Higher prices for organic grain have returned after a lengthy hiatus, say industry officials.
Demand for organic crops is building as the United States continues its recovery from a financial crisis that hurt the economy in 2008.
“During the recession, you could actually buy organic grain cheaper than conventional,” said Leslie Johnson, marketing manager for Growers International Organic Sales Inc.
The rise of unregulated natural food occurred during this time. Consumers saw natural food as a cheap alternative to expensive organic food during economic hardship.
As prices collapsed, organic farmers began switching back to growing conventional crops such as canola, which offered attractive per acre returns.
The shift away from organic crops was exacerbated by three years of wet conditions in eastern Saskatchewan, which caused a proliferation of hard-to-control weeds in organic fields.
“That’s one of the reasons why we lost so many people in that area,” said Johnson. She estimates the industry lost one-quarter of its growers in Western Canada.
The reduction in supply and the return of demand in the U.S. market started raising prices a year-and-a-half ago.
“If you’re an organic farmer, you should be happy,” said Johnson.
Current bids for organic milling wheat are about $15 per bushel delivered, up from $12.50 last fall and double the price for conventional milling wheat.
Organic feed barley is selling for $10 to $11 delivered, which is double the conventional price and 150 percent higher than the contract price last spring.
“The guys who didn’t have the production contracts were able to get some very nice prices,” said Johnson.
She estimates most organic crops are selling for a 130 to 200 percent markup over conventional crops.
Wally Hamm, a certifier with Pro-Cert Organic, said the price premiums are here to stay this time.
“This is going to be the new norm,” he said.
End users enjoyed the low prices that accompanied the recession, but they now realize the devastating impact it had on the supply chain and how difficult it is to rebuild stocks because it takes three years for a grower to become certified.
“They are not going to let the prices of organics slip to conventional prices again. It cost them dearly on the supply side. They took a beating because of that,” said Hamm.
End users have been forced to buy inferior product from countries such as Argentina and China, he added.
Buyers aren’t solely to blame for the grower exodus.
Hamm believes farmers made questionable decisions when they left organics.
“A lot of guys just jumped on this conventional canola because all of their land was suitable for conventional canola,” he said.
Hamm said farmers based decisions solely on price comparisons and didn’t factor in things such as capital costs. Pro-Cert is developing a formula to help growers conduct a more thorough comparison before switching to conventional agriculture.
Johnson anticipates organic prices will remain strong in 2013 despite some resistance from end users.
“They definitely want the prices to soften. It’s pricey product right now,” she said.
There is still plenty of interest in products such as milling wheat, she added, but while some growers are delivering at today’s prices, others are holding off.
“It’s just a game of who will blink first,” said Johnson.
Not much product remains in the system. She anticipates that what is left in bins will be sold within the next three months.
She hopes more acres will be planted to organic crops this year to meet the burgeoning demand.
“Growers (International) is very interested in more product, getting our hands on as much as possible,” said Johnson.