COVER STORY: Kamut brothers

RADVILLE, Saskatchewan -- Alex and Robert Galarneau have taken their organic business in southeast Saskatchewan through a "gateway to the world." They say now would be a good time for others to join them.

The Galarneaus see an expanding European market for kamut, a type of durum wheat, which is good for people with slight wheat allergies. They say the relative weakness of the U.S. dollar make this opportunity more attractive than ever for North Dakota and Montana producers.

Brothers Alex and Robert, ages 45 and 41, respectively, operate Prairie Heritage Seeds Inc. of Radville, Saskatchewan, about 40 miles north of Fortuna, N.D. Their wives, Janet and Corrine, respectively, work in accounting and human resources for the company that employs nine people.

Galarneaus have been in Canada for 16 generations.

"Our family came out of La Rouchelle, France, and came to Canada in 1661 as stone masons to build the French forts. They stayed and started farming," Alex says.

It was their grandfather, Alexander Galarneau, who homesteaded at Radville in 1918. He migrated from the Quebec province, joining a brother who had homesteaded a decade earlier. The Canadian government offered a homestead-type system analogous to the U.S. system.

When Alexander died in 1952, their father, Alfred, then 19, had to take over the farm with his younger brother, Jess. The two brothers of that generation farmed together until the 1970s, when Jess expanded the operation to the Langruth, Manitoba, about 100 miles northwest of Winnipeg.

Alfred and his wife, Reine, stayed in Radville. They had four children, including two older daughters and then Alex and Robert.

The organic leap

In the early 1980s, Alfred started to take the farm into the organic world.

"At that time, they were calling it 'chemical-free' grain, and there was actually no organic certification at the time," Alex says. "We weren't using conventional fertilizer anyway."

Continuous cropping was just coming into vogue, Alex recalls.

"We were doing quite a bit of summer fallow," Alex says. "We knew that wasn't sustainable, that we'd have to go 100 percent chemical, with all the inputs and zero-till, or go a different path. You couldn't stay at 50-50 (planting and fallow) because the economics weren't working out.

"There was a rumor that someone would pay you a premium for a grain grown without an herbicide or conventional fertilizer. There was further investigation and we found the rumor was accurate and we started going that way. Initially, the person offering the premium disappeared and left us with a pile of grain that was produced with no chemicals or fertilizers, so that spurred us on to go find someone else."

Trying to put some order into their fledgling organic business, the chemical-free farmers came together to form the Organic Crop Improvement Association. One of the pioneers in the business was Fred Kirschenmann of Windsor, N.D., one of the world's leading organic prophets.

The OCIA was started in New York in 1985, and went international in 1988, about the same time the Galarneaus were certified. The OCIA headquarters started in Ohio, but in 1997, moved to Lincoln, Neb., collocated with the University of Nebraska-Lincoln's sustainable agriculture program.

The Galarneaus now certify their crops with another agency, Quality Assurance International out of San Diego, Calif.

Success as partners

Alex graduated high school in 1982. He went on to the University of Saskatchewan in Saskatoon, and earned an agriculture diploma. Four years later, Robert followed a similar path.

Back home, Alex and Robert started out essentially as hired men for the farm, in what was then known as Galarneau Farms. In the off-seasons the brothers took seasonal jobs in the oil fields.

When Alfred started in organics, he had directly sold raw commodities, unmilled to mills for cleaning, to metropolitan areas of Canada. Eventually, the Galarneaus built their own cleaning plant -- a scalping line that took out a percentage of the foreign material, but didn't make it mill-ready.

At first, the mill operated at about 75 bushels an hour. They renovated it to 125 bushels of mill-ready grain in 1990, then to 200 bushels an hour in 1997, and finally to 400 bushels an hour in 2004.

There were other improvements.

In 1990, they built a distinctive office and 11,000 square-foot warehouse. In 1991, they added an automated, pneumatic grain handling system.

In 1995, the company name changed to Prairie Heritage Seeds Inc.

The next year, Alex and his new bride, Janet, traveled to Europe.

"As terrible as it sounds, I managed to have my honeymoon around a business trip," Alex admits. "Within six or seven months, we were exporting grain to Europe -- Britain, France, Switzerland."

The Galarneaus slowly expanded into Europe. By 1997, Alfred handed over the reins to the sons.

"We have a "50-50 operation," Alex says, describing the relationship with his brother as a partner. "We both bring to the table different skill sets that complement each other. I don't think either of us would be as successful without each other. Our success, actually, is our partnership."

Meeting 'Mr. Kamut'

The next big turning point in the business was the shift to kamut -- this ancient durum.

It sells at a premium compared with the organic durum.

Alex was in Europe at a trade show, where he met with Bob Quinn of Big Sandy, Mont., a long-time friend in the organic business. Quinn had built his own flour mill in Fort Benton, Mont., and was developing a kamut product line.

