2020 Starting an Organic Grain Farming Operation – Alex Wolf Presentation
Starting an Organic Grain Farming Operation – What You Need to Know Program held Thursday, Jan. 30, 2020 at the University of Nebraska Eastern Nebraska Research and Extension Center. Organic Grain Marketing presented by Alex Wolf, Scoular Organic Grain Manager – Omaha, NE.
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[00:00:20.840]Our next speaker is Alex Wolf.
[00:00:23.120]He's with Scoular Organic,
[00:00:24.960]he's in organic grain,
[00:00:28.410]and just a second here, let me get Alex's...
[00:00:39.460]Yeah, he's the Senior Manager with Scoular Company,
[00:00:43.710]and he leads the company's organic grain group.
[00:00:49.310]Office is in Omaha, and it...
[00:00:54.900]And he sold over 50 million sales there.
[00:00:58.520]He started with Scoular in 2009 as the intern,
[00:01:00.850]worked full-time in merchandising roles
[00:01:03.820]down in Overland Park, Kansas, Charleston, South Carolina,
[00:01:07.290]and Hancock, Iowa.
[00:01:10.280]He's also a merchandise shuttle trains with Gavilon,
[00:01:14.441]and worked in raw materials in the division
[00:01:17.590]of Anheuser-Busch in Saint Louis.
[00:01:19.990]Grew up on a family farm and ranching operation near Albion,
[00:01:23.750]graduated from University of Nebraska in Ag. Economics,
[00:01:28.010]and he's got his MBA from Harvard Business School.
[00:01:32.360]Alex enjoys Huskers sports, country music,
[00:01:35.040]dogs, and the great outdoors, so thanks for coming, Alex.
[00:01:38.820]Alright, thank you.
[00:01:41.160]You hear me alright?
[00:01:44.490]Well, it'd probably be more fun to talk about
[00:01:46.060]the Huskers for a half an hour,
[00:01:48.000]but I guess we can stick around and do that afterwards.
[00:01:50.730]But this is I guess one of the rewards
[00:01:54.050]of organic farming too is the grain marketing piece
[00:01:56.830]when you can capture that premium
[00:01:58.840]after all your hard work of growing the crop,
[00:02:01.640]and managing the certification process and all that.
[00:02:04.720]So yeah, I'll try to share what I know about that,
[00:02:09.860]and I only have about 10 slides in here,
[00:02:12.320]so we should have plenty of time for questions
[00:02:14.740]both during and after the presentation.
[00:02:18.920]One note, I didn't have the handouts printed out,
[00:02:22.510]because I'm using quite a bit of proprietary data
[00:02:25.590]from a research firm called Mercaris,
[00:02:28.340]and so I didn't feel right to just mass-distribute that.
[00:02:31.680]But yeah, I mean, you're welcome to contact me,
[00:02:35.120]and I can be happy to answer all the questions,
[00:02:38.843]and get you the information that you're looking for.
[00:02:43.490]Alright, so we'll start out with just an overview
[00:02:46.600]of the entire organic market,
[00:02:48.850]so you can get a feel for the scale of it,
[00:02:51.090]and the crops that make up the major demand.
[00:02:56.220]So the total market, corn, soybeans, and wheat's
[00:02:58.720]about 110 million bushels.
[00:03:01.440]It's really a fairly similar breakdown
[00:03:03.700]to the conventional market here in that,
[00:03:06.190]corn is king.
[00:03:07.980]Corn is by far the most grown and the most used
[00:03:11.850]commodity in the organic market,
[00:03:14.480]and that'd be followed by soybeans and wheat.
[00:03:18.650]So 57 million bushels of corn,
[00:03:21.060]34 million bushels of soybeans, and 20 million of wheat,
[00:03:25.400]in a year.
[00:03:27.090]I broke down in-between import and domestic
[00:03:29.850]because the U.S. is a significant net importer
[00:03:33.520]of organic grains, so that's of course in sharp contrast
[00:03:38.910]to the conventional market.
[00:03:41.230]So on corn, roughly two-thirds of our supply
[00:03:45.500]is supplied by U.S.-grown corn,
[00:03:48.560]and then the balance, around 37% is imported,
[00:03:52.640]and soybeans is the flip side of that.
[00:03:56.840]So the U.S. is actually importing close to 80%
[00:04:00.920]of the soybean crop,
[00:04:02.900]and growing about 21% domestically.
[00:04:06.900]Wheat is almost all U.S.-supplied.
[00:04:10.030]Really the only wheat that's imported
[00:04:11.690]is a small amount of durum wheat.
[00:04:17.030]The real drivers for organic grain demand
[00:04:21.070]is livestock feed, and so,
[00:04:23.920]it's about, if you add up layers, broilers, and turkey,
[00:04:28.610]you've got about two-thirds poultry, and a third dairy,
[00:04:33.910]for the grain consuming animal units.
