The lingering question in organic markets heading into spring seeding is how big an impact the downturn in the U.S. economy will have on demand for high-priced organic food.
Initial signs are that independent brands sold through co-ops and natural product retailers are doing well because they are being marketed to the industry’s core consumers who are firmly committed to organic ideals.
However, multinational brands sold to mainstream consumers through retail giants like Wal-Mart are losing huge market share, according to Jason Freeman, sales and marketing manger for Farmer Direct Co-operative Ltd.
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“Anybody who is really focused on increasing their business through the mainstream end of organics is being hurt,” he said.
The impact on Canadian farmers remains to be seen. If organic demand stagnates rather than increasing at its previous clip of 10 to 15 percent annually, there should still be some decent prices. But any reduction of demand could drive prices lower depending on North American production, which is hard to predict.
Tom Cowell, general manager of Growers International Organic Sales Inc., said there has been a renewed link to conventional grain markets because end users are paying closer attention to the spread in the two commodities.
“I believe this should mean sideways to slightly firmer prices from today’s organic grain values over the next six to 12 months depending on the particular grain-oilseed and how niche-independent it is from its conventional relative,” he said in a Feb. 1 company newsletter.
Freeman still sees some good bets for organic farmers looking to lock up production contracts, which should be available toward the end of March.
“Flax is looking good,” he said.
Producers should take a hard look at any offer of $30 per bushel or more. Gold flax could be particularly enticing but farmers shouldn’t get too greedy, he said.
A $5 per bu. premium over brown flax should be a reasonable incentive.
Freeman anticipates another strong market for malting and feed barley in 2009, with farmers fetching $7 to $8 per bu. for feed barley loaded into rail cars.
There will likely be some organic wheat carryout heading into spring, but that is not too big a concern because the crop moves well. If there is a wreck in Kazakhstan, the Europeans will be looking to Canada.
He expects milling wheat contracts in the $12 to $15 a bu. range in the bin, down from $17 to $19 last year. While that is quite a drop, $12 a bu. isn’t bad, historically speaking.
“That’s your new low but it’s still $3 per bu. higher than what your averages were a few years ago,” said Freeman.
Producers might want to steer clear of durum, which was overproduced in 2008.
“If you’re a durum farmer, I highly recommend holding your durum into next year so you can get a decent price,” he said.
There is a market for feed peas that should pay growers $10 to $11 per bu.
The niche organic hemp market will likely deliver about 85 to 90 cents per pound, but that forecast comes with a big caveat.
“Don’t grow unless you have a contract or you’ll be sitting on it for a long time,” said Freeman.
All of the above price estimates will be subject to the severity of the U.S. economic slump. Potentially offsetting the withering demand is the fact that farmers have had two years of great prices and may be stubborn sellers.
“That will really determine what the price bottoms out to,” said Freeman.
