Organic Demand Races By Supply

March 4, 2017 02:41 AM

A CoBank report reveals opportunities and challenges

Consumers speak with their wallets, and right now they’re opening up for organic and non-GMO crops, according to a CoBank report. And U.S. production is failing to keep up.

A sharp rise in organic grain imports the past year has some food manufacturers offering incentives for farmers to switch to organic production. U.S. production of non-GMO crops are on the increase, CoBank notes, but domestic production of organic corn and soybeans falls short of current demand.

“Domestic supplies of non-GMO corn and soybeans increased steadily in 2016,” says Dan Kowalski, director of CoBank’s Knowledge Exchange division. “Transitioning to organic production, however, is a multiyear, risk/reward calculation that’s likely holding some U.S. growers back.”

Organic corn imports doubled from 2015 to 2016, and U.S. production of organic soybeans only met 20% of domestic demand. Analysts say 1 million to 5 million U.S. acres need to transition to organic production to meet current demand.

“Apprehension among growers is likely fueled by the three-year transition period before their crops can be certified as organic,” Kowalski says. “Remaining profitable during that period is often a struggle.”

Food manufacturers are incentivizing farmers by providing free agronomic services and paying premiums on transitional acres. A new transitional certification allows farmers to capture prices in between organic and non-organic crops, Kowalski says.

Proximity to local markets is another critical factor. “If local buyers don’t exist, the cost of logistics involved with transportation can quickly erode pricing premiums,” he says.

Demand for non-GMO and organic crops will continue to rise, Kowalski adds. Monetary incentives (or a lack thereof) will likely determine how U.S. farmers will close the supply gap.  

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