[00:04:37.750]That other bucket of 3% would include beef cattle and swine,
[00:04:43.640]so as you can see there's maybe some room for growth
[00:04:49.180]in those markets, but currently it's being dominated
[00:04:52.200]by poultry and dairy.
[00:04:54.980]So any questions so far?
[00:05:01.073]The import of both corn and soybeans,
[00:05:04.394]they're (mumbles) percent (mumbles)
[00:05:08.330]Yes, on the corn side,
[00:05:11.070]most of it comes from two regions,
[00:05:14.990]Argentina and then the Black Sea region of Turkey,
[00:05:23.350]Those would be the major countries of import for corn.
[00:05:26.370]And then for soybeans, India is the primary country,
[00:05:30.670]and there's been a shift that I'll show
[00:05:33.200]in a couple of slides
[00:05:34.390]that the market used to import
[00:05:36.040]a lot of whole organic soybeans,
[00:05:38.210]many of 'em coming from India, some from Argentina,
[00:05:41.190]and some other places, but there's been a pretty large shift
[00:05:44.240]in the last couple of years to importing soybean meal
[00:05:48.010]that's crushed in India.
[00:05:49.810]And so that's come in heavily into the U.S. market
[00:05:53.380]over the last couple years.
[00:06:00.980]What are we looking at, like,
[00:06:03.114]how (mumbles) of the segment is this
[00:06:06.082]that is forecast for future?
[00:06:08.170]Yeah, that's a good question, we don't have as--
[00:06:10.740]Repeat the question.
[00:06:12.120]Oh, oh, yeah, yeah, so the gentleman asked
[00:06:14.930]about food consumption of organic grains,
[00:06:18.230]and there certainly is some.
[00:06:20.040]It pales in comparison to the livestock feed demand,
[00:06:25.890]and we don't have as good a data on the food side,
[00:06:28.440]but there is some demand there.
[00:06:32.200]And I guess wheat would have larger demand
[00:06:36.014]than really corn or soy on the food side,
[00:06:39.010]so we're known about eight to nine million bushels
[00:06:44.070]of organic wheat each year for food consumption.
[00:06:49.316]If we're importing this from Argentina,
[00:06:51.538]or lots of Black Sea corn,
[00:06:53.218]how do you know if organic, if they're organic,
[00:06:55.762]that's what it is?
[00:06:56.595]Like, this guy's (mumbles) at ordering,
[00:06:58.707]you gotta have all this stuff.
[00:07:00.730]Then somebody ships it in from somewhere else
[00:07:02.802]and says, yeah that's organic?
[00:07:05.008]I mean, how do you document that, or is that just false?
[00:07:08.402]Yeah, the question is,
[00:07:10.780]how do we ensure the organic integrity
[00:07:13.831]of imported grain that comes in to the U.S.?
[00:07:17.370]And this is definitely a hot button issue in the industry.
[00:07:23.960]Ultimately, the USDA sets the National Organic Program,
[00:07:28.790]which is then enforced by the certifying agencies,
[00:07:33.396]And so those agencies certify the grain,
[00:07:38.870]both U.S. and abroad,
[00:07:42.590]and there are some challenges
[00:07:46.110]with ensuring organic integrity really in both places,
[00:07:52.039]but that's really the system that the market relies on
[00:07:57.580]is the USDA NOP certification.
[00:08:07.300]Yes, these are 2019 estimates.
[00:08:13.650]Okay, we'll look at the growth here
[00:08:15.910]from the last several years.
[00:08:17.750]And so organic food sales were up 5.9% in 2018 versus '17.
[00:08:25.120]We don't have the '19 figures yet on that.
[00:08:28.090]It is important to note that,
[00:08:31.920]fruits and vegetables are the largest component
[00:08:33.920]of organic food sales,
[00:08:35.020]so that's not necessarily representative
[00:08:37.410]of the growth of organic grain demand.
[00:08:40.050]And so to try to get a good estimate
[00:08:43.480]of how our organic grain demand is growing,
[00:08:46.450]we look at those key drivers
[00:08:47.960]that we identified on the prior slide here
[00:08:51.590]with the layers, broilers, and dairy.
[00:08:55.090]And so USDA does provide data on all three of those.
[00:09:00.380]Organic layer inventories have grown at a 12%
[00:09:04.010]compound annual growth rate since 2014,
[00:09:07.510]so the layer business is really what's driven,
[00:09:11.530]or led to market growth over the past several years,
[00:09:14.900]and layers grew 3 and a half percent in 2019 versus '18.
[00:09:20.550]And then organic broiler slaughter
[00:09:23.490]has grown about two and a half percent since late 2016.
[00:09:28.310]Unfortunately, the USDA changed their data set in 2016,
[00:09:33.240]so we can't really compare data prior to that time.
