Current Trends in Organic Grain Marketing

By Mary Barbercheck and Anna Busch et.al

Three experts representing the organic industry discuss current trends and issues in organic grain markets.

Demand for US organic poultry and livestock feed continues to grow, creating demand for more production of organic feed grains. The strong demand creates an opportunity for PA producers, but the ways that organic grain are marketed differ from conventional grain marketing and is currently in a very dynamic period. To help producers and other ag professionals get a better understanding of current trends in organic grain markets, three members of the Penn State Extension Organic Agronomy Team - Kristy Borrelli, Agronomy Educator in University Park, Dave Hartmann, Livestock Extension Specialist in Lycoming County, and Anna Busch, Field and Forage Crops Educator in Union County - hosted a panel discussion “Avenues for Marketing Organic Grain.”

Three experts representing diverse experiences in the organic industry were available to answer questions and discussed current trends and concerns in the organic grain industry. Panelist Robert (Bob) Anderson of Sustainable Strategies LLC—Advisors in Food and Agriculture serves as Senior Trade Advisor for the Organic Trade Association. Bob has extensive experience in organic production, marketing, and policy. He operated Walnut Acres Organic Farms, America's first organic value-added food processor, for 30 years beginning in 1969. A long-time organic pioneer, he was the first chair of the USDA's National Organic Standards Board, which drafted the national organic regulations and advises the National Organic Program. Panelist Andrew Smyre is the owner and operator of Lazy Dog Farms, LLC, where he produces agronomic crops on 200 transitioning and 200 organic acres in Mohrsville, PA. Andrew is also a Certified Crop Advisor and organic grain merchant with Tuscarora Grain Co. LLC and is currently serves as the Vice-President of the Pennsylvania Certified Organic (PCO) Board of Directors. Panelist Luke Howard is the owner and manager of Homestead Farms, Inc. in Millington, MD. which has been certified organic since 2002. The farm produces organic row crops on 750 acres and produces organic chickens under contract. Luke is also self-employed as a consultant for the organic industry through SLM Partners Management and Advising. SLM Partners acquires rural land to implement regenerative, ecological management systems that are commercially viable and environmentally beneficial. Luke is a member and past president of the PCO Board of Directors and served two terms as a member of the Maryland Agriculture Commission.

All of the panelists expressed the opinion that as the organic industry has matured, marketing has become more complicated, and all advised growers to “sow what they can sell,” and ensure that they have a market for their product before planting. Smyre further advised growers to have more than one buyer lined up and to diversify sales outlets. He added, “Know what you have – the quantity and quality, especially for value-added sales, and know your actual acres because some contracts for grain can be based on either bushels or acres.” In the past, it was relatively easy to sell organic grain directly to mills that were buying organic, and because supply of organic grain was short, mills could take as many acres as could be produced. Now, as the markets are maturing, Howard advised to use a mixed approach and to work with both mills and brokers, but to be sure to get information on payment timelines with either type of buyer. Smyre added that a grower’s market can depend on acreage and location, because large grain buyers and brokers may want to buy from large producers as opposed to many smaller producers. Producers of value-added or specialized products are more likely to sell direct to consumers than to commodity buyers. Smyre emphasized that it is important to request credit references from buyers. “It’s a business practice that shows you are serious,” he said.

Organic grain quality has become especially important. Coming into 2020, there was a million-bushel carryover of organic corn from 2019, and in theory, the US produces enough organic corn to meet domestic needs. Smyre explained, “Because we aren’t currently facing the same kind of shortages of domestic organic corn as in the past, buyers can be pickier on issues like toxin levels.” Howard emphasized that selling organic grain is about building a relationship with buyers and communicating with them along the process to get the best possible price. “It’s a good idea to add storage to the farm as acreage increases, so that grain can be marketed into the next year,” he advised. The situation is somewhat different for US organic soybeans, for which there is a high demand and high price premium compared to conventional soybeans because domestic production still lags far behind need.

In response to a question about information and technical needs in organic grain value chains, Howard sees the need for the development of greater efficiencies through the use of robotics and precision ag, and the need to adapt rotations to local conditions and needs. Anderson added that there is a need to develop markets for alternative crops like alfalfa, which many organic grain growers use between grain crops to build soil fertility and reduce weed pressure. Smyre explained that Mid-Atlantic growers have a competitive advantage for regional value-added and specialty grain markets, such as packaged grain for bakers and maltsters, spelt, and buckwheat. For specialty markets, especially for food, it is critical to grow what the buyer will buy – they generally want specific varieties for specific uses. A technical need related to this are variety trials. According to Smyre there is currently no established system for trialing organic varieties. For that reason, it is important for growers to have test plots every year to see what does well in a specific location. Even a small planter pass each of a few varieties can be helpful for comparison and allow a farmer to observe how a variety performs.

A question about fraud in the organic grain market came up, as there have been some high-profile cases involving domestic and imported conventional grain being misrepresented as organic in recent years. Anderson explained, “We have to take a step back and look at the situation. Why is there fraud? In recent years we have had a 300% increase in organic livestock and protein production to meet consumer demand, but only a 20% increase in organic acreage producing feed grains. That means there is an opportunity to enter a growing market, but also an opportunity for fraud. The fact that the fraud was caught and prosecuted indicates that the system is working. USDA recognizes the problem and has revised rules for ensuring integrity and enforcement to maintain consumer confidence. Organic integrity is everyone’s responsibility.” The new proposed rules to deter fraud include tighter regulations around the requirement for handlers to be certified and for organic certificates for all organic grain imports, and improved inspections and inspector certification requirements. Anderson added, “When you have shorter supply chains, you can be more confident about the people you are working with.” According to Howard, “Organic started as a small, consumer-driven industry but as it has evolved, the need has arisen for more structure to stop fraud. With the evolution of the organic regulations on fraud and enforcement, I think the future looks bright on avoiding fraud.” Smyre added that as domestic production increases, especially for soybeans, we may grow out of the problem by decreasing organic imports. Although most organic soybeans are imported, the rate of importation is slowing. Anderson concluded, “Past instances of fraud present an opportunity for Pennsylvania growers to market Pennsylvania grain both locally, because consumers are looking for local and regional products, and to the world as a USDA-certified, high quality product.”

According to Howard, East Coast producers have a great market advantage because of the proximity to many local and specialty markets in the region. Each of the panelist saw an opportunity for the development of local specialty markets that are currently lacking. Howard would like to see the development of better local markets for alfalfa, since it is an important crop in organic rotations, but transportation is currently expensive and there isn’t necessarily a price premium for organic alfalfa. There are also opportunities to partner with local livestock and dairy producers for local sales. He also likes barley because it can be double-cropped with soybeans, but the market for organic barley is currently limited. Anderson added that we need to think about alternative grains like millet, while Smyre thinks there could be good opportunities for malting barley, dry beans, hard red spring wheat, field peas and more early spring crops.

In response to a question about the ability of US producers to meet domestic organic grain needs and still farm in an environmentally-sound way, Howard answered that scale doesn’t necessarily detract from the ability of a grower to use environmentally sound practices. He thinks that larger-scale growers can take advantage of efficiencies for constant improvement, such as incorporation of organic no-till into appropriate crops in the rotation, especially in more northern areas of the region where weed pressure is not as intense. Anderson added that integrity and environmental conservation are not a function of size, but a function of commitment. Smyre agreed, “It is up to each individual grower how they will manage their ground.” He added that he would like to see more information and development of integration of livestock and crop production to improve soil health on farms.