Canada’s organic industry has a popularity problem. Each year, Canadians buy more organic beef, more organic breakfast cereal and more organic soymilk than the previous year. The public’s hunger for organic food seems insatiable and consumer demand is expected to expand exponentially, but can supply meet the demand?
Paying $8 for a small box of breakfast cereal might seem outrageous. But an increasing number of Canadians are willing to pay 10, 20 or 40 percent more for certain grocery store items, if the food is produced organically
The Canadian Organic Value Chain Roundtable, a coalition of government and industry representatives from the organic sector, published a document last fall on organic grains and oilseeds. It said 58 percent of Canadians buy organic products every week, and sales of organic food and beverages grew from $2 billion in 2008 to nearly $3 billion in 2012.
Consumers cite many reasons for buying organics, most of them involving the perception that organic food is more nutritious, better for the environment, or is in some other way healthier than conventionally raised food.
Value Chain Roundtable leaders say organic food and beverage sales could increase to five percent of the Canadian market by 2018 from 1.7 percent in 2013.
The prediction may be accurate because organic food had a 4.3 percent share of the U.S. market in 2012, according to the 2014 World of Organic Agriculture report, an annual publication featuring organic trends and statistics.
Tripling sales in Canada over five years, albeit from a low level, doesn’t seem like it could trigger a crisis.
However, there is an underlying weakness in Canada’s organic sector. Canada’s organic industry may not be able to keep up with consumer demand because only a fraction of conventional producers are converting to organic, despite record prices for organic grains and oilseeds.
Canada could be in an absurd situation if demand for organic food grows as expected and if industry leaders can’t persuade conventional growers to give up pesticides, fertilizer and biotechnology.
A country that is one of the largest exporters of grains and oilseeds in the world could become a net importer of organic grains and oilseeds.
It’s hard to pin down the exact number of farmers who produce organic grains and oilseeds, but there is little doubt the number has declined in parts of Canada over the last five to seven years.
For example, the Prairies lost hundreds of organic field crop producers from 2009-12.
“We don’t keep good statistics but we think it’s between 20 and 40 percent of organic producers left in the three years of the recession,” said Laura Telford, business development specialist for organic marketing with Manitoba Agriculture.
Telford said the exodus was the most dramatic in Saskatchewan, which at one time had more than 1,200 organic farms.
“These days I’d be surprised if it was much over 950,” said Telford, a member of the organic roundtable.
Doug Pchajek, manager of the Saskatchewan agriculture ministry’s crops and irrigation branch, said the province had 55 percent of Canada’s certified organic land in 2009.
“The organic sector estimates that there was a 15 to 20 percent reduction in certified organic acres between 2008 and 2013,” he said in an email.
Farmers quit the sector when organic grain prices crashed during the global economic collapse of 2008-11. Conventional grains and oilseeds hit unheard of highs during the same period. Wheat briefly topped $20 per bushel in 2008 and soybeans traded at higher than $17.50 per bu. in 2012.
Biofuel production, minimal stocks and increased demand from emerging markets kept prices high for several years. Prices have dropped in the last 24 months, but organic grain spiked in North America when production couldn’t satisfy demand:
- Organic milling wheat sold for $20 per bu. in January 2014, and organic feed wheat hit $16 per bu. in Alberta, while regular feed wheat sold for $4 per bu. last January.
- Organic flax topped $35 per bu. in 2014, while ordinary flax traded for $13 to $14 per bu.
ORGANIC PRICES IN THE U.S.
THE U.S. DEPARTMENT OF AGRICULTURE PUBLISHES A BI-WEEKLY REPORT ON ORGANIC GRAIN PRICES. AVERAGE PRICES AS OF JAN. 7, 2015 ($US/BU.):
- Feed grade corn $11.62
- Feed grade soybeans $23.47
- Feed grade barley $7.46
- Feed grade oats $5.89
- Feed grade wheat $21.00
It’s difficult to sympathize with farmers who receive $21 a bu. for organic wheat, but price spikes have consequences. It creates a chaotic market for buyers, and milling grain and organic livestock feed becomes unaffordable. This, in turn, threatens organic sales.
“As we came out of a recession, nobody was prepared for this huge rebound in organic (demand),” Telford said.
“So we get stuck in the bind that we are currently in.”
To get out of this quagmire of negligible acreage expansion and rabid demand for organic grains, Telford and others have developed a sales pitch to attract conventional producers.
The pitch can be summed up in a word: profitability.
“There’s a group of us who have always thought that we needed to have the business case for organic in our back pocket,” Telford said.
The roundtable laid out the economics of organic grain and oilseed production last fall in a document titled the Organic Advantage: Transition to Higher Profits:
- Organic input costs are half of conventional inputs.