[00:09:37.530]But, in 2019 it was down just a little bit.
[00:09:43.580]Yeah, I don't think that that's necessarily a big deal
[00:09:47.090]or something to be too concerned about,
[00:09:49.000]but overall the layers and the broilers
[00:09:52.530]have been on a nice growth pattern.
[00:09:55.150]Organic fluid milk sales have been mostly steady since 2014,
[00:10:00.560]you know, slightly increasing,
[00:10:02.780]and they were down in 2019,
[00:10:05.210]and this is really no different
[00:10:07.130]than the conventional dairy market.
[00:10:09.970]Consumers are unfortunately,
[00:10:13.010]there's a trend away from dairy products,
[00:10:15.710]and so consumers are drinking alternatives
[00:10:18.420]such as almond milk and things of that nature.
[00:10:21.750]Soy milk, too.
[00:10:26.070]Okay, the organic corn balance sheet,
[00:10:29.750]this'll give you a little bit better idea
[00:10:31.700]of really what's grown, what's imported,
[00:10:35.130]and how much we have on hand at the end of the year.
[00:10:38.410]So you can see the growth trajectory here,
[00:10:41.000]on the acres harvested especially.
[00:10:44.090]It's roughly doubled since 2015.
[00:10:48.040]I did put some asterisks in here for the 2019/2020 crop year
[00:10:52.730]that we're in right now,
[00:10:53.750]because these are projections from Mercaris, and,
[00:10:59.530]so there will be some more revisions to those numbers,
[00:11:01.980]and personally I think the area harvested
[00:11:05.230]and production numbers are too low on this slide.
[00:11:08.490]I expect 'em to be higher,
[00:11:11.030]by the time it's all said and done,
[00:11:12.970]and that's just due to the nature of.
[00:11:16.051]I know that there were some prevent plant acres this year
[00:11:19.760]that didn't get in the ground,
[00:11:21.509]but still the trend has been growing organic acres
[00:11:26.170]in the U.S., and I see that continuing.
[00:11:30.920]Let's see, okay, so the imports on this slide
[00:11:33.730]is kind of interesting to look at.
[00:11:35.837]The whole corn imports have been going down
[00:11:39.890]but replaced basically lockstep with cracked corn imports.
[00:11:47.710]Okay, so the reason for that is there are some countries
[00:11:50.780]that the U.S. is not allowed to import whole corn from.
[00:11:54.760]Many of those countries are in the Black Sea region.
[00:11:58.640]Ukraine, Russia, Kazakhstan, et cetera,
[00:12:02.650]and so what some in the market are doing
[00:12:08.586]to make it legal is they process the corn,
[00:12:13.100]crack it, and then it's allowed to come into the U.S.
[00:12:18.100]So, total imports, another important thing to note
[00:12:21.790]on this slide is that in 2017, there was a dropoff,
[00:12:26.370]and that's because there were some significant fraud cases
[00:12:29.440]that were exposed in 2017 by the Washington Post.
[00:12:35.190]And so as a result, the import supply chain got cut off,
[00:12:41.410]cut back temporarily while the market
[00:12:44.720]kind of came to terms with that,
[00:12:46.630]and then as you can see here in '19,
[00:12:49.990]the imports have picked up again.
[00:12:52.710]So that sum of production and imports,
[00:12:55.070]about 57 million bushels this year of organic corn.
[00:12:59.150]That's the same number that I had in the prior slide
[00:13:01.420]for how we estimate the size of the market,
[00:13:04.510]and that's really because it's a lot,
[00:13:07.070]the data is a lot easier to come by on the supply side
[00:13:10.670]than it is the demand side.
[00:13:13.140]That food and residual category at the bottom,
[00:13:18.190]economists use residual as kind of a catch-all
[00:13:21.520]for things that they can't explain and add up.
[00:13:25.480]So yeah, so...
[00:13:28.630]I should make a comment here too,
[00:13:30.150]so USDA provides that demand data on layers, broilers,
[00:13:35.110]and dairy, but what they haven't done since the 2016 crop
[00:13:40.020]is provide any acreage or production numbers for grain,
[00:13:44.050]and that's why I'm relying on this third-party
[00:13:46.750]research service called Mercaris for most of this data.
[00:13:51.430]The USDA is doing a survey from the 2019 year
[00:13:57.800]that will be published in
[00:13:59.490]probably August or September of 2020,
[00:14:02.610]and that'll give us the first time in three years
[00:14:07.530]that we will receive data from USDA
[00:14:09.680]on organic grain production.
[00:14:11.490]So I know I'm very much looking forward to that,
[00:14:14.210]being kind of a grain marketing junkie,
[00:14:17.070]and it'll be nice for the market
[00:14:19.410]to get a little bit more reliable data that way.
[00:14:23.450]I saw a question, I think?
