Organic feed grain prices may have soared too high

backfire? Brokers warn farmers holding out for even higher prices that they may miss the boat

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Prices for organic grains prices may be too good and could end up pushing the organic industry over a cliff like they did in 2008-09, some buyers fear.

“I’m concerned that these prices are getting too high,” said Roger Rivest, an Tilbury, Ont.-based buyer for Keystone Grain.

“We’re getting a lot of resistance from feed companies and buyers.”

Driven by the U.S. drought, old-crop organic corn has reached $14 per bushel, and feed soybeans at $23 to $24. That’s reminiscent of three years ago, when some feed companies bought $14 corn and ended up selling it for $8 when organic livestock feeders, faced with the prospects of negative margins, simply shifted back into the conventional market.

“Then the whole system collapsed. I’m afraid we’re getting close to that again,” said Rivest.

Corn supplies this year are likely to be an issue, and the livestock industry is likely to reach for relatively cheaper barley and then wheat as substitutes. However, talk of drought in Ontario may have been overstated with some areas reporting bumper crops. Crops east of Toronto were hardest hit, but Quebec has seen an average year, he said.

Melissa Gardner, an Ann Arbor, Mich.-based buyer for California company New Organics, said some farmers are holding out for even better prices. One Amish farmer in Iowa with 800 bushels of organic corn in his bin recently turned down her offer.

“He’s like, ‘I’ve got room to store it. I’m not in a hurry to sell it,’” she said. “But he turned down $17 a bushel.”

Can backfire

Hoarding too long can sometimes backfire, she said. Farmers expecting a return to the eye-popping prices of 2008, when wheat hit $30 a bushel, may be disappointed.

“I had a farmer the other day tell me that he had 2005 peas for sale. Seriously, those are seven years old. I don’t want them,” said Gardner.

The gap between buyers and sellers seems especially wide this year, she said.

One customer sought peas for $9 a bushel at a time when farmers are looking for $15 to $16, she said.

“When they told me the price they were looking for I kind of laughed at them,” she said.

On the other hand, farmers seeking $14 to $15 a bushel for hard red spring wheat at the farm gate are finding customers in short supply.

South of the border, she said, corn, soybeans and edible beans are in short supply, but wheat, barley, and oats seem fairly abundant, depending on the region.

Bin-run barley is fetching $10 a bushel, and oats $5.50 in Canada, but U.S. farmers seem to be aiming for $8 oats. Brown flax is trading for $23 to $24 a bushel, and golden, $28 to $29 on a clean weight basis.

Strong prices for feed grains has also driven millet up to $10 a bushel, she added.

Prices for organic feed grains have “gone crazy,” but many farmers are waiting for the spread between the organic premium and conventional grains to widen, said Laura Telford, an organic business development specialist with Manitoba Agriculture, Food and Rural Initiatives.

“They’d like to see it at least 20 per cent, and it’s not there yet for wheat,” she said.

The small size of the organic feed grain sector and lost production due to drought in the Midwest has some producers of organic meats south of the border showing signs of panic, she added.

“We are getting lots of calls here in Manitoba from all sorts of places that would normally source organic feed grains from the U.S. Midwest,” said Telford.

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