Bloom is off organic grains:
Prices are down, but growers
optimistic
By PETER JOHNSON • Great Falls Business Writer
• March 14, 2010
It's a great time to be a consumer of organic foods,
but not the best time to be producing it, according
to Roy Benjamin, who grows organic grains and
legumes east of Shelby.
"The availability of retail organics is broader than
ever," he said. "We've got more shelf space in a
greater variety of groceries and more diversity in
products."
But the price of organic wheat, which reached an
abnormally high level of $20 or more a bushel from
mid-2007 to mid-2008, was down to $6 to $8 a
bushel by early this year, Benjamin said.
"Buyers aren't ordering much grain even at those
prices," he said.
An oversupply of organic grain because of strong
crops last year, coupled with reduced demand
during the recession caused a big drop in prices,
said Benjamin, a member of the state's Organic
Commodity Advisory Council.
"There are large surpluses of organic grain around
the state that farmers are holding on to, and
absolutely no demand for lower quality organic
grain," he said.
Organic producers, processors and grocers concur
that demand for organic food, while continuing to
grow, could fall below the double-digit annual
growth rates of the last decade.
Industry analyst Mintel sounded an alarm last year,
saying: "The economy is starting to cast a shadow
over green living's glow."
Company research showed the number of Americans
who regularly buy organic, natural and "green"
products remained unchanged at 36 percent in
2008, after large increases in previous years.
"People's priorities have changed because of
economic hardship," said Mintel research analyst
Marcia Mogelonsky. "A substantial number of
shoppers are now struggling to provide the basics
for their families, so green living is no longer on
the top of the minds of many Americans."
Barbara Haumann, spokeswoman for the
Massachusetts-based Organic Trade Association,
sees the slowdown as temporary.
Organic food sales grew 18 to 20 percent a year
during the last decade, while overall food sales i
ncreased just 3 to 4 percent annually, she said.
Sales of organic food increased 15.8 percent in
2008, to $22.9 billion, even though the recession h
ad started and fuel prices soared, Haumann said.
"Surveys show consumers still buy organic
products, but many seek deals because of the
economic slump by buying lower-priced store
labels, using coupons and buying organic
ingredients for a home-cooked meal more often
instead of eating out," Haumann said.
Benjamin said the soft market impacted his farming
decisions. He still is planting organic wheat, barley
Advertisement and peas, but edging toward more specialty grains
and other products that are more likely to sell.
He believes the agricultural press and government
agencies oversold the potential of organics to
producers, drawing more people into the field than
the temporarily flat demand can support.
However, he and his wife, Kaylee, still "enjoy the
lifestyle of organic farming and expect it to
rebound," he said.
Ole Norgaard, who grows organic grains and
legumes near Lewistown, also is optimistic.
Norgaard is board chairman of the Montana Organic
Association, which has 240 members who are
primarily producers, but it also includes
processors, grocers and consumers.
"For a number of years, until the last 12 months,
there was no way organic producers could keep up
with growth in demand," he said. "Then prices rose
extremely high for both conventional and organic
grain producers for a year and a half. Now demand
has flattened out, leaving prices lower."
"Grain yields last year in the Golden Triangle,
northeastern Montana and North Dakota were very
good, leaving a lot of grain in farmers' and
processors' bins," he said.
Norgaard is confident the organic farm market will
bounce back.
"I think the organic market will follow the cycle it
has in Europe, climbing consistently like a step
ladder, with occasional plateaus," he said.
Doug Crabtree, who manages the state Agriculture
Department's organic certification program, said
he's "confused at the apparent disconnect," between
continued consumer interest in organic foods and
the lower prevailing prices.
He and his wife, Anna, began operating an organic
farm north of Havre on weekends last year.
"Timing wasn't our strong suit," he said, noting that
the price for organically grown hard red spring
wheat ranged from $15 a bushel to $30 a bushel in
2008 -- more than double the price for
conventionally grown wheat -- but has fallen to $8
to $10 a bushel now, if farmers can find a buyer.
The state Agriculture Department's marketing
department has surveyed the price difference
between organically and conventionally grown
wheat for about eight years.
The charts show organic spring and winter wheat
fetched a price nearly double that of conventional
wheat during much of that time span. The premium
price for organic wheat shot up to 2 1/2 to 3 times
as much as the price for conventional wheat during
the boom time in 2007 and 2008. Since then,
organic wheat prices have returned to a level of just
a few dollars above conventional wheat.
Nancy Matheson, a marketing specialist with the
state Agriculture Department, said the larger spike
in organic prices during the two-year bubble could
have been caused by a mild drought and lower
yielding organic crops.
"If a baker needs high-protein organic wheat, he's
willing to pay what he has to for it," she said.
But in the past year, strong production of organic
wheat has coincided with reduced demand,
Matheson said.
"A lot of people remain committed to buying
organic, but may be becoming more selective in
their choices as they try to stretch their budgets
further," she said.
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Montana Milling President Greg Thayer of Great
Falls agreed that the combination of a surplus of
organic grain held in mills and bakeries, and flat
sales of organic breads in grocery stores have made
it difficult for his organic farming suppliers.
"They're probably sitting on some grain in their
elevators," he said. "But I don't want to discourage
farmers from planting organic crops because this
soft market is a temporary blip in the growth of the
organic market."
Thayer and his father, Gene, have flour mills and
processing lines in Conrad, and recently have built
the first of several anticipated phases of a mill north
of Great Falls.
"We're bullish on specialized and organic grains in
Montana," Greg Thayer said. "We think the public
will keep asking for more food products grown
without pesticides and synthetic fertilizers."
A shortage of wheat globally in 2007 led to the big
increase in prices, but that was followed by two
enormous production years in 2008 and 2009,
about when the recession struck, he said.
"A lot of people will choose to spend an extra 30
percent for organic food, but wheat prices got too
high during the boom period," he said. "Then came
the recession, which ate into the discretionary
spending of a lot of families."
Thayer said prices for grain will increase as
bakeries and mills work through their surpluses. By
then, shoppers might have more to spend.
Andre Giles, owner and manger of Montana Flour &
Grains of Fort Benton, voiced a similar view.
With an effective nationwide unemployment rate of
15 percent, counting those who stopped looking for
work, "Americans are looking for ways to cut their
budget, including some going back to conventional
bread," he said.
"We're buying, but mostly just high-quality organic
wheat," Giles said. "Guys who have low-protein
organic wheat are struggling to find a home for it
right now."
Giles doesn't expect organic wheat prices to reach
$10 or more a bushel until fall or later, whenever
the economy picks up and the market for
conventional wheat rallies.
"Some of us millers are really committed to organics
and some consumers really like it," he said. "But the
marketplace won't reward hard work and extra effort
of organic farmers unless consumer demand keeps
growing."
