By Michele F. Mihaljevich
Organic farmers are facing some of the same risks as conventional producers during the coronavirus pandemic, but also have concerns specific to their industry, according to an official with Mercaris.
From an operator standpoint, both types of farmers are dealing with such issues as having enough labor, said Ryan Koory, the company’s director of economics. With many grain elevators limiting access, organic and conventional producers may find it more difficult to make spot grain deliveries, he noted.
“Organic farming does have a different risk when it comes to trade,” Koory explained. “With conventional farming, there’s a concern over exports. For organic, there’s concern over imports.”
In the 2018-2019 marketing year, 26 percent of the U.S. organic corn supply was imported, he said. Seventy six percent of the organic soybean supply was imported as was 7 percent of the organic wheat supply.
The United States imports more organic soybeans than corn for several reasons, including agronomics, he said. The country has about half as many organic soybean acres as it does organic corn acreage.
“Weed suppression is a bit of a challenge in organic soybeans,” Koory said. “There’s also not a strong market for organic soybean oil. Conventional soybean oil is used for biodiesel and feed. We don’t export organic soybean oil. There’s no organic biodiesel.”
As for the livestock market, there is “very comparable exposure to risk there with conventional agriculture,” he pointed out. “The big concern in the conventional sector has been pork. You hit that weight and you’ve got to sell it. There is not a big organic pork industry but in poultry there is. We’re starting to see some impact with turkey and chickens.”
About 52 percent of U.S. organic corn is used for animal feed, as is 77 percent of organic soybeans and 40 percent of organic wheat.
The organic corn outlook for the current marketing year is bearish, Koory said. After the previous marketing year, Mercaris was expecting stronger prices and a reduced supply. Things changed as more corn hit the market than anticipated, demand slowed and imports increased, he stated. “We underestimated the growth in the number of certified organic operations. Farmers put a lot more corn in the market and that pushed on the price. They added a lot of supply to the price.”
Prices through April were about $7-$7.75 a bushel for organic corn.
The outlook is better for organic soybeans, he said. Production for the 2019-2020 marketing year is expected to be down 4 percent from the previous year; supplies are expected to fall about 2 percent. A drop in organic soybean meal imports could mean an increase in U.S. organic soybean crush. Organic soybean prices were $20-21 a bushel through April.
With an anticipated 17 percent increase in supply, the organic wheat market is also bearish, Koory noted. Livestock feed demand is expected to rise. U.S. organic wheat production was up 15 percent in 2019 over 2018. Organic wheat prices through April were about $8 a bushel.
Indiana has nearly 900 certified organic operations (farms, processors/handlers), with about one-third of those in LaGrange County, said Michael O’Donnell, Purdue University extension educator for organic and diversified agriculture. Statewide, about 0.6 percent of all crop acreage is certified organic, compared to a nationwide average of 1 percent, according to the 2017 Census of Agriculture. In Indiana, most of that acreage is in corn, soybeans, wheat, hay and pasture.
Hoosier farmers are showing increasing interest in organic corn production, but a little reluctance in soybeans, he said. “Some farmers are more hesitant with organic soybean acres. From a weed management perspective, corn is generally easier to manage, and historically, the revenue potential of organic corn has been very attractive.”
The process to certify a farm as organic, following conventional management, takes three years, O’Donnell said. “That can be scary when you think of where the market is going to be. There will always be a demand from the marketplace for differentiated food. If you start (the process of organic certification) and there’s a shift in the marketplace, you’re in a better position to continue to evolve with the market. If all your eggs are in conventional farming, you’re not going to be in as good a position as you would be if some were in organic. There are quite a few acres in transition in our state. You’re going to see increases in acres under certified organic management.”
Over the next year, Koory said he’d be watching organic production and demand, plus the macroeconomic fall out of the pandemic. “If there’s a good growing year, we’ll have a much bigger supply, which could mean lower prices. We’ve seen an organic meat production slowdown. There was previously 8 percent growth; now it’s 2 percent. Demand has slowed. With COVID-19, prices will be pushed lower, incomes will be lower.”
He does see a silver lining. “There’s been a shift in social behavior (due to the pandemic). Organic doesn’t have a big imprint in restaurants. With restaurants closed, consumers are going to grocery stores and that leads to an increased number of consumers interacting with organic. There’s an opportunity for organics to have a stronger impact on consumers.”