[00:14:25.280]Yeah, go ahead.
So is that a good thing
[00:14:27.182]that the USDA has these (mumbles)
For you, or?
[00:14:34.500]For everybody, I think.
[00:14:35.750]I mean, I think that accurate reliable data
[00:14:39.820]benefits everybody in the market,
[00:14:41.880]and USDA is not perfect, and I know...
[00:14:45.610]Do you think it's gonna be accurate widely?
[00:14:49.130]So, better than what we've got
[00:14:52.143]is the true answer, I mean...
[00:14:59.020]USDA, probably not without its shortcomings,
[00:15:02.420]but they still have more resources and more reach
[00:15:05.420]than any other organization out there,
[00:15:07.965]so in my opinion it will be good to get some data from USDA.
Is Nebraska kind of a hotbed
[00:15:22.090]between the coast of New York and California
[00:15:25.781]for growing a bunch of (mumbles)
[00:15:29.970]and have 'em (mumbles) for the oats?
[00:15:33.010]Yeah, good question.
Alex, could you repeat
Yeah, the question is,
[00:15:38.450]is Nebraska somewhat of a hotbed
[00:15:40.640]for organic grain production,
[00:15:42.600]and essentially exporting to the coast of the United States,
[00:15:47.660]and it is exactly right, it is.
[00:15:51.100]We're a large, so Nebraska, along with the other states
[00:15:55.220]in the western corn belt are grain surplus areas
[00:15:58.710]and organic just like they are in conventional,
[00:16:01.650]and we do ship quite a bit of product
[00:16:04.480]to grain deficit states,
[00:16:06.890]many of which are on the coast,
[00:16:08.610]and the coast also happen to be
[00:16:10.620]where the most organic demand is,
[00:16:13.410]for the organic end products.
[00:16:15.734]So we do load out a lot of railcars from Nebraska,
[00:16:20.170]Iowa, Minnesota, many of which go to the west coast.
[00:16:25.340]Some go to the east coast, also.
[00:16:30.180]Okay, this chart here has some price data from USDA.
[00:16:35.170]So they do provide this on a regular basis,
[00:16:38.300]just not the production numbers.
[00:16:41.590]The five year average is the dark gray line,
[00:16:44.940]and oh, one other comment about this slide
[00:16:47.480]is these are national prices,
[00:16:49.260]and so because of those discrepancies
[00:16:52.250]that we were just talking about on surplus and deficit areas
[00:16:56.080]with us being a surplus area,
[00:16:58.070]our prices are usually lower than the national average
[00:17:02.070]because of the transportation cost
[00:17:03.560]to get it to the deficit areas.
[00:17:06.010]But yeah, you can see that nationally,
[00:17:09.140]organic corn prices for the last five years
[00:17:12.300]have been around the $10 a bushel mark.
[00:17:16.480]In 2019, prices were lower,
[00:17:21.620]more in the $8 to $9 a bushel mark nationally.
[00:17:26.470]And we've had a little bit of a rebound since harvest,
[00:17:30.740]but basically it would be still kind of a flat line
[00:17:34.830]to where the end of those prices go in 2019.
[00:17:41.910]Okay, here's the same data for soybeans
[00:17:44.500]that we just looked at on corn.
[00:17:47.875]You can see that the area harvested is lower.
[00:17:50.550]So we're somewhere around 200,000 acres of organic soybeans
[00:17:54.600]versus close to 350,000 for corn,
[00:17:58.980]and I think the primary reason for that
[00:18:01.350]is just that it's very difficult to grow soybeans,
[00:18:07.520]On the positive side of that,
[00:18:09.290]there's very solid demand for soybeans for that same reason.
[00:18:13.750]So if you can perfect your, not perfect,
[00:18:17.460]but if you can get good at your craft
[00:18:19.500]of growing organic soybeans,
[00:18:21.450]you can be pretty well-assured
[00:18:23.510]that they'll be a good market for you at the end.
[00:18:27.210]The U.S. produces somewhere around 7 million bushels
[00:18:30.740]of organic soybeans.
[00:18:33.270]You can see this trend that I was referring to earlier,
[00:18:36.260]that whole soybean imports have been coming down,
[00:18:41.030]but soybean meal imports have increased drastically,
[00:18:45.250]most of that coming from India.
[00:18:49.520]Let's see, I think that's it.
[00:18:51.980]Any questions on that on the soybean balance sheet?
[00:18:55.929]I don't have a question about (mumbles)
[00:19:00.389](mumbles) grain produced (mumbles)
[00:19:13.492]and most poultry and dairy in the west.
[00:19:18.586]So why is (mumbles)
[00:19:22.933]I'm not quite catching that.
