Organic Broadcaster

 

Organics needs to build soil, market cooperatively to beat conventional mindset

By Oren Holle & Carmen Fernholz, OFARM

As the organic movement established a firm foothold in the 1980s and 90s, hardly anyone envisioned that CAFO (concentrated animal feeding operations) and hydroponic systems of production would forge their way into organic production. These industrial model production structures have convinced the National Organic Program (NOP) and the National Organic Standards Board (NOSB) of their legitimacy as fully compliant organic operations even as they operate within a basic conventional structure.

Now the conventional farming mindset is encroaching on organic grain production. With the current low prices for conventional grains, improved engineering of farm equipment, and agronomic data and research of nearly four decades of organic production practices, organic grain farming is fast becoming a viable option for non-organic farmers on larger and larger tracts of land. It appears this trend will continue even if non-organic prices improve at some time in the future.

There are more subtle conventional practices emerging in organic production, too. Farmers who choose to transition today often do so with a conventional approach, thinking—as they’ve been trained to do—in terms of purchased inputs to enhance productivity and assist with correcting soil deficiencies. They’re not creating an environmentally sustainable production system based on robust soil-building rotations and use of nutrient-rich cover crops—the foundations of organic farming. Even some long-established organic producers are succumbing to this same mentality of enhancing short-term yield potential while maximizing their land base to produce higher income-generating crops with shorter rotations.

Operations with huge land bases are entering the arena as well, often backed by investment firms, with a mentality of short-term economic profitability overshadowing the basic premises of an organic production system based on rebuilding soil within the framework of environmental responsibility.

In a direct throwback to conventional agriculture, the most damaging action taking place in all of this is that organic farmers, far too frequently, are approaching the organic market as individuals. In the early days of organic grain marketing, this approach had fewer consequences because demand for organic grains from buyers, processors, and consumers easily maintained the balance of supply and demand in favor of farmers. Domestic organic acreage was limited, and sourcing internationally was not yet an alternative. Startup companies were the only game in town and consumer interest was just beginning to develop.

As the organic food system continues to mature, the influence of larger companies is becoming visible. These companies are using their experience and size to source raw product internationally, with their presence in countries across the globe. This entry of transnational companies into the organic food system is swiftly taking ownership of the market pricing environment.

All of these factors simply mean that organic food production has matured to a level where it is no longer a niche market or a specialty enterprise. It is a food production system that is worldwide and, as such, feeds its production into an international arena of commerce and trade. Organic agriculture now sits at the table with all other segments of agriculture and food production.

In light of this inevitable growth and evolution of the organic food sector, for many organic farmers, an instinctive first reaction seems to be one of fear along with abandonment of production and marketing discipline. Too many farmers may be willing to compromise organic principles for personal gain and forsake responsibility for protecting prices. Almost on cue, a significant number of farmers begin to abandon any thought of a managed production inventory and revert to the survival mentality of thinking they can produce their way out of sagging grain prices. They opt for more simplified rotations that focus on short-term gross income rather than long-term profitability; profitability based on sweat equity rather than capital investment.

A significant number of farmers surrender their pricing responsibility to a brokerage firm or a board of trade type of public auction. Or, as individual farmers, they approach this now well-established international market arena with the misguided idea that they can go “toe to toe” as equal players and come out on top, all the while losing sight of their obligations to protect their enterprise investments by resigning any market decision-making opportunities or assistance to their individual time allotment or skills in price discovery.

The devastating consequence of this “go-it-alone” approach to marketing is that they are becoming the victims of the age-old conventional mindset of the rugged individual, which by its very nature means pitting oneself against fellow organic farmers in a survival-of-the-fittest approach to farming and, more specifically, to marketing.

The endgame for our domestic organic grain production will be that organic farmers will no longer have the voice they once had in seeking the prices they enjoyed a mere five years ago. Individual volumes as well as singular voices will shrink and will continue to do so unless these voices begin to speak in terms of cooperative action. As Alice Walker, an American novelist, short story writer, poet, and social activist has stated: “The most common way a people give up their power is by thinking they don’t have any.”

 

Broker or Organic Grain Marketer

Differentiating between a grain broker and a grain marketing agent is where it begins. It begins here because it is an admission that while grain marketing is simple, it’s just not easy. A broker is an independent buyer who is dependent on getting product at a low enough price to make a profit at resale, yet competitive enough to grow a business. A broker can also be a person employed by a company. So, it would be a logical conclusion that a broker’s price offer will be the lowest possible price offer a farmer is willing to accept.

