Infographic: Feed shortage limits organic poultry sector growth

While consumer demand for organic products is growing rapidly, poultry producers will be challenged to meet it due to one key constraint: the supply of organic feed.

Austin 70x70 Headshot
| Freeimages/Roberto Ribeiro
| Freeimages/Roberto Ribeiro

While consumer demand for organic products is growing rapidly, poultry producers will be challenged to meet it due to one key constraint: the supply of organic poultry feed.

At the Oilseed & Grain Trade Summit in Minneapolis, held in October 2015, a panel of experts spoke about the growing demand for organic and genetically modified organism-free (GMO-free or non-GMO) grain. They said demand for organic products is so great that the U.S. is importing organic grain to meet it because a number of limiting factors are keeping farmers from quickly growing the nation’s organic crop.

Profitability is not one of those limiting factors, however. In the U.S., the total organic food market earned $39 billion in revenue in 2014. Non-GMO food sales were worth an estimated $200 billion in the U.S. and an estimated $550 billion globally during the same year. Organically produced crops are also more profitable than their conventionally produced counterparts. Demand for both specialty foods is projected to expand steadily in coming years.

Demand for organic and non-GMO products is strong, and farmers are already raising far more organic birds than they did at the turn of the century. Data provided by Peter Golbitz, founder of Florida organic consulting service Agromeris, indicated the size of the organic flock of layers, broilers and turkeys has skyrocketed between 2000 and 2014. There were 43.3 million organic broilers in 2014, up from 1.9 million in 2000; 9.6 million organic layers, up from 1.1 million; and 1.4 million turkeys, up from 9,138 in 2000.

Golbitz said the amount of organic livestock could easily double or triple to meet consumer demand, but further growth will be limited due to the shortage of organic grain. Although U.S. farmers’ are producing more organic and non-GMO crops every year, they still lag far behind conventionally produced grains.

Organic Grain Chart

The shortage of organic and non-GMO cereals for feed

Sales of organic food products have increased more than 900 percent since 2000, but organic crops only make up a small percentage of total acreage. While about 4 percent of U.S. food sales are organic, only 0.5 percent of U.S. acreage is organic. The U.S. is also one of the biggest users of GMO crops. Jamie Welch, supervisor of technical support for Oregon crop diagnostics company EnviroLogix Inc., pointed to research indicating 94 percent of the U.S. soybean crop and 93 percent of its corn crop are genetically modified (GM). Lisa Spicka, founder and CEO of Oregon-based consultancy Maracujá Solutions, said there are about 181.5 million hectares of GMO production around the world. The U.S. leads the way with 73.1 million hectares, followed by Brazil, 42.2 million; Argentina, 24.3 million; India and Canada, 11.6 million each; and China and Paraguay, 3.9 million each.

GMO use is widespread because of the pest control and yield improvement bio-engineered crops have granted to farmers. In the U.S., farmers are hesitant to make the switch to organic and GMO-free farming because of reluctance to abandon conventional farming – replete with products to control pests and maximize yields, established logistics to get products to market and regulatory and financial support structures – and switch to riskier, more labor intensive, organic and GMO-free practices.

Spicka said the three-year transition period the U.S. Department of Agriculture (USDA) requires for farmers who want to become organic-certified is also slowing growth of organic acreage. Kellee James, CEO of Maryland organic market data and online trading service Mercaris, said the lack of a concrete definition of what exactly constitutes a non-GMO product, plus uncertainty about what GMO labeling requirements Washington might impose, are also contributing to the relative lack of non-GMO production.

Because the products are not allowed to comingle with conventionally produced crops, both organic and non-GMO producers suffer from a dearth of dedicated logistical resources to store, ship and process their products. Organic and non-GMO farmers must also contend with the constant threat of GM products or non-organic fertilizer and pesticides drifting over from other farms or appearing in their finished products.

Possible solutions

If U.S. poultry producers want to meet the demand for organic-certified meat and eggs, which also require antibiotic-free husbandry, they will need to find a sustainable source of grain for feed.

In order to circumvent its domestic production issues, the U.S. is currently importing organic-certified grain from countries with lower costs of labor that haven’t planted GM crops or used non-organic fertilizer or pesticides in the past. Leavitt said the U.S. imported $1.3 billion worth of organic grain in 2014. Golbitz said the vast majority of that grain is going into the feed stream, as importers don’t want to use it for human consumption due to poor quality. He presented federal data indicating the U.S. imported twice as much organic soybeans and corn in the first seven months of 2015 than it did in all of 2014. He estimated about $500 million worth of organic corn and soybeans were imported in 2015.

During a panel discussion at the event where the speakers fielded questions from the audience, the speakers said there is increasing interest from major food companies in investing in organic practices in those countries that are currently exporting organic-certified grain to the U.S. They mentioned McDonald's is already testing organic products in Europe and is looking into farms in Peru in order to create a steady supply of organic and non-GMO ingredients.

Producing feed locally, rather than importing it, is preferable for U.S. producers in the long term, Globitz said. Right now, the U.S. needs to dedicate about 500,000 more acres to organic grain production to meet current demand. He said it would only require about 1 to 2 percent of U.S. soybean and corn producers to go organic to meet organic livestock’s current feed needs. Within the next five years, he predicted, the U.S. will need 1 million to 2 million acres of new organic production, and possibly more on the non-GMO side, to keep up with demand.

Currently, Golbitz said the shortage of organic and non-GMO production is leading to much higher grain prices, and therefore, more expensive animal feed. While non-GMO corn and soybeans are not much more expensive than their conventional counterparts, the organic crops are almost three times as expensive. As more farmers go organic and GMO-free, as Golbitz said is likely to happen due to the economic incentive to so, the price will come down.

“U.S. farmers are the best and smartest farmers in the world,” Golbitz said. “There isn’t any reason why the challenges of organic farm production cannot be addressed by modern farming technology.”

Getting farmers to make the switch to non-GMO and organic will require big food companies and grocers to help ease the risk involved with transitioning to organic. Golbitz said the food companies are already involved in non-GMO and organic, because they see the specialty segment as a high-profit margin product and a key to getting young, affluent consumers in the door. If the retailers want to ensure the sustainability of their supply chain, the panelists said, they will need to help defray the cost of transitioning to organic – the crops that are ultimately more expensive and riskier to produce – and make it easier to get organic and non-GMO products to market.

What exactly that will look like remains open to debate. Whether those companies will need to buy farmland, purchase crops produced during the three-year organic transitional period, or come up with a scheme to ensure farmers can stay in business during the transitional period remains to be worked out. The speakers agreed, however, that the retailers will need to help the producers until the organic farming industry is more mature.

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