Mercaris, the Maryland-based market data service and trading platform company focused on organic and non-GMO feed and food commodities, has just released a report outlining the factors influencing the US production of feed grains and import of those raw materials in a new report.
The goal of the publication is to provide more transparency on production and development within the US organic market, so stakeholders can have a better understanding of supply dynamics, said Ryan Koory, senior economist with Mercaris.
The outlook suggests that the demand for organic livestock feed grains will increase by 6%, while interest in high protein feed ingredients will rise by 7% during the 2018/19 marketing year.
“What we see this year is a continuation of the trend we saw develop last year where livestock is really becoming the driving force within organic grain demand.”
The demand for feed grains is predominately from the organic poultry sector, said Koory.
“We need to focus on how that works in the greater context of the US organic sector.”
US organic corn production is expected to see about 2% growth in the 2018/19 crop marketing year, Mercaris reported. That expansion would bring organic corn production in the US to 42.3m bushels.
Imports of both whole and cracked organic corn into the US are forecast to grow by 10% year-on-year, the analysts said.
Total supplies of organic corn, then, are anticipated to expand 5% to 59.5m bushels.
Soybean production grew by 13% in 2018/19 but total supplies are anticipated to shrink 4% based on a drop in organic soybean imports, according to the report. However, the domestic supply of organic soybean meal is forecast to expand by 7%.
Organic wheat production expanded in marketing year 2018/19 expanded based on improved yields, and showed 8% year-on-year growth, said the economists. Although, the area harvested for wheat only grew 1%.
Use of organic wheat in livestock feed is anticipated to grow about 7% from the prior year, while the use of wheat in food is set to expand about 4%, the company added.
Alternative feed crops
Koory said that any plant to increase US organic feed grain production to better match industry needs would need to involve a strategy beyond just additional acreage.
“Right now … we’re importing a significant amount of soybeans and corn, and we’re feeding predominately corn and soybeans.”
Adding enough acres to supply the corn and soybeans from US production would completely throwing the organic production system out of whack, he said.
“There are limitations to just how many acres you can push in because of the crop rotation issues.”
To boost the soybean acreage to match current imports would require an increase in planted acres of 240%, he said. However, all other crops also would need to expand to allow for rotation.
“If you add the supply of those just to match the demand for soybeans, then you wind up swamping those markets,” he added.
“What it comes down to is bringing the whole feed demand perspective more in line with organic crop rotation. If you were able to push more of that organic rotation into that feed sector, then you could bring that demand more in line with acreage and you could see some catalyst for expansion because you would be raising demand for these other crops.”
US organic crop sector challenges
The need to make better use of alternative crops generated through crop rotation is not the only challenge facing feed grain producers working in the organic system, said Koory.
Producers working with organic crops lack some of the tools that producers raising conventional feed grains have, including solid future markets that provide price transparency or the ability to hedge, he said.
There also remain fewer organic crop handling facilities per organic farm than there would be in a non-organic system, he said. Insurance policies are tailored more to prices in the conventional market and the amount of research done to support work in the sector is lagging compared to what has been done with conventional grain production.
“There are barriers up and down the supply chain for organic farmers,” he said. “There are substantial premiums being paid for organic products right now and it’s definitely a demand growth market, so it has those benefits – but the support network that is needed to really help accelerate the growth of this industry – it is slow to develop [and] it’s not quite where it needs to be yet.”