[00:19:24.080]Okay, yeah, so he's asking about,
[00:19:27.650]really the grain flows,
[00:19:29.190]and why the grain flows are what they are
[00:19:32.110]when there's quite a bit of poultry and dairy demand
[00:19:35.110]in the Midwest, and--
Yeah, why is it so much
[00:19:39.530]poultry and dairy is produced here,
[00:19:41.760]in the middle part of the country?
[00:19:43.800]Not necessarily for organic.
[00:19:46.190]There is some organic poultry and dairy production
[00:19:49.720]in the Midwest, but it's more heavily concentrated
[00:19:53.010]in areas like Pennsylvania and California,
[00:19:55.330]and a few other places like that, yeah.
[00:20:02.810]Okay, here's a chart for prices
[00:20:05.432]on organic feed grade soybeans.
[00:20:08.950]For the last two years here, '18 and '19,
[00:20:11.380]you can see prices have been quite steady
[00:20:14.600]in this $18 to $19 per bushel range nationally.
[00:20:21.680]Soybean market really has had some strength
[00:20:25.400]over the last month or so,
[00:20:26.860]so that's been kind of exciting for organic producers
[00:20:29.980]that have soybeans to sell.
[00:20:32.670]So you'll see once 2020 data gets populated on this chart,
[00:20:38.150]it'll be in an uptrend.
[00:20:42.320]Alright, how to find an organic market.
[00:20:45.230]So, I was tempted just to put my picture
[00:20:48.620]and phone number up here, but I figured that UNL Extension
[00:20:53.190]probably wouldn't appreciate that,
[00:20:54.974]so here are some other ideas, also.
[00:20:59.230]There are some really good organic conferences
[00:21:01.380]around the midwest that I encourage you to attend.
[00:21:04.630]The biggest conference is the MOSES Conference
[00:21:07.210]that's held across Wisconsin every year.
[00:21:10.250]It's the last weekend in February this year,
[00:21:14.170]and I think every year,
[00:21:15.940]and so that's a good one to go to.
[00:21:17.991]They'll have, it's,
[00:21:21.290]they'll have a lot of workshops, educational seminars
[00:21:24.910]there as well, and probably some pretty advanced-level
[00:21:28.960]organic farming talks,
[00:21:31.590]in addition to some beginner level.
[00:21:33.870]And then most of these conferences
[00:21:36.210]have pretty large trade shows
[00:21:38.500]of companies that you can go talk to.
[00:21:43.370]So Iowa Organic Conference, that's in the Fall in Iowa City.
[00:21:48.350]Minnesota has one in St. Cloud in January,
[00:21:51.400]and then Practical Farmers of Iowa I know,
[00:21:54.350]I think it was Joel Hoover mentioned them earlier.
[00:21:57.370]That's a really good organization
[00:21:59.110]that puts on a lot of good functions throughout the year,
[00:22:03.290]including several field days
[00:22:05.290]that are on organic growers' farms in the summer time.
[00:22:09.120]And so I enjoy going to those.
[00:22:12.900]I go to two or three of 'em every year,
[00:22:15.273]and those would be really good for you to attend, also.
[00:22:19.600]There are a couple organic publications that are out there
[00:22:23.593]that can be good resources for you.
[00:22:26.770]The Organic and Non-GMO Report and the Organic Broadcaster
[00:22:30.520]are a couple of those.
[00:22:31.750]And that's not an exclusive list,
[00:22:34.060]so if I left out anything that somebody remembers,
[00:22:37.680]feel free to speak up.
[00:22:40.770]And then the other one, probably the most important one,
[00:22:43.960]the best one is to ask other organic farmers for referrals.
[00:22:49.510]Some of the good questions to ask
[00:22:52.997]are things that you might take to granted
[00:22:55.100]in conventional grain marketing
[00:22:56.890]that you really can't take for granted in organic,
[00:23:00.020]and so I put those questions on here.
[00:23:03.520]Do they ship their contracts on time,
[00:23:05.630]what's the financial strength of the company,
[00:23:07.790]how quickly do they pay?
[00:23:10.380]In the conventional grain market,
[00:23:11.770]you're most likely used to dealing with
[00:23:14.010]some pretty large organizations that are well-financed,
[00:23:19.540]In the organic market there are some companies
[00:23:22.000]out there that have those things, like Scouler,
[00:23:25.460]but also there are some smaller companies
[00:23:28.020]that don't necessarily have those same resources.
[00:23:32.210]And then of course you want to ask
[00:23:33.580]what quality specs they require.
[00:23:36.920]You know, geographically it's very common
[00:23:40.090]in the organic market to sell picked up on the farm,
[00:23:43.870]and so we can always give producers bids
[00:23:47.540]picked up on the farm everyday,
[00:23:50.490]and we can also give delivered bids.
