Organic farmers rebound after recession-driven drop in demand
Two years after the recession cut demand for higher-cost food products, organic farming is on the rebound, with prices at record highs.
But the industry is still not as strong as it was just a few years ago, and no one knows if organic sales will return to the double-digit growth of the pre-recession years.
Still, farmers like Ben Cook are pleased with the turnaround. As he walks into a soon-to-be-harvested field of organic corn near the town of Adrian in southwest Minnesota, Cook can't help but admire the quality of his corn.
What makes the crop different from conventional corn is that Cook does not spray it with chemicals. That means no bug killers or weed killers. Nearly 10 feet tall, the stalks are loaded with big yellow ears.
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It's not his best crop ever, thanks to the weather. First the fields were too wet, then too dry. That was followed by a cold spell that cut yield at least 10 percent. But still, Cook said, it's a good time to be an organic farmer.
"I think this year's going to be an excellent year," he said. "Because both the yields are respectable and prices are very good."
Cook's price assessment may be a little bit of an understatement. He's already sold corn this year at $13 dollars a bushel, more than double what conventional farmers get. The extra money is not going to make him rich, but it will help remove some of the sting of the recession.
During the worst of the downturn his corn brought just over $4 dollars a bushel. His cattle profits also went down. As a result, his farm's total income plunged.
"For us it fell, I guess you'd say, as much as 30 percent," Cook said.
As Cook watched profits decline, the same thing was happening throughout the organic food chain. During the recession, the organic food companies that buy what Cook and other farmers grow saw a sharp drop in sales. That was a big reversal. For more than a decade organic sales had grown by more than 15 percent annually.
Sales growth reached nearly 20 percent in 2007, said Carla Ooyen, director of Market Research for the Colorado-based Nutrition Business Journal, which tracks a wide range of food sales information.
Then in December of that year, the recession started.
"In 2008 we started to see a slowdown," Ooyen said. "And in 2009 the category only grew about five percent."
The reduced growth reflected lower consumer demand for organic food, as many switched to cheaper conventional products.
Forced to adjust were organic food companies like Wisconsin-based Organic Valley, one of the nation's largest organic firms. The company had grown steadily until the recession hit.
"In 2009 we went to a zero growth rate," CEO George Siemon said.
Siemon said the company made an array of decisions to cut costs, among them slashing the price it paid Cook and other farmers for their cattle.
Organic Valley also reduced the amount of milk it bought by seven percent. Siemon said even though the Organic Valley cuts caused financial pain for the farmers the company depends on, most producers supported them as the right long term move.
"It was what was necessary to give the co-op the increased financial well-being to get through the recession," he said.
Since the 2009 low point, Siemon's company and the rest of the organic food industry has rebounded. Last year, U.S. organic sales increased by more than 8 percent.
Ooyen, of the Nutrition Business Journal, said sales so far this year are as strong as or better than last year's. That demand has helped boost corn and other prices for organic farmers like Ben Cook.
But Cook said while corn prices are important, they're not the most important thing for him. Unlike conventional farmers, he said he would never expand corn acres just to take advantage of the high prices. He said what's most important is the organic farming system itself: not using chemicals, rotating crops, enriching the soil.
"That whole system needs to be in place for it to work," Cook said. "So then the $13 corn doesn't drive your decision as much as having the whole system in place."
For Cook, the high corn prices are just a temporary reward for practicing what he sees as the healthiest way to farm. Prices may go down next year, but he said he'll still farm the same way then as he does now.