ST. LOUIS — While there is a growing demand for organic grains, farmers with high-quality land may be at a disadvantage to cash in on the need.
Farmland in Illinois and Iowa presents profit challenges for those seeking to transition from conventional crops, said Anthony Michaels. Michaels, CEO of Midwestern BioAg, laid out the opportunities and obstacles for organic corn and soybeans at a conference in St. Louis.
“The problem is, at $12,000 an acre it’s really hard to get a proper return,” Michaels said. “We can’t grow enough nitrogen to compete with how much nitrogen you can flood onto these fields that are going for 300-400 bushels.”
He told those gathered at the Organic and Non-GMO Conference that recent field trials yielded 300 bu./acre organic corn. But that is not a realistic goal.
“That is really hard and not sustainable,” he said. “A lot of land is not appropriate for organic. There are diminishing returns. With land at $5,000 to $7,000, you’re up to that 200-bushel level. That’s really good for taking an existing farmer already operating that land and shifting them over to organic. If you can grow the nitrogen and get 200-bushel corn, grow corn.”
Overall, organic agriculture is picking up. In a few years, organic farms have gone from a third to half of Midwestern BioAg’s customer base. The growth may partly be due to stagnant prices for conventional crops in the region.
Michaels doesn’t gloss over the bumps on the road to organic success. The three-year transition period itself is enough to stop many farmers in their tracks. But he has advice on making the switch. That includes laying off what they’ve been doing.
“The worst thing that happened to organic is transition premiums for corn and soybeans,” he said. “There should be transition premiums for alfalfa. Most of our best customers don’t even take any crops off during transition. They just build soil for two years and train the team. And when they’re ready to go, their best organic year is the first one out of transition, because they have more nitrogen built up in that soil than they’re ever going to have again.”
Michaels touched on three strategies for transitioning, from maximum to minimum soil building. The maximum model calls for focusing only on soil building and growing cover crops for seed. A moderate program involves growing alfalfa and a small grain with a legume cover crop to follow and grazing a diverse pasture mix. Minimally, a producer grows corns and beans while restricting the crops to organic-allowable inputs.
While the transition period is the proverbial 800-pound gorilla in the room, producers must face other realities.
“It’s not just transition that scares people,” Michaels said. “All these risks have to be managed and mitigated and explained. Some of these are fertility. Do you have a farming model that can make some money? Do you have a farming model that has enough diversity and complexity in the rotation? Do you have the skill set that it takes? People have to learn a whole bunch of tasks that they don’t know, that their grandfather never passed on to them.”
One obstacle is financing. Many bankers are averse to supporting organic farming. However, cooperation between a landowner and farmer can smooth out some wrinkles.
“The banker is often unfamiliar with the process,” Michaels said. “Most don’t talk directly with the farmer. There are all these intermediaries. These are pieces that are missing. It is the farmer aligning with the landowner on a very long-time scale. Let’s take a lot of risks out of that by making that partnership work. A lot of land investors don’t want to buy more land, but want to buy into transition.”
One option is gradual transition, in which a farmer transitions his acreage a little at a time, such as 10 or 20 percent. Some operators are pressured to do more by investors who are seeking organic lands.
Contracted acreage may be a good fit for some farmers. Midwest BioAg worked with General Mills to transition 34,000 acres into organic wheat for its Annie’s organic products brand. Such opportunities in vertical integration are promising.
“They have to grow that business,” Michaels said. “On the bottom of the box it tells you what farm. They’re setting a local capacity within the context of a large organic brand. That’s marketing.”