PRAIRIE grain farmers have been caught in a vise of low commodity prices, high input prices and gradual government abandonment.
But the squeeze may yet extrude a market advantage they’re well positioned to exploit.
That advantage is identity preservation, the ability to separate products and keep them separate, and to trace them from origin to end user.
Ironic though it may seem, the economic conditions that forced widespread agricultural diversification in recent years have also put prairie grain farmers into a key position. They’re better able than their competitors to extract premiums from markets poised to demand ever-greater levels of product identity preservation.
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The advantages:
- Prairie grain farmers are quick to respond to market pressures, including demands for specialty products.
- They have large amounts of on-farm storage, developed as they diversified into various grain varieties, special crops and pulses.
- A lack of government subsidy programs frees them – or perhaps forces them – to try new crops to extract maximum value from markets.
- The Canadian grain grading system has an array of classes and subclasses that have given it experience in keeping a multiplicity of products separate.
Signals have pointed toward identity preservation for years. Consumers, faced with an array of food choices beyond that of any previous generation, are spending their food dollars on branded foods and organic products.
They say they want to know where their food comes from and under what conditions it is grown. In essence, they want identity preservation.
What remains now is a mechanism that will pay farmers to deliver it.
Gary Pike, an agricultural consultant who spoke on IP at a recent Winnipeg conference, says he has clients who have extracted premiums of up to $9.50 per bushel in the United States for product that has attributes specific to buyers’ needs.
Apparently the premiums exist at some level. Can access be expanded? He says it can.
Pike believes grading standards and the blending of pooled grain prevent farmers from getting the profits they could realize – if only they knew the exact attributes of the crops they grow and could market on the basis of those attributes.
But few farmers do. No. 1 durum from Moose Jaw isn’t the same as No. 1 durum from Bow Island, says Pike, but there are buyers out there who want the specific qualities of each.
He sees a future with crops grown and then segregated on the basis of specific milling qualities, malting qualities or nutraceutical content. And he envisions a time when the producers will receive premiums for identity preservation as a matter of course.
Pike’s view takes identity preservation to a minute level.
David Kohl, an agricultural economics professor at Virginia Tech, takes a broader look that should prompt producers to use their IP advantage quickly.
“Today’s niche is tomorrow’s commodity,” says Kohl. He foresees a day when product traceability will be a requirement, not an option. Once that happens, premiums available for identity preservation will disappear.
Kohl agrees that prairie farmers are in a better position than their U.S. counterparts to employ the benefits of identity preservation. On a recent tour in his job as a Royal Bank associate, he refers to American farmers as “fat and lazy” because of their willingness to use farm subsidies rather than diversify.
But preserving the identity of a product or branding it, to use another term, takes a different set of skills than does commodity production, Kohl warns.
Federal and provincial agriculture ministers acknowledged the value of identity preservation this summer by noting it as a specific part of long-term agricultural policy. The federal government acknowledged it further in late November with a $1.2 million program through the Canadian Seed Institute to develop market delivery quality assurance.
Identity preservation of grain is certainly not a new concept. Every farmer who grows more than one kind of grain or pulse practises it at some level.
Now it’s time to take it to new levels, while there is maximum profit to be gained.