A marketing agent, on the other hand, is a person hired to assist in marketing a farmer’s grain. Through the structure of a marketing group, a farmer pays this person to provide a service. The marketing agent is working solely for the farmer’s best interests. Consequently, the better the marketer performs, the more income both farmer and marketer will enjoy.

A marketer is a personal source for price discovery. A marketer is in the market 24/7 talking to buyers, talking to other farmers, learning about crop and weather conditions, and most importantly finding out firsthand what buyers are looking for today and into the future. This is called robust price discovery.

A good marketer is experienced in logistics and all of its complexities. A good marketer is learning which buyers are low bidders and which are higher bidders. A good marketer is also aware which buyers support the added value for domestically grown grains and the benefit such a relationship can bring to the table. A good marketer is ever aware of which buyers are sound financially and which are questionable in their performance. A good marketer provides all of this information, which a farmer can utilize to make a sound decision regarding potential sales or contracts. And finally, the good marketer assures the contract terms, in addition to price, are producer-friendly.

Finding a respectable price with a place to deliver can be a challenge. Every farmer has had grain quality issues from time to time. Nearly every longstanding organic farmer has experienced a rejected load. When that happens, it can be difficult to know if the rejection is legitimate. And, finding a place for the grain without having to pay the freight back home can be difficult. Here again is where a good marketer does the heavy lifting.

 

Marketing Organic Grain

Intelligent marketing, we have come to understand, is knowing one’s limited skills in price discovery and being wise enough to hire the expertise of professionals to assist with one’s marketing plans.

It is a fact that farmers bond quite closely to the grain in the bin simply because of all the time and sweat they have invested in getting it there. It is their livelihood. However, its market value is not dependent on this bonding or emotional connection. Buyers only see bushels to buy to make their own product. Consumers only experience the satisfaction of having good quality food on the table. So what is the value of your grain?

Setting that value is probably one of the greatest advantages of having a marketing agent. As an individual in the market, the decibel level of a farmer’s voice will be in direct relation to the volume of bushels that farmer has to offer. So combining those bushels with other organic farmers’ bushels logically raises the marketing decibels for all. Turning up the volume can be accomplished by engaging a good, honest grain marketer to represent more farmers and more bushels.

This approach to the organic grain market, including structure and previously referenced attributes of good marketers, already exists. It is the Organic Farmers Agency for Relationship Marketing (OFARM).

OFARM’s cooperative information and inventory-sharing significantly increase the negotiating position for the farmer in the person of the marketer. This group of collaborating marketers at the negotiating table becomes the farmer’s voice as well as the voice of hundreds of other organic farmers. The often-unrealized benefit of this structure is the simple fact that the more farmers and inventory represented by these marketers the louder and stronger becomes their voice and position in negotiating a price.

But this service certainly is not without some investment. Here again, as a participant in a marketing coop, the farmer sets the level of cost for this service. The farmer determines the salary for the marketer because the farmer, with full expectation of satisfactory service, is the one providing the marketer’s paycheck. The success of any cooperative entity is totally dependent upon the loyalty of its patrons.

OFARM marketing agents guided by the directives of their respective coop boards of directors and participating farmer members approach the organic markets with this set of goals in mind.

  1. Organic prices must reflect the production costs of healthy, wholesome food in an environmentally responsible manner.
  2. Organic prices must reflect an income that provides for support of the social and economic viability of the community.
  3. Organic prices must account for full recovery of all inputs including those unique to the production, handling, and marketing of organic grains.
  4. Organic prices must reflect a return on investment that provides for the acquisition and ownership of land and the related infrastructure required of an organic food system.
  5. Organic prices must reflect a return to labor and management and provide family income at levels that allow for the full involvement of all participants in the production unit.
  6. Organic prices must reflect income that allows for the education, training and transitioning to future generations of organic farmers.

The definitive purpose for OFARM is to assure that the determination of our economic destinies as organic farmers and the destinies of future generations of organic farmers will be and continue to be the direct results of the decisions its members make each day as they, through their marketing agents, approach the market together.

Oren Holle is president of the Organic Farmers Agency for Relationship Marketing (OFARM); Carmen Fernholz is vice president. See www.ofarm.org.

 

From the November | December 2020 Issue

 

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