There is a sharp increase in consumer demand for organic and non-GMO foods, prompting food manufacturers to provide incentives for U.S. farmers transitioning to organic production, according to a new report from CoBank.
“Domestic supplies of non-GMO corn and soybeans increased steadily in 2016, as growers converted acreage and captured moderate market premiums,” Dan Kowalski, director of the Knowledge Exchange Division at CoBank, said in a news release. “Transitioning to organic production, however, is a multi-year, risk-reward calculation that’s likely holding some U.S. growers back from taking advantage of the market opportunity.”
Organic corn imports doubled from 2015 to 2016 and domestic production of corn only met 50 percent of the domestic demand with roughly 80 percent of soybean imports supplying the U.S. organic demand.
The main markets for organic-produced grains are animal feed for organically raised dairy, beef, pork and poultry products, and ingredients used in organic consumer packaged goods.
Analysts estimate for U.S. farmers to satisfy this growing appetite for organic foods between one and five million U.S. acres would have to be transitioned to organic production.
“Apprehension among growers is likely fueled by the three-year transition period before their crops can be certified as organic,” Kowalski said. “Remaining profitable during that period is often a struggle and, coupled with the volatility of organic price premiums in 2016, grower uncertainty about the sustainability of financial rewards for transitioning to organic is unwarranted.”
CoBank notes that some leading food manufacturers are finding new ways to help boost domestic supply and reduce reliance on imports. Those include free agronomic services to contract growers and premiums for goods grown on transitional acres.
A new transitional certification is also available that growers and food companies can use to market their products for a price somewhere between that of organic and non-organic crops, Kowalski said.
Proximity to local markets is another critical factor that is a consideration for prospective organic and non-GMO farmers.
“If local buyers don’t exist, the cost of logistics involved with transportation can quickly erode premiums, leaving little incentive to grow specialty crops,” Kowalski said.
Demand for non-GMO and organic crops will continue to grow, according to Kowalski. Monetary incentives will ultimately determine to what degree U.S. farmers will begin to transition and close the existing supply gap.