Fraudulent Imports Weigh on U.S. Organic Producers02/07/2017
U.S. organic producers are increasingly competing with world producers who import products under the organic name, but don’t always adhere to high U.S. organic production standards.
John Bobbe of Stevens Point, Wis., is the executive director for the Organic Farmers Agency for Relationship Marketing, a cooperative incorporated in Minnesota. He was among the speakers Jan. 26 at the Northern Plains Sustainable Agriculture Coalition annual winter conference in Aberdeen, S.D.
Bobbe said organic producers welcome some high-quality organic imports because they help expand the premium market share, which accounts for 5 percent of U.S. food consumption but is growing at nearly 15 percent per year.
But, many of the organic grains are coming from countries like Ukraine, where the European Union has deemed their standard enforcement “high-risk” for organic integrity.
The U.S. Department of Agriculture’s Foreign Agriculture Service has cited a major port for Ukrainian organic goods in Istanbul, Turkey, with rampant fraud. What’s missing is the “certified transaction certificate,” which accompanies a shipment of grain to its final destination, providing the trace and transportation mode records. That requires an annual inspection by an organic certification agency. If there are violations of rules, farmers are subject to fines, imprisonment and decertification.
Ukraine has had a civil war and Turkey has had massive civil unrest, with tens of thousands of jailed and civil servants fired. “Under those circumstances we wonder who’s minding the store about the integrity of organic,” Bobbe said. The FAS report accused Turkey of “fraudulently manufacturing the transaction certificates,” among other things.
The U.S. has lots of conventional corn, so this is organic corn. He showed a photo of a transport of 15,000 metric tons of organic grain, or about 490,000 bushels of organic corn, on Sept. 13, 2016. “It’s coming in not by the container load, but by the bulk shipload,” he said . “Seventy-three percent of it is coming from Turkey, while Turkey is a net importer of U.S. corn but is the biggest exporter of organic corn.”
Some American conventional farmers are looking at converting to organics, but Bobbe said the farmers tell him the current cost of producing a bushel of organic grain is about $10 a bushel, but that depends a lot on factors such as how much land is owned versus rented, or whether they are a starting farmer with higher debt levels.
“Right now, that price of organic corn is in that $7.50-per-bushel area, and one of the reasons we hear continuously from buyers is that they have a supply of imports,” Bobbe said. In some cases, the buyers have said it costs them $10.50 a bushel to import it into the U.S. “The logical conclusion is they’re pricing domestic corn to lower their cost of the high-priced importing corn. They’re using the U.S. market as a ‘residual market,’ and getting their supply from the imports.”
The processors may like the convenience of being able to order up a large amount of “organic” grain from a supplier, versus dealing with 10 to 15 U.S. farmers. The big draw for organic feed grain is for poultry, whose demand has been growing astronomically for the past 10 years.
Bobbe said 75 percent of U.S. consumers will buy at least some organic products in a year, but it’s still only about 5 percent of the total food market for expenditures. The organic food market is projected to grow at a rate of 14 percent a year for the next three years, so the U.S. producers need imports of foreign organic feed grains to help grow the organic market share, Bobbe said.
In addition to perceived nutritional or food safety advantages, some consumers value organics because they see them as friendlier for water quality and soil erosion, including pollinators.
Some large food marketers, like General Mills, have gotten into the organic market. Organics are showing up in large snack food markets and U.S. producers currently can’t fill the demand. About 40 percent of organic corn used in the U.S. is imported, and 70 percent of the organic soybeans—almost all for animal feed.
“The industry is going to have to come to grips with how to grow (domestic) organic production,” Bobbe said. “Right now, with the low prices, they’re sending a signal that they really do not want more organic corn and soybeans. How do we get them to send a signal to domestic producers to convert more domestic acres — producers who produce the highest standards of organic in the world?”
Source: Mikkel Pates, Agweek