New Tools Arise as Demand for Organic and Non-GMO Grains Outpaces Supply

by Elizabeth Penney

What’s for breakfast? If trends in consumer preferences continue on their double-digit trajectory, organic grains will continue to claim a larger share of cereal bowls each year. Although produce remains the largest category in organic food, sales of organic breads and grains are burgeoning. In tandem, demand for organic feed-grade corn and soybeans is also soaring. Dairy now accounts for 10% of consumer organic purchases and eggs are a growing category.

“Planted acres for organic corn increased 28% over the past five years but even that is not sufficient to keep up with demand,” says Kellee James, CEO of Mercaris, an online marketplace and data service. “The industry is definitely wrestling with this.”

In fact, concerns about an adequate supply of food and feed-grade organic grains led the Organic Trade Association to form the Grain, Pulse and Oilseed Council. Food manufacturers, including Annie’s, General Mills, Pete and Gerry’s Organics, and Stonyfield, are banding together to address issues.

One major shortfall faced by growers and users is a lack of in-depth trading data for organic and non-GMO grains that mirrors the conventional grain marketplace, a role that four-year old Mercaris is attempting to fill. “Right now it’s a patchwork quilt,” James says. Mercaris recently received Series A funding from Seed 2 Growth, a $125 million food and agriculture venture fund, to expand their information services.

While the USDA and others provide some reporting, Mercaris combines that data with proprietary sources they interview. Since there wasn’t a one-stop clearinghouse, their weekly reports allow farmers, brokers, and others to stay abreast of the latest information. Access to the data includes custom reporting options. In addition, they offer in-depth industry analysis on a periodic basis.

Dan Bewersdorff, organic grain manager for Herbruck Poultry Ranch, relies on marketplace reports to help manage a 1.5 million-hen operation. “We use about one bushel of organic corn per hen per year,” Bewersdorff said. He’s seen “double-digit growth all the way” since the company added organics in 1999. Herbruck’s largest customer is Costco. Bewersdorff plans to add another 500,000 organic layers over the next couple of years.

In order to ensure enough supply, Herbruck contracts with local farmers to provide feed-grade corn. Bewersdorff has seen a number of small farms convert. “It’s about a three year process and organic requires more management, but prices per bushel are higher.” He notes that imports help fill supply gaps, something Mercaris confirms.

“In 2015, the US imported just under 11 million bushels of organic corn while we produced close to 40 million bushels,” James says. The bulk of the demand is for feed-grade, according to James. Such dependence worries companies and increasing the supply of domestic organic grain is one aim of the Grain, Pulse, and Oilseed Council.

While large operations like Herbruck’s use contracted growers or rely on imports, Mercaris is bringing smaller buyers and sellers together through on-line auctions. James reports there are 400 organic grain-handling facilities across the U.S. Although in general, the organic grain industry follows the footprint of conventional grain, “there are pockets of growers in areas like the Pacific Northwest and the mid-Atlantic seaboard,” she says.

Rather than sell options and futures as is standard in commodities trading, loads of grain change hands. For example, a recent Mercaris auction sold 25,000 bushels of feed-grade corn in 1,000-bushel lots. The aim is to help small producers of organic beef or eggs readily find sufficient supply through this e-bay for organics.

Mercaris made the decision early on to also track non-GMO crops and trading, a sector that is a “fast growth category” according to James. The Organic Trade Association is calling for mandatory labeling in response to consumer awareness and demand. Retailers and manufacturers are taking note of customer distaste for modified grains. For example, Whole Foods has set a goal of “GMO transparency” by 2018 and has pledged to work with suppliers to source non-GMO ingredients. According to a 2015 report by Errol Schweitzer, global grocery coordinator for the chain, 93% of corn grown is GMO. Schweitzer also asserts that 40% of consumers are avoiding GMO ingredients.

James cautions that the non-GMO corn market is “long” presently, with more supply than demand, at least for 2016. Although James says the market is in flux, she cites voluntary labeling by Campbell’s and Ben and Jerry’s commitment to non-GMO ingredients as having an impact on the industry. Exactly where that will go is still uncertain, according to James.

However, James believes organics are firmly established now. “Walmart is the largest retailer of organics in the U.S. When it’s in Walmart, it’s mainstream.”