Posted  6 Feb, 2020 
In: Articles

Originally published January 31, 2020 on OrganicBiz

By Phil Franz-Warkentin

The demand for organic grains and other crops continues to grow in Canada, but production increases have outpaced that demand and burdensome stocks may limit prices for some crops until more balance returns to the market.

The middle of winter is always a slower time of year, as the harvest rush has long subsided and spring seeding is still some time away. However, this winter is proving even slower than normal.

“There’s not a lot of bids out there,” said Jason Charles, of Minneapolis-headquartered Pipeline Foods. “There’s a lot of grain moving, but we’re at historically low prices right now – which will be a thing for the next several months until we get into planting.”

There’s so much in the bin, and we have to chew through that amount. – Mylo Chubb

“Pulses are extremely slow,” added Mylo Chubb, of Stonehenge Global Seeds in Assiniboia, Sask.

While demand has grown at about two to three per cent on an annual basis, production was rising by closer to seven per cent, according to Chubb. In addition to an influx of Canadian growers switching from conventional to organic operations, the United States has also seen a large amount of prevent plant acres move into organic production. Large imports from the Black Sea region also continue to enter North America.

As a result, prices have dropped considerably over the past year, which “will chase some people out of the industry,” said Chubb.

“There’s so much in the bin, and we have to chew through that amount,” said Chubb. He added that the burdensome supplies were also leading to contracts being broken, as contracted prices were much higher than current levels.

“It’s a quandary where this product is coming from,” said Michael Messer of Rein Agri Foods in Tisdale, Sask. While many farmers had good crops in 2020, adverse harvest conditions led to quality issues in some areas.

Acres are growing, but domestic usage is not growing at the same rate. – Andrew St. Jean

“We’ve seen a lot of acreage growth, and it seems there’s a lot of grain in the system that we’re not used to,” said Andrew St. Jean, organic manager with Beechwood Agri Services in Ontario. A poorer crop in 2019 also had more growers looking to generate some cash flow at harvest time – which flooded the market earlier in the year.

“Acres are growing, but domestic usage is not growing at the same rate,” said St. Jean. Imports of corn and beans also haven’t slowed. “There’s more grain in general, and our usage isn’t keeping pace.”

St. Jean expected it would take two to three years of softer prices before the market turns the corner.

“We’ve seen such rapid growth in acres – not traditional organic growers – but farmers chasing the money,” said St. Jean. “If the effort isn’t worth it, they will eventually drop out,” he added.

However, the lengthy transition period to gain organic certification means that additional acreage increases are expected over the next two years. At the same time, St. Jean didn’t see anything major on the horizon to increase domestic usage.

Demand is increasing at a faster rate for plant-based proteins than for organic meat, which puts organic feed grains under pressure compared to pulses, said St. Jean. He said the market was so flooded for corn that it was hard to even put out a bid.

Looking to the spring of 2020, market participants didn’t expect to see any large acreage swings, as organic growers will keep to their rotations.

“At the end of the day, what it boils down to is rotation,” said Charles. He said there could be a slight shift away from durum towards spring wheat or peas in some durum growing regions, “just because durum demand is really down.”

Production contracts typically start appearing around this time of year, but forward pricing options remain few and far between this year.

“We’re still trying to get a handle on what will be left in the system,” said Messer on the relative delay in offering new crop bids. “There are loads of yellow peas left in the system, lots of wheat, lots of oats, lots of lentils around.”

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