Organic Arable Market Update 24th February 2023

Less about the organic cereal market this week with focus on the organic food market as following data presented at the Biofach organic trade fair and the publication of the Soil Association Organic Market Report.

Whilst the Soil Association report has a UK focus and Biofach is more international both have a similar themes.  There is a general consensus that whilst the organic food market is experiencing stagnation at best and decline in organic sales due to the general economic turbulence, organic farming answers many of the societal questions that need answering around improved soil and water quality, action to reduce atmospheric carbon and improved biodiversity.  It is also apparent that consumers believe that organic food is capable of responding to these challenges and current downturn is temporary as longer term organic sales will grow once again.

In the more immediate term the Soil Association report shows bakery down 6% in value but given that food inflation was significant through 2022, following the invasion of Ukraine the volume reduction must be greater than.

The challenge for the dairy sector is highlighted by the Soil Association. Despite predictions of milk shortages later in 2023 lower milk values are suggested and so further exits from the organic dairy sector which will impact organic feed grain sales.  As often seems to happen the organic sector suffers from a lag in prices increases (prices rise slower when the market is rising) but then they fall concurrently with the conventional market squeezing margins for organic producers.  Conventional milk values rose to almost match organic at times though 2022,  prices did then rise but organic prices are sliding alongside conventional. We similar dynamics in the cereal market.

Recent supply issues in salad crops will again focus consumers' minds on localising supply chains and as we have previously highlighted this provides opportunities for us as domestic producers whilst not as immediate as for salads the move towards improved interest in provenance of food can only be a positive as smaller fleeter supply chains as we see in the organic sector are better able to respond to these requirements.