[00:23:53.740]We have three facilities in Nebraska,
[00:23:56.200]including one just up the road at Fremont,
[00:23:58.970]and something that we do at Fremont
[00:24:01.480]that's a bit unique in the industry
[00:24:03.800]is that we have several hundred thousand bushels of space
[00:24:06.980]that we dedicate to organic grain year round,
[00:24:10.860]including during harvest,
[00:24:12.670]and we also use the dryer for organic corn at harvest,
[00:24:17.640]and so that can be nice for producers there too.
[00:24:24.430]Yep, go ahead.
What do you need
[00:24:26.638]from the grower (mumbles)
[00:24:31.180]The question is, what do grain buyers need
[00:24:33.470]from the grower in order to receive organic grain?
[00:24:40.048]The first part would be the organic certificate,
[00:24:43.660]so we require, we have to have the organic certificate
[00:24:47.760]on hand before the grain ships,
[00:24:50.497]and it's gotta be obviously in good standing.
[00:24:53.900]We check the Organic Integrity database
[00:24:56.410]prior to shipments to make sure that the producer
[00:24:59.680]is still in good standing when that grain ships.
[00:25:04.160]And then each shipment has to come with
[00:25:07.420]an organic bill of lading with a lot number on it.
[00:25:10.730]The lot number is designated between the producer
[00:25:13.720]and the certifying agency,
[00:25:15.600]and then each load also has to have a clean truck affidavit
[00:25:20.330]that's been signed verifying
[00:25:22.130]that the trailer was cleaned out prior to use.
[00:25:27.671]So that answer your question?
Can you expand on,
[00:25:32.600]do they ship your contracts on time?
[00:25:34.450]So when selling a grain in February,
[00:25:37.750]they might not come pick it up
[00:25:39.139]until some company (mumbles) in June, is that what you mean?
Repeat the question, please.
[00:25:47.310]The question was kind of an expansion
[00:25:49.790]on the do they ship their contracts on time,
[00:25:52.230]and if grain was contracted for February,
[00:25:55.210]is it possible that the buyer might not
[00:25:57.460]come pick it up until June?
[00:25:59.330]And so it's, I guess,
[00:26:02.916]how I will answer that is that the organic grain industry
[00:26:08.720]is not as mature as the conventional grain industry is,
[00:26:12.460]and so not all organic grain buyers
[00:26:17.180]use that same element of professionalism,
[00:26:19.690]and there's not as much storage available in the marketplace
[00:26:23.660]and so sometimes there are some inefficiencies in that.
[00:26:29.730]We of course, it's our job to take away those inefficiencies
[00:26:35.694]and we do ship our contracts on time and all of that,
[00:26:39.020]but that's just one thing to be aware of,
[00:26:41.350]to know who you're working with on the other side.
[00:26:52.660]Yes, we do.
[00:26:54.240]So at Fremont, they have normal harvest hours,
[00:26:58.200]and take delivery right out of the field.
[00:27:02.240]In other geographies, we can line up trucks
[00:27:05.870]to pick up out of the field as well.
[00:27:08.380]It's of course a little bit more challenging.
[00:27:10.720]It's preferable to have a bin that can at least be used
[00:27:13.630]on a temporary basis so that trucks
[00:27:15.750]aren't waiting on the combine,
[00:27:17.130]but yeah, ultimately we try to work with you,
[00:27:22.400]and meet your needs on whatever your logistical needs are.
[00:27:28.190]Yeah, so, how that process would work
[00:27:31.960]of picking up grain out of the field.
[00:27:35.180]So the main thing would be communication up front
[00:27:38.970]so that the buyer understands exactly what your needs are,
[00:27:43.860]and can arrange the freight accordingly.
[00:27:47.320]And you definitely want that to be established
[00:27:50.710]before the contract is entered
[00:27:52.490]so that the price factors in everything,
[00:27:55.760]and that everybody's on the same page
[00:27:57.607]with what the plan is to execute the contract.
[00:28:09.020]Yeah, we do do specialty corn.
[00:28:13.390]It's representative of the market,
[00:28:16.320]the vast majority of the volume is for feed.
[00:28:19.710]But yeah, we do do organic white corn, waxy corn,
[00:28:25.410]that's more in the eastern corn belt,
[00:28:28.301]and have a significant-sized organic food grain
[00:28:33.350]soybean program also.
[00:28:35.630]And to qualify for that program,
[00:28:39.680]you'll want to plan a high-yielding,
[00:28:41.680]large seeded, high protein soybean.
[00:28:45.100]And for that, you want to talk about the variety
[00:28:49.540]prior to planning to make sure that it's a variety
[00:28:52.120]that'll work well.
[00:28:58.270]Okay, talk a little bit about forward contracts.
[00:29:02.070]Actually, we covered a little bit of this
[00:29:03.850]during the questions
[00:29:05.290]but really all the same principles apply
[00:29:07.710]as in conventional contracts.
