Because of “unmet demand,” the 58–year old
farmer has benefited from higher prices, with his organic corn routinely
fetching as much as $12 a bushel and soybeans $26. That compares to
bushel prices of $3.70 and $9.80 for conventional corn and soybeans. The
focus on organic has allowed Johnson, his brother and his cousin, who
farm 3,000 acres in Madison, to shrug off the sharp drop in corn and
soybean prices that has left some producers struggling, following years
of robust income.
“The last five to 10 years, we’ve had no problem at all,”
said Johnson who grows organic corn, soybean, oats and alfalfa. “I could
have sold my grains multiple times over, just based on the demand. My
last three years of farming has probably been better than the last
30-years combined. That’s how much of an uptick there is now.”
Organic food sales have risen by double digits annually as
the public consumes more fruits, vegetables, pastas, dairy and meats
raised and grown without pesticides, genetically modified crops or
antibiotics, among other stringent requirements.
Despite the organic farming’s booming growth — organic food
revenue has tripled over the past decade to a record $36 billion last
year — it remains a small fraction of the $630 billion in total
supermarket sales in 2014 reported by Progressive Grocer Magazine.
The industry’s growth isn’t expected to subside anytime
soon, according to the Organic Trade Association. It predicts sales will
increase 12-to-15 percent annually for the next three years.
But the rapid growth has brought challenges the organic industry is struggling to address.
One of those challenges is demand, which organic producers
are struggling to meet. Shortages of some organic products has led to
sky-high prices. And more livestock producers, hungry for organic feeds,
are importing from overseas because they can’t find enough in the U.S.
The Organic Trade Association (OTA) concedes that because of
incomplete data, competition for land in some areas, and the
three-years it takes to earn certification as an organic farm, it’s
difficult to know how many new acres of organic crops will come into
production.
“The biggest thing holding back growth isn’t demand, it’s
shortages,” said Laura Batcha, executive director of the OTA. “There is
not a major retailer in the country that doesn’t have appealing to the
organic shopper in their strategy right now. But what happens if the
industry can’t fulfill that opportunity and people walk away?”
Batcha said some private-sector food makers and retailers
are buying land to produce their own organic produce, or are enticing
producers with long-term contracts that offer to pay them extra while
they transition to organic. The transition period can be costly for
producers, who must deal with lower yields and input costs but aren’t
able to take advantage of the premium that organic producers receive.
The trade group is evaluating options to help growers
transition to organic. One possibility would offer farmers a chance to
participate in a program that would make sure they follow necessary
requirements while completing the 36-month transition period. It also
would help food companies plan for the future by giving them a sense of
how much new land is in the organic pipeline.
“The momentum is not going to dissipate for organic,” Batcha said.
Grocery stores, restaurants and other users often struggle
to find the products they need to meet demand for organic products,
yielding unique, creative strategies for wooing prospective farmers and
ranchers.
Elevation Burger, which sells organic, grass-fed, free-range
beef at 55 stores mostly in the U.S., shares its sales growth figures
and projections of store openings with suppliers to give them a glimpse
into the company’s long-term needs.
Elevation also sometimes pays for producers to obtain their
certificates signifying they’re organic — which can cost up to $4,000 —
in exchange for a slice of future supply. In addition, the burger chain
has hired consultants to help farmers convert their operations to
organic.
“It’s all about supply. Every farm we bring on supports our
growth,” said Michael Berger, a founding partner of Elevation Burger.
“If you want to be in the business like we are of having a consistent
organic protein supply, your only option is to control and grow the
supply chain to your customized needs, and that is to go directly to the
growers.”
Berger said one of his meat processors abroad was decimated
by a cyclone seven months ago and couldn’t deliver a promised 50,000
pounds of beef. The burger chain had to scramble to procure enough meat
from other suppliers at a higher cost.
“We were stuck biting our nails, down to the wire,” said
Berger, who estimated Elevation will buy 4 million pounds of beef and
500,000 pounds of chicken during the next 12 months. “You can’t just
call a regular distributor and say, ‘Hey, sell me that.'”
Wal-Mart Stores, the world’s largest retailer, carries more
than 1,600 organic items ranging from dairy and produce to peanut butter
and macaroni and cheese at many of its more than 4,500 U.S. stores.
John Forrest Ales, a spokesman for Wal-Mart, said the company works with
farmers and other suppliers to outline its organic needs three to five
years out so farmers can plan and invest.
“We’re always realistic when we plan,” Ales said. “If you’re
going to supply organic to a grocer as large as Wal-Mart, that is not
always a fast turnaround time.”
To win certification as organic, a farm must stop using
pesticides and make other changes, then maintain those practices for
three years. During that time, they may not benefit from the higher
prices linked to organic products. Livestock producers also need to
transition their animals and land before they can be certified.
Colin Johnson, a corn and soybean farmer in southern Iowa,
said the lower yields associated with organic farming coupled with
higher larger labor and input costs have discouraged him from switching
his 700 acres.
“I haven’t thought very deeply about it,” Johnson. “For us, we’re at a pretty sustainable system now with our crop rotation.”
But the fourth-generation farmer said if he was approached
by a grain processor or supermarket with a lucrative deal to make the
change, he “would definitely consider it.”
Bob Quinn of Big Sandy, Mont., who started raising organic
crops in 1986, worries that high prices might deter some organic buyers.
“It’s really too much to be sustainable,” said Quinn, whose
grain customers include an organic dairy and bread makers. “You can’t
price your customers out of business where they can’t sell their
products. We can see ever-faster growth if the supply was greater and
the price was a little lower so that the final (cost) wasn’t such a
shock.”
What is organic?
Organic, which is governed by strict government standards,
requires that products bearing the organic label are made without the
use of toxic and persistent pesticides, synthetic nitrogen fertilizers,
antibiotics, synthetic hormones, genetic engineering or other excluded
practices, sewage sludge, or irradiation.
So what can organic farmers use instead?
Organic farmers rely on hand weeding, mechanical control, mulches, cover crops, crop rotation and dense planting.
Who sets the organic standards?
Certified organic foods are produced according to standards
set by the U.S. Agriculture Department’s National Organic Program. These
regulations outline what the grower must do to use the word “organic”
or the USDA organic seal.
How long does it take to transition from conventional to organic?
A farmer must go through a three-year transition period of
compliance with organic requirements. During this time, growers
generally face lower yields and increased input costs but do not benefit
from higher prices given to organic producers. Livestock producers also
need to transition their animals and land before they can be certified.
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