By Brenda Frick
Buyers of organic grains are approaching the new marketing year with guarded optimism. They see product beginning to move, and prices fairly stable, perhaps even creeping slowly upward.
This is good news to organic producers who have been discouraged by stalled markets in the last couple of years. Predicting organic prices is a bit like forecasting the weather. Historic highs are worlds away from historic lows and there are many factors that can influence what will happen. It is hard to guess what prices may be like at any time in the future. But it is easy to identify some of the factors worth watching; especially those that have been at work in the recent past.
Sometime about 2007 a number of new players like Wal-Mart decided to get into organics in a big way; others like Loblaw’s, made commitments to provide organic products at mainstream prices. This enthusiasm created market demand in excess of supply. Prices went up, way up. Buyers started hoarding to avoid even higher prices.
As one expert suggested, “the cure for high prices is high prices”. High prices inspired conventional farmers to make the transition to organic and organic farmers to increase acres in grain crops. Other countries pushed to bring their organic production to market.
Supply increased.
At the same time, buyers reacted to the higher prices by looking for alternatives. Some went elsewhere. Eastern European countries started to supply European demand. China and Argentina became important suppliers to the USA. Although the core organic consumer remained, less committed processers turned to cheap conventional products, and labelled them ‘natural’. At the same time, the USA was hit by a profound recession, which spread to Europe. People losing their homes aren’t focusing on quality higher priced food. Demand crashed. Although solid numbers are not available yet, buyers are guessing that the number of organic producers is down 10 to 30% in North America. In addition, organic acres of small grains are down because of devastating flooding in eastern Saskatchewan, south western Manitoba and North Dakota.
Reduced supply has been coupled with resurgence in demand. It has taken time, but the oversupply has finally worked its way through the system, so traditional buyers are returning to the marketplace. Consumers are beginning to see through the ‘natural’ claim, and retailers are beginning to return cautiously to their promises to sell organic product at mainstream prices and thus at mainstream volumes (e.g. Galon Weston talking about organic baby food). Buyers are hoping for a slower more cautious growth in the market, in order to provide some stability for both producer and consumer.
So what are prices like now? Several buyers shared their current prices with me. These prices vary from 20% higher than conventional, to 1.5 or even 2 times conventional, a return to previous norms. Most buyers suspect that prices will remain steady in the short term, as supply and demand seem to have reached a sort of equilibrium. Of course each of the buyers reminded me that this situation could change.
Ballpark Prices, 12, October 2011 (expressed as $/bu at the farm unless otherwise noted. Terms may vary with buyer, location and price.
- Oats: $4.50-$5.00
- Wheat: $8.00-$9.50 low protein, $10.00-$12.00 high protein
- Durum: $12.00-$16.00
- Feed Barley: $6.00
- Rye: $6.00-$7.00
- Flax: $20.00-$28.00
- Pea: $6.00-$7.50 feed; $10.00-$11.00 food
- Lentil: $0.50-$0.75/lb (higher for French greens, lower for large seeded)
- Mustard: $0.50/lb
- Hemp: $1.10/lb