[00:29:09.900]Quantity, price, shipment period,
[00:29:12.900]who's responsible for the freight
[00:29:14.600]if it's FOB to farm or delivered
[00:29:18.210]are all important things to have in the contract.
[00:29:22.080]There are acre and bushel contracts available.
[00:29:26.670]It's very common to do forward contracts up to a year out.
[00:29:29.690]It's less common to go past a year,
[00:29:33.890]and that's something that the market is still developing,
[00:29:38.080]you know, we would all love to be able to lock in prices
[00:29:40.680]for three years, but kind of the reality of the situation
[00:29:45.510]is is that most end users aren't able to lock in their,
[00:29:51.070]you know, organic chicken egg, milk sales
[00:29:53.820]three years out into the future,
[00:29:55.560]and so the market does tend to mostly operate
[00:29:59.060]within a one year window.
[00:30:02.700]And then the last thing is just,
[00:30:05.820]make sure your contracts line up
[00:30:07.260]with what your bin space and drying needs are,
[00:30:10.830]and it's yeah, there is infrastructure out there,
[00:30:15.530]obviously, but it's not as prevalent
[00:30:18.860]as in the conventional market
[00:30:20.170]to where you can't, you know,
[00:30:21.590]there's not necessarily an elevator
[00:30:24.940]10 miles down the road from ya,
[00:30:26.380]so you just have to take those things into consideration.
[00:30:33.120]Do your contracts have an Act of God clause?
[00:30:40.484]We don't generally put Act of God clauses
[00:30:43.710]in the contracts.
[00:30:45.660]An acreage contract would inherently have that as part of it
[00:30:51.090]but what I'll say on that is
[00:30:54.180]that if you enter into a bushel contract and come up short,
[00:30:59.810]we and probably most other buyers in the market
[00:31:02.970]are gonna want to work with the producer
[00:31:05.020]the best that we can,
[00:31:06.950]because the main goal is to do business
[00:31:09.610]for not just this year, but many years into the future,
[00:31:13.000]and so it's pretty rare that we have a real problem
[00:31:17.790]with a significant shortage on a contract.
[00:31:22.600]And we of course always advise people
[00:31:24.480]to contract conservatively, too,
[00:31:26.370]just as you would in the conventional market.
[00:31:37.040]Alright, what other questions do you have?
[00:31:42.670]Say like a first time person doing corn,
[00:31:46.120]they conservatively mark at 150 bushel of corn,
[00:31:48.940]and you end up with a 225. (mumbles)
[00:31:54.310]Can you still get those extra bushels
[00:31:57.010]at the contract price, or are they spotted,
[00:31:58.930]like in commercial grains, how does that work?
[00:32:02.369]Yeah, so that would depend if you did it,
[00:32:05.670]if you contracted by the bushel or by the acre.
[00:32:08.040]So if you did a bushel contract,
[00:32:09.640]then you know, the excess production is,
[00:32:14.060]well, first of all, it's still yours to market,
[00:32:15.860]so you can market it to anybody,
[00:32:17.970]but yeah, you would be subject
[00:32:19.710]to the current market price on it.
[00:32:21.640]If you do an acreage contract,
[00:32:24.040]those can be done a couple different ways.
[00:32:26.670]There are some acreage contracts out there
[00:32:29.240]that would be just for whatever you produce.
[00:32:34.240]You know, as a grain buyer,
[00:32:37.130]that's a pretty significant transfer
[00:32:39.550]of production risk from the grain grower to the grain buyer
[00:32:43.520]so I think those contracts are a little bit more rare,
[00:32:46.690]and you might have a little bit lower price
[00:32:48.800]to compensate for that risk transfer.
[00:32:52.430]How we do a lot of our acreage contracts
[00:32:54.560]is that we'll ask the producer,
[00:32:58.258]what's a conservative estimate of what
[00:33:01.896]you're pretty sure you can produce?
[00:33:04.640]And then we'll lock in the price on all those bushels,
[00:33:08.850]and if you come in short of it,
[00:33:10.550]it's an acreage contract so there's no penalty.
[00:33:13.890]If you do come in in excess of the BPA estimate,
[00:33:17.630]then we would work with you to establish fair market price
[00:33:20.680]on that excess.
Yeah, at Scoular,
[00:33:27.360]say I have a grain overload, how do you suggest (mumbles)
[00:33:31.297]and also, about (mumbles)
[00:33:38.500]Sorry, repeat it, yeah.
[00:33:40.327]The question is, how do we test loads at Scoular,
[00:33:45.997]for it being organic, and then also,
[00:33:48.650]what happens if the load has bugs in it?
