Analyst: Organic future still bright
Strange times for organic farmers
These are strange times for U.S. farmers, including organic producers. But farmers and ranchers involved in the organic industry should stick to what they know and believe, an organic industry analyst said.
"Organic farmers are still doing pretty well at this point, despite all the challenges from COVID-19," said Ryan Koory, director of research for Mercaris, which provides information and analysis to the organic industry.
His advice to organic producers: Though there is risk, "Don't get bogged down in worrying about the risk. Continue to make the good choices that you already know to make to manage your farm."
Koory talked with Agweek about his organization's most recent Organic Commodity Outlook report as well as his assessment of how the coronavirus pandemic affects the short- and long-term potential for the production and consumption of organic foods.
With spring planting well underway in parts of the country, the outlook for organic corn, wheat and soybeans (the nation's three major crops) is mixed, according to the Organic Commodity Outlook report:
- Organic corn and wheat are on a "bearish trend" because of larger-than-expected beginning stocks and more harvested acres. The larger-than-expected 2019 corn harvest was exacerbated because a relatively large amount of corn was imported and stored in the United States at the end of the 2018-2019 crop year.
- In contrast, strong demand and reduced imports (China and the Black Sea are sending less organic soybean meal to the United States) have bolstered the outlook for organic soybeans. That could change if there's a good organic soybean harvest this fall, but for now organic soybean prices "look firmly supported."
About 70% of U.S. organic soybeans is fed to livestock, with about 50-60% of organic corn and a relatively small amount of organic wheat fed to livestock. With so much going to livestock, pandemic-related closings and potential closings of meat packing plants become particularly worrisome.
"That's something we're watching very carefully at the moment," Koory said. "There's no reason to think organic slaughter capacity would be protected from the risks that conventional (meal slaughter) plants are experiencing." In fact, "We're starting to see that impact bleed into the organic sector."
Unlike the conventional food sector, the organic food industry doesn't benefit from ethanol production and exports, Koory noted.
Prices and production are always important for organic farm operators, but organic producers have even more than usual to think about this spring. The pandemic is changing Americans' eating patterns and could continue to do for months and even years to come., creating both challenges and opportunities for organic farmers and ranchers.
Already, Americans are eating at home more often. Organic food sales are concentrated at grocery stores, so more home consumption can boost organic sales, Koory said.
"Everyone we've talked to in the industry said organic has definitely seen a big boon" in demand because of changing eating patterns, he said. "And think as a phenomena that's not going to end even when social distancing ends. We'll probably see restaurant activity pick up, but I think we'll see grocery store activity remain escalated just because of a shift in the social paradigm. People's preferences are being reshaped by COVID-19."
On the other hand, organic food is a premium good — i.e., it costs more than conventionally produced foods. If the U.S. economy slumps badly, consumers' ability and willingness to buy organic likely will decline, Koory said.
But the cost differences between organic and conventional food have narrowed, potentially limiting the extent to which organic sales will be reduced, Koory said, noting that some "big-box retailers' now offer organic products at relatively attractive prices.
"Organic has some problems at the moment. There's a rocky road ahead of us, no doubt," he said. Nonetheless, challenges faced by the food sector are even greater. "Our prices are holding up better than prices in the conventional sector, and profitability in the organic sector is looking better than in the conventional sector. And we're exposed to fewer risks, things like the loss of export markets don't affect the organic market."
And consumers continue to increasingly prefer foods "that have some kind of social or environmental benefit to them. They're willing to pay a premium to buy that good," Koory said.