Growing demand for organic ingredients leads to supply challenges
Suppliers of organic wheat, yeast, dough strengtheners, oils and other ingredients have implemented strategies to boost acreage and specialty ingredient production, but organic demand is so strong that hardly any domestically grown organic wheat, corn or soybeans is exported.
Organic food sales are expected to see a CAGR of 7.6% to 2025, according to Rabobank figures – although it warns the lack of an established supply chain could restrict further growth. John David Roeg, senior consumer foods analyst for Rabobank said: “Food producers should increase their focus on organic, through new products and brands, or through the reformulation of existing products to help grow their top lines. This will also help them to position themselves as responsible businesses.”
There is now more organic farming in the United States than ever before. The number of organic operations increased 12% in 2015 from the prior year, according to USDA figures, and is up nearly 300% since 2002. However, farms classified as organic still account for just 0.7% of the total operations in the U.S.
The main problem for farmers is that converting from conventional to organic farmland is time consuming and expensive. It takes at least three years, during which time farmers must use organic practices but are not paid organic prices.
There are plenty of incentives for U.S. farmers to make the switch to organic farming, including the USDA’s Environmental Quality Incentives Program (EQIP) which offers first-time organic farmers technical assistance as well as a one-off payment that varies by region. Food manufacturers and retailers also have put programs in place as they struggle to meet their needs for organic ingredients and products. Stonyfield Farms, Organic Valley, Whole Foods and Nature’s Path Foods are among those who have offered grants and technical assistance to farmers in an effort to boost supply.
For many manufacturers it is often a challenge to source organic ingredients, whether they be specialty ingredients like organic herbs and spices, which may not be grown in the U.S., or mainstream commodity crops like wheat. Digital platforms have been set up to help, such as GreenTrade.net or Mercaris Auction Platform, which claims to have traded 280,000 bushels of organic grain so far this year – more than what was traded during the whole of 2016.
The Organic Trade Association also provides a range of resources for suppliers and manufacturers alike, including pricing and market data, and a directory of certified organic suppliers. Shortages of some organic products have cause price spikes. In some cases, livestock producers, hungry for organic feeds, have imported it from overseas because they can't find enough domestically.
Some grocery stores and restaurants have worked closely with farmers and ranchers to give them an idea as to how much of the product they will need in the future. Wal-Mart, for example, works with farmers and other suppliers to outline its organic needs several years in advance.. Elevation Burger, which sells organic, grass-fed, free-range beef, shares information like growth projections and store openings with its suppliers.
- Food Business News Organic ingredient suppliers work to meet demand