Farmers like round numbers when it comes to marketing their crops. Numbers like $4 or $5 a bushel for corn, $11 a bushel for soybeans, $1 a pound for their cotton — well, maybe 90 cents would be good enough these days.
Those numbers can be difficult to achieve. Example: As this was being written, July 2018 corn was trading for $3.50 a bushel on the Chicago Mercantile Exchange. That’s a long way from $4 a bushel when corn futures rarely move more than a few cents a day.
That’s why the 47-cent premium Indigo Ag, Inc., offered to corn growers in the spring attracted attention across the Mid-South. Add 47 cents to the $3.53 close on June 19 and you have $4 corn, a price most growers would love to have in 2018.
Indigo Ag, a relatively new company that was started initially to develop new products involving the microbiome, is capitalizing on new consumer interest in how and where and under what circumstances their food is grown.
The company, which was launched in Boston, but now has a substantial presence in Memphis, Tenn., is working with more than 75 growers across the Mid-South to help them deliver crops that will bring that kind of premium.
What types of crops?
“We’re really agnostic,” says Barry Knight, senior vice president at Indigo Research Partners, responding to a question about what types of crops — GMO, conventional, organic — Indigo Ag is working with its growers to provide to textile mills, rice mills, food processors and, ultimately, to consumers.
“We’re more focused on what the grower can deliver than the products we can sell,” he said. “What the textile mill or rice mill or wheat buyer wants is what we want to provide for them. And those things that provide the biggest health benefits to consumers are what we’re clearly interested in.”
Indigo Ag’s first generation microbial seed treatment is designed to address water stress in crops, but its future focus goes well beyond that.
“The things that we will invent and the things that are in our pipeline now will address many of the big problems in ag,” says Knight. “So, clearly, water, and we’re working on nitrogen, and insects and fungi and diseases are among those.
“What has been most interesting to us is having a system that can produce an end-product that consumers want. If consumers are given a choice of buying corn that was produced with synthetic inputs or with something natural, our research suggests they would choose something natural.”
Farmers and merchandisers have long sought to capture premiums on valuable crop traits. But those have proven to be elusive because of the lack of measures for preserving the identity of the crops and the tendency of any premiums to disappear in times of low prices.
Indigo Ag’s 2018 spring crop premiums — 51 cents per bushel for soybeans, 47 cents for corn, $25 an acre for cotton (the equivalent of 2 to 2.5 cents per pound, depending on yields), 43 cents for wheat and 35 cents to 75 cents per hundredweight for rice, depending on milling quality — would be a welcome addition to farmers’ bottom lines.
“Indigo started out with an ethos that said we were going to focus on three things as a company, and that we were going to be rather uncompromising about those,” said Knight, who brings several years of working with basic manufacturers and a retail organization to his new role.
“No. 1 is farmer profitability, and that’s the reason we don’t think of ourselves as a product company — that we’re just going to sell a farmer something we can charge him more for. We literally think about how we can partner with the farmer so we can enhance his profitability.
“No. 2 is to do that in such a way it enhances the environment we all live in. And, No. 3, that that product we produce made the farmer more money and enhanced the environment, that we do it in such a way that consumers have a healthier, better product.”
With cotton, for example, “we have people who are interested in rainfed cotton,” he said. “There are parts of the world where consumers are competing with agriculture for water, and if those consumers can buy cotton from areas where it is rainfed, they would probably pay a premium for that.”
Some consumers, on the other hand, are more concerned about the amount of CO2 (carbon dioxide) in the atmosphere. Those could be interested in programs where farmers put more carbon back in the soil through production practices.
Indigo can provide such information to processors and consumers because its research partners share records on varieties, planting dates, populations, rainfall, irrigation and fertilizer, insecticide and fungicide applications with the company.
Thus, if an end-user wants to know how a crop was grown, Indigo Ag can provide the information that makes that corn, cotton, rice, soybeans or wheat more valuable to the purchaser.
“So, we’ve grown from being a products company to a partner to growers, and we’re learning along the way,” says Knight. “There will be a case where we will sell the seed treatment, but that’s not our focus.”
It’s an efficient value chain being driven by consumer demand,” says Brad Godwin, Mid-South regional business manager for Indigo Ag. “It’s what consumers value, what they want around the transparency of their food.”
Godwin said Indigo Ag is partnering with seed suppliers to provide selected traits for the grower premiums. “In cotton, it’s Americot,” he said. “In corn and soy, it’s Local Seed Co., and on rice we’re using conventional varieties and the same with wheat.”
Besides the premiums, Indigo Ag has also launched an on-farm storage program that allows growers to use existing grain bins, or finances grain bagging systems with no upfront cost for growers without on-farm storage.
“As you know, many farmers have put in a lot of on-farm storage here in the Mid-South,” says Godwin. “We’re paying them the equivalent to commercial rates so not only do they have an opportunity to capture the premium, but they also have the ability to store that grain and to be able to utilize their capital investment to provide an additional payment per month.”
“That is one of the biggest places of value that we’ve come to understand,” says Knight. “With wheat, for example, farmers produce different varieties under different conditions that lead to different qualities. Some wheat may have 13 percent protein; some may have 8 percent protein.
“When they take it to the elevator, it’s all commingled. If I’m a mill, and I want to buy 13 percent protein, there’s nowhere for me to go. Indigo Ag has created an on-farm storage program with a testing component that allows us to understand where 13 percent protein is and connecting that with the mill that needs it.”
For farms that have 8 percent protein, “believe it or not there’s a premium for that as well,” he notes. “Micro-breweries are looking for low protein wheat, but they also can’t go to the elevator and ask them to load them some low-protein wheat because it’s all commingled. The same is true with other crops and other qualities, and that’s where we see an opportunity.”