeans. Just how long can conventional agriculture continue killing it's consumers and destroying the soil? Expect shocks as we discover unforeseen consequences (externalities predicted and ignored) and inter-dependencies that become weak links.
Interesting that Joel Salatin is touted as a solution. Mr Salatin whom I am well impressed with makes his money on the fact that he delivers a high priced product. By this I mean a side of beef versus a carrot. You can't follow his example with vegetables and fruit.
Farmers need to regain control of the market. This is why Mr. Salatin succeeds, he can eliminate the retailers.
Cheers
Posted by: Robin McTaggart | April 26, 2008 3:03 PM