Industry First Online Auctions for Transitional Organic Oats
If you've been watching the news from the organic sector, or if you're involved in the organic supply chain, you know that finding and procuring high quality, reliable supplies of organic commodities and ingredients is a real challenge. Consumer demand continues to outpace supply, particularly for U.S. grown organic grains & oilseeds.
There are several reasons behind the tight supply. However, there is one key factor that has proven to be a significant barrier to entry for growers looking to convert conventional farmland into organic production. That is, the three years that elapse between the time a farmer begins to manage his or her acreage under USDA NOP rules, and when the farmer receives organic certification and can begin marketing crops as certified organic. During that time period, the grower may be incurring the higher burdens and costs of changing management practices but cannot yet reap expected organic premiums.
One way of facilitating and supporting transition is to determine whether there is demand in the marketplace for crops grown under accepted organic farm management practices during the transition period (Transitional Organic). If so, what is a market price for those crops?
To begin to answer these questions, in August Mercaris hosted the first-ever online auction for transitional organic grain. Per our standard protocols, the grower was confirmed to be undertaking organic management practices with his certifier, and interested buyers were able to request samples ahead of the auction. The auction was a success, with strong participation from buyers, and observations including:
- 10,000 bushels of organic, food grade oats were sold;
- The price per bushel settled 60% above the local cash price for conventional oats, and 85% below the national price for organic oats;
- Buyer participation was motivated by the chance to form early relationships with new organic growers
- Establishing a market price for transitional crop was an efficient way to support the goals of both buyer and seller.
Companies that are proactive about procurement opportunities and growers that wish to capture some of the financial and environmental benefit of transitioning acreage now have one more option available to them for easing the transition into organic production. For more information, contact Lizzie Ekeberg, Director of Market Operations directly by email or by phone at 312-423-1875.