Organic grain premiums are holding up so far in the COVID-19 world, according to Mercaris.
The data service and trading platform for organic grains is an American company that focuses on corn, soybeans and wheat in both food and feed markets but has recently expanded into oats, barley, rye and pulses.
Sales director Alex Heilman said Mercaris aggregates information through a survey and publishes price information.
He told a webinar hosted by SaskOrganics that COVID-19 has yet to impact organic markets but eventually will.
“Fall pricing prospects appeared bearish before COVID-19, however that is flipping the script now,” he said.
He predicts more risk, along with more yield and more volatility, all leading to pricing surges.
“We have yet to see how it’s going to completely play out in the supply chains,” he said.
“Without fully being able to predict that, we do still think we’re going to see a fast escalation of demand for organic goods as consumers kind of in this era right now continue to look at health as a very big driver.”
Heilman said during past recessions organic premiums took a hit but the industry has turned a corner and is now viewed as a necessity.
Premiums are about 100 percent above conventional prices, he said, and that has been constant for the last few years and even the last few months.
Livestock feed, mainly soybeans, is the big driver in the United States and demand has been essentially flat because of the emphasis on plant-based protein.
Heilman said soybean production dropped 14 percent last year, to just below seven million bushels, due to import pressure.
“As we start to enter 2021 contracts we predict we will see a bump in production but we’re also going to continue to see increased imports,” he said.
Imports are shifting from whole beans to meal. The U.S. imported about 335,000 tonnes of organic meal or nearly half of demand in 2018-19.
Heilman said premiums remained stable at about $10.66 per bushel through that shift and as prices have gone up and down.
U.S. certified field crop acreage grew about six percent last year, while Canada held flat after significant growth over the last five years.
Organic wheat supplies have grown due to both increased acreage and yields.
U.S. growers produced 12.5 million bushels of winter wheat in 2019. Spring wheat production increased by 13 percent, and growth statistics for the Canadian Prairies are similar, Heilman said.
Feed grade wheat prices average just more than $10 a bushel, while on the food grade side they average $12.50 per bushel.
Heilman’s data for small grains is based only on a few months of data. Forward contracts for organic oats are coming in at about $5.25 per bushel. Barley is similar.
He said all producers should remember that times are uncertain but there is still competition and most buyers prefer to source supply within the U.S. or Canada.
“With smaller supply chains and less processing facilities it’s very critical to know what your local buyers are and what that market essentially is,” Heilman said.
He added that product quality is critical as are solid relationships with buyers.