Over the past couple of years, I have been developing and promoting new marketing tools to help farmers prove the concept of sustainability to consumers, and to use that to their advantage in pricing.
Most recently, my efforts have targeted helping those transitioning into organic.
I have always been honest and unbiased in my work when communicating market signals to farmers. To me, consumer preference can no more be ‘right or wrong’ than supply or demand can be ‘too big or too small.’ It just is what it is. An analyst’s work is to understand all the relevant information available, and to use this knowledge to predict the price trends that will follow.
The economics of organics are quite dynamic at this juncture. In recent years, there has been a steep rise in imports of certified organic crops — mostly corn and soybeans — into North America to make up for the widening gap between domestic supply and demand. Countries including Turkey, Romania, Argentina and India have become low-cost bulk exporters of certified organic grain and there is, so far, enough integrity behind the organic certification of these shipments to satisfy the sustainability requirements of food companies in North America.
Imports are coming into the U.S. at a faster rate than domestic organic crop production is rising. This is commodifying the organic market space quickly. It had traditionally operated on small, tight supply chains, thick farmer-buyer relationships, and highly variable pricing. Now it looks more like the western Canadian special crops trade, only with another piece of paper attached to the contract.
With commodification, organic crop prices will stabilize through arbitrage. Bulk marketing outlets will open up alongside existing supply chains for niche branded products. Statistics will become available around supply, demand, and cash prices — enabling market analysts to better predict future trends in organic crop markets.
This evolution of the organic market space represents an opportunity for conventional farmers keen to try something new, and get ahead of the risks inherent in not providing full transparency to buyers and consumers. Around field activities and farm inventory management, technology (such as farmathand.com) might allow our sector to catch up quickly. However, to avoid new regulations being imposed, it is an inescapable next step for all farmers to start tracking and sharing field records and bin inventories — with buyers, processors and consumers all the way down the supply chain.
Conventional crop production practices may not need to change, but nor can they remain hidden. Consumer confidence in the organic sector is attached to proven, long-standing transparency and integrity of organic food supply chains. Resulting from that, organics are enjoying healthy premiums and accelerating demand.
Farmers in Western Canada are very well suited to cater to this new growth market. The competitive edge is in the diverse mix of food crops within existing rotations, familiarity with acreage-based production contracts, sophisticated on-farm storage systems, and the region’s proximity to the U.S. market. This is arguably the largest and fastest-growing food market trend in the world today.
Consumer research strongly indicates that buyers of ‘organic’ closely associate the brand with ‘local.’ Canada is not considered ‘foreign’ in the same light as overseas origins because consumers who choose organic and local do so in part to avoid long-distance shipping of food.
At the end of the day, organic and conventional farmers are going to need — and to want — to coexist happily amidst the period of growth ahead. There remains more work to be done to achieve this, for example around cross-contamination, which can be quite penalizing financially and difficult to plan around. For conventional farmers, it’s the threat of weed seeds. For organic farms, it’s spray drift.
In closing, this isn’t about organic being better than conventional. This is about a response to legitimate market demand. I wish for every conventional farmer in Western Canada to start looking at this space with an open mind, seeking new information, working with their organic neighbours, and to seriously consider taking the plunge. The market wants to buy a lot more organically produced crops grown in North America, and Western Canada is perfectly positioned to capitalize on the opportunity.
This article was originally published on OrganicBiz.