Demand for identity-preserved (IP) grains has never been higher, especially for certain food-grade crops.
IP grain buyers are struggling to ensure they're offering an attractive premium that will entice producers to sign contracts.
“Producer opportunities in the IP grains market have never been better,” says Greg Lickteig, senior group manager at Scoular Company.
John Motter, a producer in Jenera, OH, has been producing low-linolenic soybeans for four seasons. This season marks the first in which 100% of his 400 soybean acres will be planted to the IP soybean. “There's a demand for low-lin soybeans, and that demand will continue to grow,” Motter says. And the premium offered is a payoff for his additional management time. “I have to segregate the soybeans, plant the right bean in the right field and deliver the bean to the processor. Asking me to do these things means I have to be rewarded.”
Bob Utter, Louisa Gold Farms, in Columbus Junction, IA, says the added premium is worth the effort, as long as producers clearly understand their contract and what is required of them.
“It's all about the premium paid,” Utter says. “I get enough of a payback for my management skills. It's worth my time and effort.”
HOWEVER, DEMAND FOR the 1% ultra low-linolenic soybeans will continue to drive premiums higher in order to secure product to meet the demand.
“When we get to the real question in terms of grower premiums, the marketplace is certainly more competitive,” says John Hibbard, business manager of the Bunge/DuPont Biotech Alliance. “Growers have to think about their marketing due to the volatile nature of the market. At the end of the day, growers are going to have to look at the economics of their farm, and look at the costs and benefits of participating in an IP program.”
Rich Gassman, crops manager at Amana Farms, Amana, IA, has been growing Asoyia soybeans for three years. In addition, the farm produces waxy corn, white corn, some wheat and non-IP yellow corn. “IP grains fit well with our operation,” Gassman says. “We have enough storage to segregate the grains, and the premium is a good incentive for us. We're always looking for innovate programs that offer us a better return.”
THIS YEAR, the planned 2,000 acres of IP soybeans shrunk to about 1,100 acres due to this spring's flooding. Acreage of waxy corn and white corn has also been reduced, which is putting some added pressure on Gassman to ensure what's planted will meet his contract needs. “You can't just go out and buy 50,000 bushels of white corn,” he says. “We usually build in a cushion to ensure we'll meet our contract needs. But this year, it will be very tight.”
Producers stress that it really comes down to a matter of management time when growing IP grains.
“Like every successful business, it's in the detail,” Utter says. “There are more details to take care of when dealing with IP grains.”
Details like ensuring that the planter is cleaned out prior to switching varieties or hybrids. One seed in the planter means several kernels of corn or soybean seeds in the planter.
“You must understand what the grade is going to be, and how the contract works,” Utter says.
And you must also understand what is in the contract. For instance, Utter's white corn contract specifies an aflatoxin level below 10 parts per billion. “That's about one kernel in a 10,000-bushel bin,” Utter says. “That takes good management on my part.”
Motter, who says his first foray into the IP soybean market was due in part to his interest in low-lin soybeans, says that in order to grow a specialty grain, he has to see the economic payoff. “I have to segregate, plant the right bean in the right place and deliver the soybeans,” he says. “I have to have a payoff that justifies that work.”
His experience with low-linolenic soybeans has been positive. “It's a good market, and does not have as many stringent requirements as other IP grains I've worked with,” Motter says. “The requirements aren't that difficult to meet, and the buyers have been good to work with.”
Past experiences, including having entire loads of specialty grains rejected because they haven't met contract requirements, can leave producers with a bad taste in their mouths. “It's difficult to put all that effort in to grow an IP grain, then not have a payoff at the end,” Motter says. “That's why it's important to understand the contract, and how you can ensure you meet the contract's specifications.”
Utter says it comes down to being able to produce grain of a specific variety or hybrid, within specified tolerances. “If grain quality isn't one of your primary concerns, or if you don't want to take the time to clean out a planter from field to field, then IP grains probably aren't going to work for you.”
“This year was one of the toughest ever to convince producers to grow IP grains,” Utter says. “At $15, producers didn't think a $1 premium was worth the effort.”
But for Utter, the premium is worth the effort. “I never lose sight that the premium is just an extra incentive to grow a product that I'm already planting. It just takes a little more management. But the payoff is putting money in my pocket.”
ARE IP GRAINS RIGHT FOR YOU?
Volatile markets, changing premiums, skyrocketing input costs…deciding if that extra premium is worth the time and effort can be challenging. At the Asoyia Web site (www.asoyia.com) a profit calculator allows you to input actual costs associated with grain production, then compares the revenue per acre for Asoyia soybeans, regular soybeans and corn.
The calculator takes into account land costs, tillage practices, crop input costs per acre, planting costs, fungicide/insecticide costs, corn drying expenses and yield.