ST. LOUIS — It’s time for the organic and non-G.M.O. industry to invest in infrastructure to straighten the current “crooked” supply chain, said Eric Jackson, chief executive officer of Pipeline Foods.
“We think it’s time to grow up as an industry and get after the elephant in the room, which is invest, put money into the infrastructure,” Mr. Jackson said in his presentation at the Organic & Non-GMO Forum in St. Louis on Nov. 6. The two-day event continues on Nov. 7.
While it’s not the same size as conventional commodity markets, there is an opportunity to invest $300 million to $500 million in the organic and non-G.M.O. space over the next three to five years, he said.
“I think we can straighten out a pretty crooked road right now and there’s money to be shared all along the way,” Mr. Jackson said. “Rather than talk about premiums, we talk about margins.”
Pipeline estimates there are less than 200 facilities that are certified for organic grain and oilseeds. Only about 50% of those are on rail and only 50% are of commercial scale.
“The entire industry is supported by 50 or less relevant facilities in the country,” Mr. Jackson said. “That speaks to the opportunity, but it also speaks to the issue.”
With the organic and non-G.M.O. market there’s an opportunity to create a shared value approach, which is a new concept in commodities, Mr. Jackson said.
“We’re taking a very transparent and open means by which to communicate values up and down the supply chain,” he said. “This is much more about working together than working under a black box and hiding what the margin opportunities are and not sharing the data associated with the grower practices as well.”
A hub supply chain, similar to the conventional marketplace, would allow for a high degree of traceability and much lower operating expenses.
“It’s these efficiencies that can be shared appropriately through the margin structure at the various nodes on the chain that are adding value,” Mr. Jackson said. “It is exciting to think about how we can change the economics so that the grower can make more and the consumer can pay less.”
Infrastructure improvements aren’t just needed for moving domestic product but also to handle imports. The United States doesn’t produce enough organic and non-G.M.O. grain and oilseeds to meet current demand so imports are needed. Mr. Jackson said about 75% of organic products consumed in the United States are imported.
Millions of acres domestically need to be converted to organic acres in order to meet the projected 15% annual growth rate in the next 10 years.
“We think there is a great opportunity to convert a lot of conventional acres,” Mr. Jackson said. “It’s a good diversification strategy and a great economics story for the growers who are participating.”
During a panel discussion at the forum, Nathaniel Lewis, farm policy director, Organic Trade Association, said it’s difficult to get statistics on acreage that is in the process of transitioning into organic or non-G.M.O. acres. Acreage must go through a three-year period free of prohibited substances such as pesticides and fertilizers before it can be certified organic.
A 2015 survey showed that 150,000 acres, of which 141,000 acres are cropland, are in transition. Those acres are spread over about 1,500 farms.
“There’s not going to be one policy, or one new input or one new genetic trait in a seed that is going to make organic farming easy to get on board with,” Mr. Lewis said, adding that organic farmers face a myriad of barriers, including market access and an information gap. “This is a whole new system of farming that folks need to learn. They need a coach or a mentor out in the filed who’ve made the mistakes that they don’t need to make themselves.”
To help, the Organic Trade Association is working to tweak existing policies and programs to address the unique needs of organic farmers, he said.Enforcement presents another challenge for the organic and non-G.M.O. industry, Mr. Jackson said.