Organic Farmers Face Growing Pains As Demand Outpaces Supply

admin | August 13th, 2015 - 6:28 pm

Rising demand for organic food presents opportunity and challenges for farmers.

A young farming couple from Des Moines, Iowa decided to overhaul their farming operation by embracing what was then a small but growing niche in agriculture: organic farming, now one of the hottest sectors in the multibillion-dollar food industry.

Organic is much more mainstream now. More people are seeking it out.  This farmer sells beef along with carrots, kale, cabbage and almost 60 other crops to Whole Foods, co-ops and farmers markets in Iowa. They actually do end up saying ‘no’ quite a bit. They’re pretty much selling everything they grow now.

Embracing organic has made it easier to get produce and meats into grocery stores and attract customers seeking organic goods at farmers markets. The decision also has been a boon to the farm’s bottom line, with the operation posting sales of around $400,000 last year, up 20% from two years earlier.

Their success has allowed them to focus full-time on farming, with the wife quitting her job in Minneapolis-St. Paul to work on the family operation.

The demand (for organic) just keeps going up and up and up.

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 part of the $630 billion in total supermarket sales in 2014.

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. 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?

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.

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.

To win certification as organic, a farm must stop using most 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.

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.

But this 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.

Another farmer in Big Sandy, Mont., started raising organic crops in 1986 on a few acres before converting all of his farm during the next five years. Initially, he had a hard time finding a market for his organic grains, and the premiums were an average 30 to 50 percent higher than for non-organic crops.

Today, it’s a much different story. Because of “extreme competition” and short supply, this farmer said he’s getting paid four to five times more than conventional farmers for wheat and several times more for the peas, alfalfa, hay and barley he grows on 3,400 acres.

Currently, a bushel of hard red winter wheat — used to make bread — is about $5 a bushel compared to more than $22 for organic wheat.

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 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.

Source: Organic Trade Association

Source:  http://www.usatoday.com/story/money/2015/08/05/organic-farmers-face-growing-pains-demand-outpaces-supply/31116235/  8-5-2015

 

 

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