[00:33:51.980]For the first part of that, we do GMO testing,
[00:33:55.310]and well of course, so,
[00:33:58.930]first of all we have to make sure the paperwork
[00:34:00.620]is in order, the things that we talked about earlier
[00:34:02.580]with the organic certificate,
[00:34:04.960]the bill of lading with the lot number
[00:34:06.607]and the clean truck affidavit,
[00:34:08.680]and then in addition to the paperwork side
[00:34:10.610]we test for the presence of GMO.
[00:34:13.471]And that would be the process there.
[00:34:18.140]And then on the question of bugs,
[00:34:21.700]it's, bugs are an issue in organic production.
[00:34:29.540]What will usually happen is that the original destination
[00:34:34.317]that we took the grain to might not be able to take it,
[00:34:38.010]but we'll utilize our network
[00:34:41.130]and knowledge of other companies out on the market
[00:34:44.850]that might be able to handle that,
[00:34:46.730]and then we'll divert the truck
[00:34:48.520]to wherever the next best market is.
[00:35:00.670]What is the dock like for foreign material,
[00:35:02.840]like weed seed?
[00:35:08.836]So, that of course differs by commodity.
[00:35:13.370]It's generally not too punitive on corn.
[00:35:18.890]For soybeans, all FM is typically deducted,
[00:35:26.320]and there could be a cleaning charge if it's really high FM,
[00:35:30.820]but we don't come across that too often.
[00:35:37.530]Alex, I assume all grain
[00:35:39.880]is corn and beans are subject to checkoff payment?
[00:35:45.000]That is correct.
[00:35:51.805]Where do you see (mumbles)
[00:36:01.453]The question is, where do we see
[00:36:05.500]the organic market going in the next five years,
[00:36:08.650]and do we see supply outpacing demand, or vice-versa?
[00:36:13.800]That's an excellent question.
[00:36:15.960]I wish I had a crystal ball, we all do.
[00:36:20.020]I think that,
[00:36:23.906]the U.S. production is currently growing a bit faster
[00:36:29.666]than demand is, but,
[00:36:34.570]as a result of that, and you could see that
[00:36:36.920]on the price chart from earlier,
[00:36:39.790]so I'll try to get to quickly.
[00:36:44.390]We are at some lower price levels now,
[00:36:46.490]and that does help with demand.
[00:36:49.020]So that's kind of what I see happening going forward
[00:36:53.050]is that we might not have the $10 corn
[00:36:58.620]that the market used to have,
[00:37:00.322]but these prices are more economic to the end users,
[00:37:06.890]and it's gonna help us grow the market overall,
[00:37:09.550]and be a more prominent part
[00:37:13.420]of American agriculture going forward.
[00:37:18.110]Question for you.
[00:37:19.350]I haven't met Alex, per-se,
[00:37:21.950]but I've talked to him.
[00:37:23.340]I had a load or a bin of wheat
[00:37:25.810]that I thought was gonna be cover crop,
[00:37:28.830]and I called him up, and he found a market for me,
[00:37:32.540]and it was the most like conventional
[00:37:35.620]I've ever had with organic.
[00:37:37.820]They lined it up, they told me what the dock was gonna be,
[00:37:42.110]I gave my certificate, did everything, it was easy,
[00:37:45.990]and they paid the same day, so,
[00:37:48.280]what he's saying is there's some value
[00:37:50.200]in working with him or working with somebody like him.
[00:37:55.200]Thank you, much appreciated.
[00:38:00.030]Why is the Black Sea,
[00:38:01.900]supposedly what I would consider behind us,
[00:38:04.466]because it's correct, why are they so big
[00:38:06.813]in growing organic?
[00:38:08.130]They just didn't have the herbicide chemicals,
[00:38:11.060]so it's just kind of naturally already organic?
[00:38:15.223]I mean, they're taking our market from the other side
[00:38:17.100]of the world, which we thought we were beating the Russians
[00:38:20.180]back in Reagan's day, now they're sending it back.
[00:38:23.760]Are they added value added because they never developed
[00:38:27.760]herbicides, or they just called it organic,
[00:38:30.370]and they just ship it organic?
[00:38:33.122]A question I kind of wondered whether...
[00:38:36.150]Yeah, so try to summarize it,
[00:38:39.503]his question really is around the Black Sea region,
[00:38:42.730]and why are they growing so much,
[00:38:44.650]and why is it coming into the U.S.?
[00:38:47.437]I mean it's valid questions.
[00:38:52.625]We're not buying anything from the Black Sea region,
[00:38:56.970]just because we have not,
[00:39:00.740]we don't feel as comfortable with the organic integrity
[00:39:04.530]of that product, and so,
[00:39:09.890]but yeah, ultimately the USDA and NOP,
[00:39:14.380]they do have procedures in place,
[00:39:17.320]and it is certified, so, I don't know,
[00:39:21.130]perhaps Clayton, afterwards,
[00:39:25.170]you could grill Clayton a little bit
[00:39:27.120]on certification procedures for those countries over there.
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