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Time to find a niche?

Time to find a niche?
Farmers lean on niche crops such as non-GMO and food-grade-quality grain for premium prices. Specialty products from organic grain may offer farmers new opportunities.

As farmers prepare to enter a new year, low commodity prices follow them. While farmers face another year of tightened belts and tough decisions, could premium niche markets provide new opportunities?

According to Wyatt Muse, merchandiser for Clarkson Grain Co., the short answer is “yes.” Clarkson Grain Co., based in Cerro Gordo, focuses on identity-preserved grain, including non-GMO and certified organic white corn, yellow corn and waxy dent corn, and non-GMO and certified organic soybeans.

Muse shares that many farmers are already taking advantage of the premium non-GMO market. In fact, non-GMO corn and soybean production is now meeting demand.

PREMIUMS MAY VARY: Doug (right) and Neal Nelson, Nelson Family Farms, Lynn Center, plant nearly 100% non-GMO corn. Neal notes that premiums for their non-GMO corn vary depending on delivery timing and locations, from 15 cents for fall deliveries to 40 cents for corn that is 99% purity or higher at certain locations.

Doug and Neal Nelson, Nelson Family Farms, Lynn Center, plant nearly 100% non-GMO corn. Neal Nelson says they’ve had very good luck with yields, and thanks to a corn and soybean rotation, they’ve been able to keep corn borer populations down.

Nelson says non-GMO corn premiums have shrunk since 2014, shifting from 70 cents per bushel to 15 to 40 cents per bushel, depending on the buyer and purity. But he says they still come out ahead after saving $32 to $42 per acre on seed inputs, which varies depending on hybrids and quantities.

Nelson says their non-GMO yields are very close to their GMO corn yields, reaching 276 bushels an acre with some hybrids, which helped them achieve a new 24-bushel-an-acre-higher farm average. Even with herbicide costs $10 an acre higher, and insecticide costs that vary based on pest pressure, “the ROI still works out,” Nelson says.

Tom Kentner, who produces non-GMO soybeans near Danville, agrees. Kentner contracts his non-GMO soybeans with a local co-op. “Premiums in the last four years have decreased, with production being up from increasing yields,” he says.

And this year, some farmers outproduced their contracts. Kentner says excess non-GMO grain was sold along with GMO grain. That said, Muse cautions against pulling back too far on non-GMO production.

“Demand is rising rapidly, and there are localized needs,” he says. Muse points to Dannon's recent move to only use dairy products sourced from cows fed non-GMO feed. He predicts feed companies will move into the non-GMO feed production business. “That will spread demand away from the river,” Muse explains.

Related: Ag groups take Dannon to task for plan to increase non-GMO feed purchases

And organic feed? Muse says consumer-driven demand and major shifts by retailers are increasing demand for organic grain for livestock feed. Sales of organically fed poultry jumped from 10 million in 2005 to more than 60 million in 2015, he notes.

Where does organic grain for feed come from? The short answer: It’s not domestic.

Peter Golbitz, Agromeris, a consulting firm that advises companies about food processing, marketing and agribusiness, reports that in 2015, 38% of corn and 78.5% of soybeans for organic feed came from imported grain. The imports are valued at $350 million, which includes a premium on both crops. 

As the need for organic feed climbs, 2015 and 2016 USDA National Agricultural Statistic Service reports indicate domestic organic production acres are flat to declining. (See story below: Organic grain production: Who is meeting the demand?)

Why? Muse explains the process to certify organic acres takes three years following the last “unapproved” product application. Farmers can’t collect an organic premium on grain produced on the farm during the three-year transition process. There’s also a learning curve for organic production, from managing soil fertility to handling weed control.

Why go through all of that? Muse says right now, organic corn is valued at $8 a bushel and organic soybeans at $18 a bushel. He adds that the cost of production nets out about the same as conventional or GM grain, but there’s a shift on where dollars are spent. For example, savings on untreated, non-GMO seed goes toward more expensive organic fertilizer, insecticides and fungicides, and manual labor. 

Muse believes it’s not just time and a learning curve holding farmers back — there’s a social drawback, too. As battles over GMO labeling continue and the gap between average consumers and food producers grows wider, members of the ag world may have mixed emotions when they hear the word “organic.”

But to Muse, it’s about meeting a demand. “It’s a market more than a religion,” he explains. “It’s about producing what the consumer is asking for.”

While organic production could provide farmers new opportunities for premium prices, other Illinois farmers produce premium crops based on long-standing family traditions.

Check back tomorrow for more on niche markets.

Organic grain production:
Who is meeting the demand?

Time to find a niche?

Wyatt Muse, merchandiser for Clarkson Grain Co., says organic poultry producers are the leading driver behind organic feed needs, and today they rely on imports for grain.

Other countries have recognized and met that demand faster than the U.S., says Peter Golbitz, with Agromeris, a consulting firm that advises companies in food processing, marketing and agribusiness. In 2015, Greece and Bulgaria entered the organic corn market, and Brazil and Spain jumped into the organic soybean market.

The majority of organic soybean imports come from India, Ukraine, Argentina, China and Canada. Organic corn comes primarily from Romania, Turkey, Argentina, Canada and India.

Back in the United States, USDA reports indicate few farmers making the move to organic production. Organic transitional acres increased from 122,175 in 2014 to 150,880 in 2015.

To meet current organic feed demands, Golbitz says the U.S. needs 500,000 more organic acres, and counting.

A niche of another breed

If you have time and patience, parent seed production may be your calling. Jeff Lynn, Oakford, produces parent seed for Monsanto. Lynn explains that the process does require extra steps and flexibility in crop plans. Parent seed producers are typically notified in March regarding how many production acres are needed. For 2017, Lynn says he currently plans for all commercial beans, but he’ll make the switch as needed. He plants the crop as late as July.

Timing isn’t the only adjustment Lynn makes during production. Depending on the parent stock traits, 30-foot barriers around fields and 60-inch gaps between varieties may be needed for seed in the regulatory phase. This process is much easier now with GPS and autosteer.

“I used to get out of the tractor, measure and flag it,” Lynn explains. “Now I don’t have to do that.” However, the cleaning process remains, and elbow grease is required. “You have to get in and clean out everything that will touch that seed.”

Lynn notes the premium for the parent seed stock is based on several factors: moisture, splits and cleanouts, to name a few. He estimates his premium at roughly $1.20 a bushel.

As a “smaller” farmer, Lynn says he’s able to take the extra steps needed to produce parent seed stock. Next season will mark his eighth parent seed harvest.

TAGS: USDA Soybeans
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