Organic grain market thrives amid pandemic but risks remain

Published: May 2, 2020
Issue:
Organic grain and food industries are thriving while conventional food sectors are failing

As the coronavirus pandemic exposes weaknesses in the industrial food system—tons of milk and produce for food service dumped and thousands of hogs and chickens killed because of meat packing plant closures—the organic grain sector is thriving. Suppliers report strong demand for their products despite the pandemic. But whether this trend will last remains to be seen.

90% of annual projected sales sold in March

We’ve enjoyed a measurable bump in business,” says Eric Jackson, chairman of Pipeline Foods, a supplier of organic and non-GMO grains and ingredients. “We’re seeing demand for organic grains, and orders from our customers have been steady and increasing.”

At the retail level, Jackson says organic food items are “flying off the shelves,” particularly cereals, pasta, and “anything to do with flour.”

Nebraska-based Grain Place Foods is selling organic grains like “all get out,” says owner David Vetter. His business generated 90% of the sales they projected for the whole year in March alone.

Demand is so strong that Vetter is running out of supplies. “We’re out of stock, and trying to find quality grains. We have sold everything and won’t have new supplies until fall.”

Grain Place sells grains wholesale to food manufacturers and retail products like whole grains, oats, wheat, and spelt to retail stores.

In Missouri, Steve McKaskle, owner of McKaskle Family Farm, sees strong demand for his organic rice and popcorn. “We are 15 purchase orders behind. We’re covered in business,” he says.

Organic rice is seeing strong demand because it is a good “apocalypse food,” McKaskle says. “It has a great shelf life. If you buy a lot of beans and rice, you could eat for a long time.”

Peter Carlson, director at Terra Ingredients, a supplier of organic and non-GMO grains, recently told Food Dive that his business has grown 30% since concerns about the pandemic intensified in March.

We’re seeing high demand on most everything, including flax, beans, pulses, and lentils,” he says. “New customers are reaching out to us, and current customers are increasing their order sizes.”

Carlson sees the strong demand continuing for the foreseeable future.

It seems like this is going to be the new normal, at least for the medium term,” he told Food Dive. “Clearly, with more people at home, there’s some shift in what people buy—from store shelves instead of food service—that’s a different sets of ingredients.”

The buying shift from food service to retail stores may be benefiting the organic industry.

When people shift to retail grocery store purchases from eating at restaurants, that’s where organic food is,” Carlson says.

Further up the supply chain, organic flours are also in demand, says Shrene White, general manager at The Annex by Ardent Mills.

Demand for both our organic flours and quinoa is strong. Even before COVID-19, we were seeing increased demand.

Lower organic grain prices

In Wyoming, Leonard Mosher, owner of Mosher Products, says he is busy loading railcars of organic wheat for food and feed use. “A lot of customers are buying organic grain,” he says.

But Mosher is concerned that organic farmers will be hurt by low prices for their grain. He heard that one organic grain buyer was offering just $5.00 per bushel for organic wheat, which is $9.00 lower than the price for hard red winter wheat in March 2019.

Some organic farmers may go back to conventional production (due to low prices). Farmers need to have more than that,” he says.

McKaskle says that organic corn prices are around $7.00 per bushel. “Imports are flooding the market and dropping the price, which hurts the US organic farmer,” he says.

At Vermont-based F.W. Cobs, company president Shaun Brooks is also concerned about lower organic grain prices because of cheaper imports.

With our dollar being so strong it increases the buying power of companies that import grain and ultimately drives the price down for the U.S. farmer,” he says.

Brooks also sees reduced demand for organic feed grains during the pandemic.

The end user’s products were initially in high demand when there was a run on the grocery stores, however as the restaurants closed, we have had more end users be affected,” he says.

Looking ahead, Brooks sees reduced demand for organic in the short term.

I feel that the organic demand may see a decline until things get back to normal, and this will put more pressure on the organic grain prices.”

The organic farmers Ardent Mills works with are focused on this year’s crop.

Our farmers, like others, have questions about the market and are apprehensive as to what the next few months will look like,” White says. “But, they are staying busy getting ready for spring plantings.”

Other challenges

Lower prices is only one of the potential risks facing organic farmers and grain suppliers during the coronavirus pandemic, says Ryan Koory, director of economics at Mercaris, which tracks the organic and non-GMO markets.

Grain suppliers are doing well in the short-term. But there is so much we don’t know will happen, and so many touch points on potential risks.”

Koory says the biggest risk is that the problems facing conventional livestock processing—plant closures and labor shortages due to the coronavirus—will also affect organic livestock processing.

The livestock processing side of the organic industry is most susceptible to risk if they have the same problems as the conventional industry. That could back up the demand for animals and feed and push down prices for several months.”

Like Brooks, Koory says another potential risk is a stronger U.S. dollar, which could lead to more and cheaper organic imports, drive down organic grain prices, and hurt American organic farmers.

A stronger U.S. dollar pushes down commodity prices for corn and soybeans and increases incentives for imports to come in. Those imports become cheaper because the dollar can buy more. That’s a risk but we’re not seeing that yet.”

The other potential risk is that consumers may cut back on premium priced organic products in the challenging economy. Koory also wonders if large consumer packaged goods (CPG) manufacturers will scale back their production of organic products.

Will large CPGs stall their interest in the organic sector and lead to reduced consumer demand for organic?”

Jackson wonders if the current strong demand for organic grains is due to consumers stocking items like organic grains and beans that have a longer shelf life. This could hurt future demand.

Business could be slower as people go through stockpiles,” he says.

Koory says this is likely happening. “If you buy 20 pounds of rice now, you will be eating a lot of rice for the next year.”

Many questions remain about the future demand for organic grains and foods; it’s too early to tell. “There are so many hypotheticals that could come out of this,” Koory says.

“Organic market will hang in there”

Despite the potential risks, some suppliers say that the organic market will weather the challenges of the coronavirus.

We’re an optimistic group,” Jackson says. “This could shine a bright light on quality food and healthier eating. It adds reasons to keep healthy and eat healthy, which is what organic is all about.”

Further he says: “The dedicated organic buyers won’t go away. The marginal organic buyers could take a break from eating organic because of the price premiums. But I don’t think this will be a long-term drag.”

White also thinks the coronavirus could lead consumers to healthier organic diets.

We believe that the overall organic market will remain strong. Consumers are forming new habits like meal planning, cooking from scratch, and the desire for healthier diets. We are all looking for ways to enlarge our circle of influence, and today we can do that with healthy food and taking control of our own health.”

Carlson is also optimistic. “On the one hand, a massive economic downturn can’t be good for organic prices and demand. But I’m cautiously optimistic that the organic market will hang in there, and we won’t see a large drop off in demand.”

© Copyright The Organic & Non-GMO Report, 2020