- An organic grower keeps $58 of every $100 generated, compared to $31 for a conventional farmer.
- Using 2014 prices and assuming a farmer is growing wheat, durum, oats, barley and flax in Saskatchewan’s brown soil zone, a conventional farmer would earn returns of $60.05 per acre and an organic farmer would earn $189.49 per acre.
Tom Manley, owner of Homestead Organics, which sells organic grain and provides agronomic services to organic producers in eastern Ontario, said a profitability pitch is the obvious answer.
He said recruiting producers to join the cause based on philosophical, environmental and social arguments won’t work because the industry has most of the farmers who agree with those principles.
“Those who are sensitive to that discussion have already converted. The rest of them, (we) need to a do a business case.”
Roundtable co-chair Gunta Vitins said the business case for organics extends beyond the price of grain and the cost of inputs.
Vitins, who runs a consulting company in Vancouver, said an increasing number of consumers want to buy sustainably produced food. Agriculture has to meet that expectation because ignoring the trend is a business risk.
Telford and other organic leaders will roll out the economic arguments this spring. She is developing a new organization that will try to boost organic production in Manitoba, Saskatchewan and Alberta.
The details aren’t finalized, but Telford and others will appear at conventional grower meetings and lay out the business case for organic conversion.
Paul Gregory, who runs Interlake Forage Seeds in Fisher Branch, Man., isn’t sold on the strategy. He fears the economic pitch could attract conventional growers who know nothing about organic production methods. The priority should be quality organic farmers rather than quantity, he said.
“I think a huge problem in the industry … is that it’s not for the average Joe,” said Gregory, who buys organic forage seed from certified growers.
“There’s opportunity in the industry, but you better have perfect drainage and you better do your homework…. (Some of) these organic guys, and conventional guys, they don’t know their weeds, they don’t know their insects and they don’t know their diseases.”
There are a number of barriers to transition, but three stand out:
Farming organically is hard
Convincing farmers to switch to a complex production system won’t be simple in an age of big acreages, in which producers favour hardy crops that require inoculants and glyphosate and little else.
Conventional farming primarily follows a prescription model. Farmers who have an issue with soil fertility, disease or weeds call an input dealer for the appropriate product and the problem usually disappears.
“In organic production, if you have a problem it’s a long, drawn out process,” Manley said.
“While it takes about three years to transition the land to organic, it takes about five to 10 years to transition the farmer to organic because there is a whole new set of management skills and practices and a mindset that has to shift.”
Transition, transition, transition
Farmers who decide to switch to organic grain production this spring won’t be organic growers until 2018.
Organic wheat may be $20 per bu. right now, but there’s no certainty that prices will stay high for 36 months.
“What’s stopping people from thinking about organic is that three years of risk,” Telford said.
“They don’t know anything about organic production and they won’t get the organic premium.”
Vitins said the transition period is a risk, but demand for organic food is robust. Supply and demand fundamentals suggest organic grain prices will remain high.
Do conventional farmers want to be associated with organic?
Many Canadian farmers maintain a “live and let live” attitude when it comes to agricultural practices. If a neighbour chooses to farm without pesticides, for instance, that is his choice.
Still, the furious debate over genetic modification is not going away, and pesticides remain controversial. Organic advocates frequently make provocative and derogatory comments about conventional agriculture.
Defenders of conventional farming respond with equally hostile language. The nastiness has hardened positions and led to a philosophical chasm between the two systems.
Telford said organic agriculture is often presented as a new paradigm, or a new and better way of thinking. That sort of argument likely offends conventional farmers because it suggests that established practices are a colossal failure.
She said organic advocates should turn down the volume.
“I’m not telling people to stop talking about GMOs and all that stuff, but if the organic sector is going to have any inroads with the producers they hope to attract, it’s not going to be through that rhetoric, it’s going to be through the business case for organic.”
Manley said the enmity between organic and conventional is overstated. The battle may have bred a few hard-liners, but it’s incorrect to say most Canadian producers are hostile to organic.
“Yes. There was a lot of antagonistic argumentation for years. I believe now we’re beyond that.”
Will conventional growers convert?
Manley said the price of grains and oilseeds will ultimately answer that question.
Conventional growers have had little reason to switch to organic since 2008 because most crops have been profitable.
However, some farmers have started kicking the organic tires over the last year as grain prices dropped.
“We’re starting to get more people calling us,” Manley said.
“People are paying attention again.”
Vitins said farmers have to recognize that consumer dynamics have evolved. North Americans expect more transparency, and there is increasing pressure on farmers to adopt sustainable methods of growing food.
She said it makes business sense to get ahead of the curve and deliver what the public wants.
“For those that are forward looking, organic represents opportunity.”
WESTERN PRODUCER ARTICLE