Organic growers are only now feeling the pain of slumping commodity prices that their conventional counterparts have faced for months, says a major grain buyer.
Many organic farmers signed production contracts in late 2008 and early 2009 at high prices. They have now exercised those contracts and face lower spot market values.
Organic wheat prices are $6.50 to $8 per bushel, below the historical average and down from the highs of $25 to $30 per bu. reached in 2008.Tom Cowell, Growers International Organic Sales Inc. general manager, said that reflects bearish factors.
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The price slide began a year and a half ago with the global recession, which has been particularly hard on organic agriculture because consumers are unwilling to pay a premium for food during economic hardship.
Two consecutive years of global bumper harvests boosted the global supply of organic grain.
A great threat to the industry is the emergence of Kazakhstan as a major competitor in the lucrative Western European marketplace.
Growers were planting 74 million acres of crops a year when the country separated from the Soviet Union in 1991. Seven years later they had reduced plantings to 24 million acres.
Large tracts of that 50 million acres of idled land is returning to production, and a lot of it is being certified organic because it sat for years without artificial fertilizer or pesticides.
Kazakh farmers are growing plenty of low-priced, high-quality organic wheat that is displacing Canadian exports in key markets such as the United Kingdom, Cowell said.
“It’s a pretty ominous factor.”
Even more ominous is the competition organic food products are facing from natural products on North American store shelves.
Regulations governing what constitutes a natural product are ill-defined at best and nonexistent at worst, said Cowell. Yet surveys show consumers put as much or more faith in those claims as certified organic products.
Retailers embrace natural products, which now rival the number of organic products on store shelves.
“That is really impacting organic demand in North America. (It is) a big problem in the U.S. and Canada,” he said.
The increased production, slumping demand and elevated competition means an industry that once suffered shortages now has surpluses.
“There is a lot of producers with a lot of product unsold on farms. I don’t think there is much doubt about that,” said Cowell.
Organic prices, which once moved independently of conventional grain prices, are now closely intertwined and the organic premium shrank.
Not only is an organic farmer facing severely depressed prices, he often can’t market the grain at those values because demand has dried up.
Wally Hamm, general manger of Pro-Cert Organic Systems Ltd., said low protein, related to low soil nitrogen, is also hampering organic wheat exports.
He said some western Canadian growers have acquired the bad habit of ignoring the need to recharge nitrogen levels by shifting land to perennial, biennial and annual legumes.
“It makes no sense to farm every acre every year and produce large quantities of mediocre quality grain, which has no market,” he said.