"He was developing the market for kamut in the United States," Alex says. "The word gets out and then a few companies in Europe were interested."

The Galarneaus had heard about kamut in the early 1990s. Now, in 1997, they made a formal agreement with Quinn to supply grain for his mill.

Alex says there is no hard-and-fast price relationship, but a rough ratio would be described like this: If conventional durum is $5 a bushel, then organic durum probably is $8.50 to $9 per bushel. In that case, then kamut market probably is at $13 per bushel.

"It's always a premium above," Alex says. "We have to be higher than the organic durum."

Initially, the Galarneaus brothers tried to hang onto their organic spring wheat markets, but as time went on, they shifted all of their cereal acres to kamut.

In 2009, PHS has 5,500 acres of its own and has production contracts with some 180 farmers, involving an acreage figure they decline to disclose. Beyond that, they purchase grains on the spot market with another 40 producers.

PHS producer contracts are all over western Canada, they say. They also handle pulses -- mostly lentils and peas -- brown flax, spring wheat, rye and, of course, kamut.

The variety in crops is a result of demand for these crops, as well as knowing their farmers need a rotation, Alex says. "You can't grow kamut every year, and we're always looking for markets for these rotation crops. That helps our kamut growers to be more profitable. It eases their marketing."

PHS has developed 300,000 bushels in capacity on-site, plus another elevator complex, and a total of some 100 distinct storage units.

Containers

to Regina

About 75 percent of the brothers' business is through containers, loaded an hour and a half away on the Canadian Pacific Railway in Regina, Saskatch-

ewan.

The European market for kamut always is increasing, Alex says.

There are about 1,500 product types -- different things made from kamut -- such as cookies, pastas, milks and sweeteners. Kamut has a different gluten complex than conventional durum. The most widely known benefit is for people with slight wheat allergies.

About 90 percent of their market for kamut is Europe. PHS supplies kamut to every country in the European Union, but the primary market is Italy. Very little of its product is sold in the U.S., primarily because Montana Flour and Grain is the U.S. licensee.

"Suppose you're an Italian and you have allergies to pasta; that's a problem because it's a big part of the diet over there," Alex says. "If we introduce a product they can actually digest over there, they can go back to their traditional foods."

Growing organic kamut is like growing any organic crop, the Galarneaus say.

"You don't have the tools at your disposal if problems arise," Alex says. "In an organic system, you have to mitigate the problems before you have them. With conventional farming, you can spray or kill a pest the next day, but with organic, if you have a problem, it can be a problem for the next two or three years."

One of the exciting aspects of the kamut industry, and organics in general, is that it is a consumer-driven market, Alex says.

"The people you're dealing with want you to succeed and are backing it up with their purchases," Alex says. "We were never in a discussion about how we must get our cost of production from a market, because people were always willing to pay it."

On the other hand, there has been decline in opportunities for organic wheat, as developing countries get into the supply picture. The Baltic states are tough competitors in organic wheat, partly because of proximity.

Kamut is different.

"It's very difficult to grow kamut anywhere but in the Upper Great Plains and Prairie Provinces. The area of Saskatchewan, Alberta, North Dakota and Montana probably grows the best kamut in the world," Alex says.

Kamut International, the worldwide kamut association, has tried to grow kamut in other parts of the world (Russia, Italy, Argentina, Australia, Morocco, Egypt, Tunisia, Turkey and Spain) with limited success, Alex says.

"We have the very dry, arid climate and low disease consistently," Alex says. "That's what it takes."

New U.S. opportunities

PHS deals with farmers within a 300- to 400-mile radius, depending on the commodity.

"The biggest challenge is getting enough production, finding enough farmers to convert their land to go into organics," Alex says. "It's convincing them that it's sustainable and the premiums we're talking about are real. People don't believe it until the checks arrive."

With the recent weakening of the U.S. economy, and the declining relative value of the U.S. dollar, the Galarneaus say they are in a better position to be competitive for the production of farmers in North Dakota and Montana. They already deal with about 20 farmers in each state.

The key is managing risk.

"If you can hedge the dollar to minimize your risk, the producer in North Dakota or Montana should be happy," Alex says. "The checks arrive as agreed upon, and nobody loses any money. On the other hand, we've seen some companies in the U.S. and Canada that work across the border and don't do that hedging. They'll end up not making money on a transaction and then they'll walk away from an agreement and leave the farmer hanging."

He says there's no telling how the market will grow.

"Right now, we don't see anything turning it around," he says.

Alex says some large retailers that had planned to put in an organic lines before the recession have backed off, but probably will re-engage.

"It all depends on the economic recovery, but my crystal ball is kind of cloudy at the moment. Regardless, our clients are saying sales are up."