farmgate: Premium Grain Prices Have Shifted From Specialty Grains to Organic Grains
A decade ago Cornbelt farmers were signing production contracts to get an extra dime on a bushel of specialty corn, or an extra 50-cents for food grade soybeans. When corn was $2 and beans were $5, that extra 10% of value meant a lot. When the octane kicked in on the markets in 2007, very few specialty crops were grown because premium was not worth the hassle, and there was money to be made on basic commodity crops. With that glow dimmed, premium prices are becoming more attractive, particularly those offered for organic crops.
Organic production has grown exponentially in the past two decades, but still is only at the 4 million acre point. Organic producers suffered ridicule from neighbors for many years, but after continued profitability, their legions are increasing, along with their production. USDA reports 3,411 certified organic producers in Cornbelt states, including 905 in Wisconsin, and over 143,000 organic acres in North Dakota.
USDA’s latest report on organic farming says there are organic operations in every state, with 1.7 million acres of organic cropland. There may be no surprise the center of organic gravity is in California with over 2,000 organic farms and nearly a quarter million organic acres. USDA says there would be more interest, but the greatest obstacle is high management cost, risks of taking on a new venture, limited awareness, lack of marketing infrastructure and inability to capture marketing economies. But those producers who have shifted to organic production have done so to achieve what many farmers have tried, including lowering input costs, capturing high value markets, and boosting farm income.
The Organic Foods Production Act of 1990 set the federal standard, but USDA’s rules were not adopted until 2002, which bolstered certification programs and provided rules that farmers and buyers needed. Those regulations require organic growers to be certified if they have more than $5,000 in annual sales. And there are 53 different certification programs, including 19 different state programs that implement the rules and keep everyone on track.
If you doubt the potential profitability of organic production, consider price that were paid for organic grains, well before the highs for commodity grains in summer of 2008. Upper Midwest prices in 2007 ranged from:
1) $6.48 to $9.09 for feed grade wheat.
2) $6.31 to $11.26 for feed grade corn.
3) $14.59 to $17.00 for food grade soybeans
4) $13.36 to $17.43 for feed grade soybeans
April 9 organic grain prices were:
1) yellow feed corn $6.50 to $8.25
2) food grade soybeans $19.50 to $21
3) feed grade soybeans $17 to $19
4) feed grade HRW wheat $7 to $8
You may not be able to tell organic crops from conventional crops unless your neighbor admits to producing them, however there were 7,245 acres of organic corn in Illinois, over 11 thousand in Nebraska, and more than 20 thousand acres in each Iowa and Minnesota when USDA last reported state acreage in 2005.
USDA’s package of information on organic production would be helpful in researching opportunities as well as development of a business plan. The latest USDA market news report indicates sales of new crop feed grade soybeans are being reported from $16.00 to $18.00 per bushel. New crop food grade soybean contracts are from $19.00 to $24.00 per bushel. It is expected that fewer organic acres will be planted this year, compared to last year.
Organic crop production is not something you are going to decide today to implement for the current crop year, however, it is something that will take some thinking and planning time and that may become available as many Cornbelt farmers head to the fields in coming days.
Summary:
Organic crop production takes time and effort, however, organic acreage is growing steadily, and the number of organic producers is increasing annually. While prices for organic grains are at a premium to commodity level products, planning and work is required to achieve those prices. At a time when commodity prices have settled down, organic premiums are offering the potential for increased farm income.
Posted by Stu Ellis on April 21, 2009 12:00 AM to farmgate