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Organic Grower Network Focuses on Organic Grain Marketing

Posted: April 11, 2011

Organic milk, meat, poultry and eggs represent some of the fastest growing sectors of the organic market. Because agricultural feed ingredients in the diets of certified livestock must be organically produced, continued growth in the retail market has resulted in increasing demand for organic feed grains. Many organic producers in Pennsylvania produce feed grains for their own livestock or dairy operations. There are also off-farm marketing options for organic grain producers, including direct to local organic livestock producers, organic feed manufacturers, co-ops, brokers and merchandisers, with or without an advance contract. Typically, there is a price premium for organic feed grains. In the past, prices for organic feed grains have reached 50 to 150% above conventional prices.

In late January, 2011, the Central Susquehanna Valley Organic Crop Growers Network held an organic grain marketing workshop, hosted by Columbia Co. Cooperative Extension Educator Dave Hartman, at the Columbia Co. Ag Center in Bloomsburg, PA.  On the program were representatives from Kreamer Feeds, Inc., Pennsylvania Certified Organic (PCO), and CROPP/Organic Valley.

Steve Smelter, Organic Sales and Nutritionist representing Nature’s Best Organic Feeds made a presentation on Kreamer Feed’s organic feed production and marketing program. Nature's Best Organic Feed is made and distributed by Kreamer Feed, Inc. in a mill used exclusively for certified organic feed manufacturing (www.organicfeeds.com). Kreamer Feed purchases organic ingredients, including corn and other feed grains, through grain contracting for current and future supplies. According to Steve, the demand for organic grains for feed is currently very strong, after a “down” year in 2009 due to the recession, when many retailers were offering “natural” rather than certified organic meat, eggs and dairy products to their consumers.  But, according to Steve, “from an organic viewpoint, the recession is over…consumer demand for organics is there.”  Kreamer Feed began offering organic feeds in 1998, and sales have doubled nearly every year since then.  Farmer Carl Schmidt, who sells some of his crop to Kreamer, first started selling organic grain in 2001, initially found it difficult to connect with organic buyers, but over the years, marketing has become easier.   The implementation of the national organic standards created greater demand because of the need to use organic feeds in organic animal production.  Kreamer’s organic grain usage from 2006 (audited) to 2010 (estimated) increased 320% for corn, 513% for soymeal, 234% for roasted soybeans, 300% for wheat, and 201% for barley.

Smelter explained that Kreamer Feed has focused on the development of an organic feed quality policy and a company quality culture.  Early on, Smelter found that organic growers were not familiar with USDA grain quality standards.  Production of high quality feeds requires strict attention to grain quality coming into the mill.  to help educate their customers about grain quality, Kreamer recently put together information on grain quality standards for their customers, which includes tests for mycotoxins, Salmonella and GMO contamination.

The widespread use of genetically modified crops (GMOs) by non-organic producers represents a potential risk for contamination of organic feed grains. Organic standards prohibit the use of GMOs in production and handling.  Sources of contamination include GMO pollen from neighboring fields and commingling of organic and GMO crops during harvest, transportation, or storage.   If a GMO test result is positive, the whole load may be rejected.  Currently there is no USDA standard for GMO contamination of organic feed grains. The main sources of contamination are drift from neighbors, and conventional grain residues in combines and trucks from split operations.  According to Steve Smelter, Kreamer GMO tests every grain load for protection against fraud. Pennsylvania Certified Organic (PCO) provides guidelines for reducing GMO contamination from pollen on their website at http://www.paorganic.org/organic_resources.htm.

Kreamer’s mill is USDA Safe Food, Safe Feed (SFSF) certified, and buys grain from individuals, brokers and co-ops in the US and Canada, because there are currently not enough US growers to meet demand.   They contract large volumes, but also will buy on the spot market when necessary.  The price premium for organic grains fluctuates, and depends on market conditions.

Next on the program was Deb Brubaker from PCO, who gave a presentation focused on certification issues related to organic grain labeling.  Information on labels can be found in Subpart D of the national organic rule, “Labels, Labeling, and Market Information.” The labeling requirements of the NOP apply to raw, fresh products and processed products that contain organic agricultural ingredients. Agricultural products that are sold, labeled, or represented as organic must be produced and processed in accordance with the NOP standards. Except for operations whose gross income from organic sales totals $5,000 or less, farm and processing operations that grow and process organic agricultural products must be certified by USDA-accredited certifying agents.  Organic livestock feed must comply with NOP, federal, and state feed labeling requirements.  Bulk feed must be identified with a production lot number and traceable information to create an audit trail.  If for export, the label must meet the destination country’s requirements and be labeled “for export only.” Currently, Canada does not allow the use of Chilean nitrate in the production of organic products.  US growers can currently use Chilean nitrate to meet 20% or less of their nitrogen needs.

Lowell Rhienheimer, from CROPP/Organic Valley, spoke to the group via videoconference.   Several members of the Central Susquehanna Valley Organic Crop Growers Network are members of CROPP (Cooperative Regions of Organic Producer Pools), which markets products under the Organic Valley Family of Farms label. According to their website, CROPP is America's largest independent and farmer-owned cooperative of organic farmers and is one of the nation's leading organic brands. CROPP Cooperative uses the term "pool" to describe a group of farmers growing a certain product in a geographic region, and grower pool is a marketing model based on stable pricing and transparency.  Currently, CROPP manages two marketing programs, a feed program that buys and sells on the spot market, and a grower pool based in rolling 3 year contracts for organic feed crops as a risk management tool.

Late in 2007, CROPP Cooperative conducted a Grower Pool Foundation Conference during which CROPP Cooperative asked organic crop growers to describe what kind of program would be valuable to them. This activity resulted in the creation of the CROPP Cooperative Grower Pool, a new model for the marketing of organic feed crops to stabilize pay price and provide steady increases in the face of wildly fluctuating conventional markets.  Co-op member growers may enroll as many acres of organic crops as they like and have a guaranteed price via a 3-year rolling contract, and have priority access to all future sales to CROPP Cooperative for as long as they wish to remain members. CROPP membership is dependent on farm location and CROPP needs for supply to keep pay prices high by matching supply with sales. This program uses farmgate pricing with no grower marketing or transportation responsibilities.
 
In the feed program, CROPP buys whole truckloads and rail car loads of organic feed grains that meet USDA quality grade and mycotoxin levels. Premiums are offered for above average protein. Payments come directly from CROPP, and CROPP arranges logisitics and pays for transportation.  Grower commitment is waived in event of crop failure.  The farmer needs grain storage, and is required to pay a one-time equity buy-in at 5.5% annual sales, with an 8% return.  A representative grain sample for quality assessment is required as part of the application for membership into the grain pool.  CROPP is moving toward maximum nutrition per acre rather than just tonnage.

The grain pools are meant to act as a “shock absorber” for the market – to provide a fair range of prices for grain producers who sell and for livestock producers who buy the grain. Prices that CROPP pays for feed grains are based on a percentage of base price of organic milk.  Therefore, if the price of organic milk increases or decreases, the prices for organic feed grains also change.  Currently, grain prices are based on percentage of base milk prices at 24.18% for barley, 28.29% for corn, 16.12% for oats, 41.74% for peas, and 63.38% for soybeans.  Lowell stressed that this market is not meant to be a farmers primary market, but is meant as a hedge  -  a guaranteed price payment and assured market.  At the time of the workshop, CROPP needed more growers in Pennsylvania, Indiana, and Ohio.

For more information on organic grain marketing, see:

By Mary Barbercheck, Department of Entomology