Nurturing Understanding – reaping benefits

On 18th March a Organic Arable brought together organic farmers, some buyers of both animal feeds and human consumption grains and other stakeholders to explore how the organic grain market could work better under the title – “Nurturing Understanding  – reaping benefits”.

The day was chaired by Lawrence Woodward and there were presentations from Raymond Hilman, Whites Speedicook and Andrew Trump, Organic Arable.  In addition the audience were asked to consider in groups what a perfect grain contract would look like and why there is not better co-operation within the supply chain.

The presentations are available here:

Organic Arable Market Situation

Organic Arable Market Situation

Raymond Hilman's Presentation

Working Together

The first presentation by Andrew Trump set the scene for the current organic market seeing it in a global perspective.   Whilst the UK is seeing some small signs of growth in organic sales it lags well behind other international markets in Europe but particularly the strength of the US market.  At £24 billion the US organic market is 43% of global organic sales and grew by 11% in 2014 and this annual growth is larger than the whole UK market.

Whilst demand grows supplies of arable crops remain stubbornly static and the traditional suppliers to the USA of combinable crops, Canada, Argentina, Australia and South Africa are not seeing significant additional conversion of organic land and certainly insufficient to feed US demand.  In the USA grain prices have risen dramatically and this combined with the strength of the US Dollar against international currencies has led the US to look to new countries to fulfil their demand.  Of particular importance to the UK and Europe is the presence of the US in the Black Sea.  In 2014 US purchases of Romanian maize grew from $454,000 in 2013 to over $11,000,000.

A combination of a rapidly growing market, a strong currency and the volume requirements the US need to feed their organic livestock sector is likely to make them an influential entrant into the European market in the short to medium term.  They will also have an influence as they start to buy processed product out of Europe in greater volumes, for example there was recently talk of a need for additional butter requirements to fulfil the US market for shortbread.

The possibility of GM commercialisation in Ukraine was raised.  Currently GM free, the political unrest has in Ukraine has led to a greater requirement for international finance and with this (whether directly or indirectly) there seems to have been a move towards a softening in the position towards GM cultivation amongst several Ukrainian agricultural organisations.  The prospect of GM cultivation of maize would add uncertainty to the supply of organic maize from the region as the possibility of GM contamination would increase.

The conclusions of the presentation were that Black Sea organic supplies would become more expensive and less certain with the greater possibility of supply shocks making it a less certain source of product for the UK.

However, the opportunities to encourage greater supply was also mentioned.  The suggestion was made that with better financial returns available to organic farmers and greater technical support being supplied by the sector it was only the market that was the uncertainty for new entrants.  If better longer term supply opportunities could be developed this uncertainty could be largely removed providing great opportunities for additional organic conversion.

Raymond Hilman from Whites Speedicook then spoke about the supply arrangement they have for organic milling oats with Organic Arable as an exemplar of what can be achieved if buyer and seller work together to overcome supply issues.  Whites Speedicook wanted to improve milling oat quality being delivered to the mill to improve their milling efficiency.  Doing so has allowed them to become more competitive in the market and pay a stable price (with quality premiums) to growers.  This approach has also developed a strong and loyal group of producers who are working hard to improve oat quality as they now understand both the benefits to their business but also their customer with the rewards generate shared.

Additional benefits have accrued as Whites Speedicook have reduced their procurement costs and the group has established a forum to share best practice and a research fund to undertake some trial work to help drive the improvement in oat quality.  Finally, there are social benefits as friendships are formed the growers are now acting as informal advocates for the Whites Speedicook brand.