Drop in corn, soybean prices could lure growers to organic
WASHINGTON – Organic crops could become more attractive to farmers as low corn and soybean prices prompts them to look for ways to boost their bottom line.
Even as production of organic crops has been growing, many farmers and ranchers have been hesitant to invest the time and money to switch from conventional to organic. The sharp drop in commodity prices, which has made it difficult to cover production costs, could entice more producers to make the change and reap the higher prices that come with organic.
"There is a view that perhaps the drop might make it more attractive for people to take a look at," Laura Batcha, executive director of the Organic Trade Association, told reporters Tuesday at a breakfast sponsored by the group. "We haven't seen it yet, but the hope is that maybe it will."
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Consumption of organic food has risen by double digits annually as the public demands more fruits and vegetables from Whole Foods, Wal-Mart, mom-and-pop retailers and farmers markets. Organic food sales reached $32.3 billion last year — a record, but a small fraction of the $760 billion in total food sales in the United States.
Batcha said organic producers have been unable to meet growing consumer demand, a problem that will worsen as shoppers buy more of the products. This year alone, organic sales are expected to grow 15 percent. "That number would be a whole lot higher were it not for the supply constraints," she said.
The Agriculture Department said in its Census of Agriculture report released earlier this year that 512 farms in Iowa were certified organic in 2012, out of 88,637 farms throughout the state. Those organic farmers oversaw 122,479 acres out of more than 30.6 million acres, leaving significant opportunities for growth in the state.
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The challenge for organic is that producers of traditional crops must make changes to their land, such as ending the use of pesticides, and wait three years before they can be certified organic.
During the transition, they grow crops using organic practices, but they can't have their produce certified as such. As a result they may not benefit from the higher prices attached to the crops.
"That is a long time to be producing organic but not receiving the organic price," said Chad Hart, an Iowa State University associate professor of economics. "It wasn't worth it for farmers" to make the switch.
Hart said organic prices, on average, were about double those of conventional, but that premium fell as conventional crop prices soared. Now, a mild summer and timely rains expected to help farmers produce record corn and soybean crops have coupled with a strong harvest in 2013 to drag down prices. That means the organic premium is returning.
U.S. farm income this year will be the lowest since 2010, the federal government said last month. The USDA said net farm income will be $96.9 billion in 2014, down from 2013's record estimate of $122.8 billion and the lowest since $71 billion in 2010.
"Farmers are looking for those alternatives to help improve the bottom line because conventional cropping systems aren't paying the profits like they have in the past," Hart said. "You are seeing a lot more farmers investigating whether this will be worth their while."