Organic field crop production remains low

by Ron Sterk
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WASHINGTON — Production of organic field crops remains low despite often wide price premiums and demand that in many cases outstrips supply, according to the Economic Research Service of the U.S. Department of Agriculture.

Certified organic area for wheat appears to have peaked in 2008 while area for corn, soybeans and most other crops continued to increase.

“Despite potentially higher returns, adoption of the organic approach among U.S. field crop producers remains low, likely due to low crop yields and challenges of effective weed control, among other factors,” the U.S.D.A. said om the most recent issue of Amber Waves. “Organic corn and soybeans have been profitable, primarily due to the significant price premiums paid for certified organic crops that more than offset the additional economic costs. Organic wheat has been less profitable.”

Total certified organic crop acreage nearly doubled from 638,500 acres in 1995 to 1,218,905 acres in 2000, more than doubled to 2,643,221 acres by 2008 and increased another 17% to 3,084,989 acres by 2011, which was the most recent year the U.S.D.A. had numbers for total organic crop area based on somewhat sporadic data from organic certifiers. But those organic acres still comprised only 0.83% of total crop area of 370.7 million acres in 2011, the U.S.D.A. said.

Total organic acreage increased about 138% from when the U.S.D.A.’s National Organic Program began in 2002 to 2011.

Wheat had the most certified organic area of any major crop with 344,644 acres, equal to 0.63% of total wheat area in 2011. Next was corn with 234,470 acres, equal to 0.26% of total corn area, followed by soybeans with 132,411 acres, equal to 0.17% of total soybean area.

Organic wheat area at 344,644 acres in 2011 was down 17% from 415,902 acres in 2008. The most recent U.S.D.A. census data indicates organic wheat area in 2014 at 263,881 acres, which is down 23% from 2011 but may not be directly comparable since the prior data was sourced by the U.S.D.A. from organic certifiers.

The shifts in organic acreage, small in the grand picture of U.S. field crops, comes against a background in which total wheat harvested area has trended lower for decades. Wheat acreage dipped to a 45-year low in 2013, while corn and soybean area has trended higher, with corn record high in 2013 and soybeans in 2014.

But the U.S.D.A. data appear clear on one point, wheat was the least profitable of the three major crops.

A comparison of additional costs associated with organic production with historic price premiums over conventional crops indicated much better returns for corn and soybeans than for wheat. Net returns above economic costs were $51 to $66 per acre for corn and $22 to $41 per acre for soybeans, while wheat saw negative returns from $2 to $9 per acre, the U.S.D.A. report said.

“The gap between average organic and conventional wheat prices depended on the type of wheat produced,” the U.S.D.A. said. “Throughout 2011-14, price premiums for organic food wheat increased, reaching above $10 per bushel, much higher than the economic cost differential of $3.90 to $4.46 per bushel between organic and conventional wheat production. However, farm prices of organic feed wheat were only $1 to $4 per bushel higher than those for conventional wheat, often below the additional economic costs of organic wheat production.”

In a separate report the U.S.D.A. said average food grade wheat prices were $7.87 per bus higher than conventional prices from 2011-2014, while the average feed grade wheat price was $4.17 higher.

“Price premiums for both food and feed grade organic wheat were roughly at or below the higher economic production costs during much of 2011-12, but improving price premiums for organic wheat in 2013-14, especially food grade wheat, improved organic wheat profitability in recent years,” the U.S.D.A said in a September report.

The U.S.D.A. cited several possible reasons for the slow adoption of organic field crop production.

“One reason … may be a lack of information about the relative costs and returns of organic and conventional production systems on commercial farms, and the performance of farms choosing the organic approach,” the U.S.D.A. said. The department noted that organic crop production has been studied on an experimental basis, “but little has been reported about the commercial production of organic field crops.”

“Data from long-term cropping system experiments suggest that organic crop production can bring significant returns,” the U.S.D.A. said. “The data show similar conventional and organic yields and lower organic production costs. However, farm data from U.S.D.A. producer surveys show organic crop yields to be much lower than those of conventional production.” The data showed organic corn yields to be 41 bus per acre, or 24%, less than conventional yields, organic wheat yields to be 9 bus, or 19%, less and organic soybean yields to be 12 bus, or 25%, less based on average yields in 2014.

“Producers reported that achieving yields was one of the most difficult aspects of organic production,” the department said. “Mean total economic costs per bushel were significantly higher among organic crop farms due largely to lower crop yields.”

Another reason for slow adoption may be the ease of producing conventional versus organic crops, the U.S.D.A. said. Conventional seed and chemicals are readily available locally in most cases, while organic farmers have to secure organic seed and learn to manage soil fertility, weeds and other pests through natural means.

Climatic conditions also may limit organic crop adoption as “organic production is more attractive where crop pests are fewer, such as in northern states,” the U.S.D.A. said.

Available markets to sell organic grain were cited as yet another detriment to organic grain production. ” 

“Conventional products can be sold at the local elevator,” the U.S.D.A. said. “Organic farmers, in contrast, have to find their own markets to sell crops, which may require storage on the farm until pickup.”

A final deterrent may be the actual organic certification process, which requires land be free of prohibited substances for three years, significant paperwork and other requirements. There also are costs involved in the process, although the U.S.D.A. will reimburse a portion of the certification costs.

The nation’s largest miller, Ardent Mills, in an effort to meet growing demand for organic products, last week announced an initiative to double U.S. organic wheat acres by 2019 with farmer support services, workshops and long-term contracts for transitional and organic wheat output. Such an industry initiative, with support from the National Association of Wheat Growers, may be key reducing deterrents to organic wheat production.

"Our organic flour offerings allow us to purchase all classes of wheat. Due to the locations of our current organic flour mills, we are focused initially on the western U.S. for wheat origination. As we see our customer demand increase, we will be able to expand our origination base to other parts of the U.S.," states Shrene White, Ardent Mills Director of Specialty, Risk Management.

Consumer demand for organic products has grown sharply in recent years, albeit from a small base. But it’s that demand, underscored in the Ardent Mills initiative, that ultimately will drive organic crop production. In a July report the U.S.D.A. noted that “much of the increased organic corn production has been to support rapidly growing organic dairy sector, with the number of certified organic milk cows increasing nearly fourfold from 2002 to 2011.

While the U.S.D.A. does not have official statistics on retail organic food sales, it cited industry sources that organic food sales comprised over 4% of total food sales, increasing more than 20% from $28.4 billion in 2012 to $35 billion in 2014. Even at 4%, organic crop production at 0.83% of total production has a significant gap to fill.
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