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U.S. relies on imports to fill demand for organic corn and soybeans.

Mindy Ward, Editor, Missouri Ruralist

December 19, 2018

5 Min Read
consumer chooses organic products
IN TOUCH: From the seed to meat, consumers are making a choice to purchase organic products. The U.S. relies on other countries to fill the supply of organic feed for livestock. However, there is a push for more domestic growth of this feed source, but are farmers willing to make the switch?NicoElNino/Getty Images

By 2022, there will be a need for 1.95 million acres of organic soybeans and corn to fill the world’s demand. That is if the organic demand grew by just 10% annually, which is not the case. It is growing at a pace of 40% per year.

Peter Golbitz does not want to raise an alarm, but rather point out opportunities in organic for America’s farmers. The U.S. has just over 600,000 acres of certified organic corn and soybean production. Golbitz, president of Agromeris, a consulting firm that focuses on food and agricultural industries, said other countries will fill the gap unless American farmers step up production.

The primary driver of demand is organic feed, Golbitz told a group gathered at the Organic and Non-GMO Conference in St. Louis. The organic feed market grew by 46% annually due to the rapid expansion of organic poultry. His statistics point to this segment growing 50% in 2015 and another 50% by 2017.

Golbitz admits that finding data on organic production is difficult. Information has been gleaned by a variety of national government entities like USDA’s Economic Research Service, National Agricultural Statistics Service and now Agricultural Marketing Service. However, he uses government data along with private industry data to determine trends in supply and demand for the organic industry.

Overseas supply concerns
"The rapidly growing demand for organic feed has created a tight supply in the U.S.," he said. Buyers responded by importing a large quantity of grain from both large-scale producers and small farm holders from around the word.

India moved back into the top spot as an organic soybean supplier, followed by Turkey. Argentina is also a key exporter out of South America. However, Golbitz said there are several new players in the space including Kazakhstan and Serbia. Smallholder producers with one or two hectares are coming into the market in places like Africa and Asia. "These farms have traditionally farmed organically but are now becoming certified and will be able to export," he said.

However, buyer confidence waned as fraud appeared in the supply chain in May 2017. For the country of Turkey, several organic certificates were revoked resulting in producers no longer being allowed to export to the U.S. Golbitz said this is a key time for buyers to start looking domestically for organic production.

Not enough U.S. acres
There was an estimated 639,000 acres in organic corn and soy production in the U.S. last year. Still, Golbitz said it is not enough.

"To keep up with a growing market and to reduce dependence on imports, we will need to bring on an additional 1.3 million acres of organic soybeans and corn within the next five years," he added.

The U.S. depends on importers for 70% of its organic soybean supply and 25% of corn.

In 2014 there was 865,000 metric tons of organic corn and soybeans worldwide. By 2017, that number grew to 2.2 million metric tons. However, with poultry production increasing 45% per year, there is more need for product.

"It is a challenge for supply," Golbitz said, "but a great opportunity for American production. It tells us that we are going to need to produce in order to become self-sufficient on organic grain and expand food production options for American producers."

Those farmers choosing to make a switch to organic production practices will be greeted with higher, guaranteed prices.

Price upside
In August 2018, U.S. produced organic soybeans fetched $18 per bushel, Golbitz said, while October reported $17 per bushel. These numbers are actually lower due to the large quantity of imports. Golbitz added that shipping to the east or west coast is cheaper than the farm gate prices in many markets.

“Before organic imports came in, organic producers were getting $20 per bushel,” he said. “A few years ago, it was up to $35 per bushels. But commodity prices are down and so are organic (prices).” Still, he said the price is well-above conventional prices that hover around $9 per bushel, give or take.

“The differential between price of conventional beans and organic increased every year,” Golbitz said. The difference he found was 2.7 times greater price for organic soybeans over conventional in January 2018 and by August it was three times as much. “It is a good indication of the strength of the market and wisdom of American producers to move to organic to look for higher returns.”

There is some price assurance with organics as well.

For the most part, organic price is set by a contract with the producers. These are not tied to commodity price on the Chicago Board of Trade. “It is more a categorical relationship,” Golbitz said, “a multiple of the board.” Those producers selling non-GMO commodities typically are a set price from the board and a premium over the price. For instance, the CBOT is trading soybeans at $9 and the producer contracts for a $1 premium above the board price, so the grower receives $10 per bushel. It is a less stable price system, with some upside promise.

However, organic is established. It is more stable and does go up or down based on market fluctuations. “The farmer and buyer set the price,” Golbitz added.

Getting on board
Golbitz said the market is asking for organic products and there is enough farmland to provide it. So, what is holding back farmers? Risk.

Transitioning a farm from conventional to organic takes time. There is the potential for yield loss during those years, which ultimately equates to reduced farm income. “There needs to be some assistance for farmers during those years,” Golbitz said. “Those who want to buy organic corn and soybeans domestically are going to need to step up and no just be willing to pay the price but be willing to participate in the market more actively.” Farmers need assurances that the markets will be there.

Talking with buyers, Golbitz reminded them that when negotiating contracts, “remember your producer is your partner, not just a supplier.”

“These farms need to manage risks well, they need profits, they need to be able to expect and manage margins,” he said. “They need to be sustainable.”

He mentioned the need for a commitment to developing U.S. infrastructure for organic production. “We need to strategically locate elevators where there is organic soybean and corn production.”

Golbitz added that the next generation of consumers want clean, traceable and sustainable products in the market place.

"Organic checks all of those boxes," he said. "The American farmer is the most efficient and sustainable in the world. We have the ability, know-how and quality land to produce organically to fill the markets.”

About the Author(s)

Mindy Ward

Editor, Missouri Ruralist

Mindy resides on a small farm just outside of Holstein, Mo, about 80 miles southwest of St. Louis.

After graduating from the University of Missouri-Columbia with a bachelor’s degree in agricultural journalism, she worked briefly at a public relations firm in Kansas City. Her husband’s career led the couple north to Minnesota.

There, she reported on large-scale production of corn, soybeans, sugar beets, and dairy, as well as, biofuels for The Land. After 10 years, the couple returned to Missouri and she began covering agriculture in the Show-Me State.

“In all my 15 years of writing about agriculture, I have found some of the most progressive thinkers are farmers,” she says. “They are constantly searching for ways to do more with less, improve their land and leave their legacy to the next generation.”

Mindy and her husband, Stacy, together with their daughters, Elisa and Cassidy, operate Showtime Farms in southern Warren County. The family spends a great deal of time caring for and showing Dorset, Oxford and crossbred sheep.

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