The markets for organic crops 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 are stabilizing and arbitrage is working. Bulk marketing outlets are opening up alongside existing supply chains for niche branded products. More statistics are coming available around supply, demand and cash prices, enabling analysts to predict market trends in organic crops.
Most if not all of the big food companies have entered into or are exploring organics, including General Mills, Ardent Mills, Paterson Grain, P&H, AGT Foods and Richardson International. Cargill is launching programs to help farmers in transition to organic. Medium-sized conventional Canadian grain companies like Grain Millers, Providence Grain, Sunrise Foods and Thompson’s already have a toehold in the markets for organic crops.
This is great for organic farmers, because it makes the job of marketing much easier. It used to be that many of the organic buyers were hard to find, poor at communicating with growers, located at a great distance from the farm, and not set up to pay quickly. Now that there is a stronger local organic buying community, costs and risks are disappearing around loads being rejected and inventories unable to be liquidated.
It’s still possible to over-supply an organic market, especially if it is a niche food with limited processing applications and an overseas supply that competes into North American markets. But in general, for the next couple of years the mainstream organic crops like wheat, oats, peas, flax, soybeans, corn and feed grains are forecast to enjoy enough growth in demand so as to accommodate increased production. This should allow prices to hold up for a number of years even amidst accelerating supply growth.
In fact, it’s quite a unique setup in the organic markets today whereby new sales of larger parcels of mainstream organic crops to food companies leads to an increase in long-term demand. As counter-intuitive as that may seem, this is because there is so much latent demand from food consumers. Grocery stores and food companies can’t increase organic product purchases due to an inability to secure a long-term supply of organic grain. Also, traders are growing more hesitant to source organics from offshore, leaving an estimated 4-5 million tonnes of market share potential growth for local organic supplies to displace imports.