14 May 1999

Demand sees boom in organic sector

GROWING demand and a shortage of home-produced material is generating a price boom for organic grain.

"The strongest demand is coming from the animal feed sector," says John Norton, who runs a specialist organic grain marketing operation from his home at Groton in Suffolk. The reason, he says, is that while all organic production is expanding, it is the livestock sector that has led the charge.

This is creating a grain deficit, with prices to match.

Organic feed wheat is currently worth about £200-£210/t ex-farm, with milling wheat up to £20/t more. "The market has really taken off since Christmas," says Mr Norton, who points to values of about £160-£180/t as more typical in recent seasons.

Even grain produced from land in conversion carries a healthy premium over conventional feed wheat, with values of £180/t traded in recent weeks.

"Location has a big impact," says Mr Norton. "Given that the volumes involved are still seriously tiny compared with the conventional grain trade, haulage has a much bigger impact on overall cost."

Assessing actual volumes involved is not easy. The Soil Association currently has 61,000ha (151,000 acres) registered as organic in England and Wales, thought to account for about three-quarters of the total. Just 5400ha (13,340 acres) of this is down to cereals.

Based on an average yield of 5t/ha (2t/acre), and adding 25% for the land registered with other organic bodies, that implies a total supply of about 35,000t in England and Wales, with perhaps another 3000t from Scotland.

Another 63,000ha (156,000 acres) is estimated to be in conversion in England and Wales, of which 75% is livestock land and just 18% is arable. "The arable sector is just not keeping pace," says Laure Barrington of the Soil Association. "We are facing a real shortage of supply in the next few years."

The reasons for the demand boost are not hard to fathom. "The BSE crisis and now the GMO issue have heightened peoples fears about food safety," says Mr Norton. "But thats not the whole story. The public is also becoming more sophisticated and understands the wider principles of organic farming, including the environmental impact."

This, combined with the fact supermarkets are now getting in on the act, makes him confident the bubble is not about to burst. "The growth may slow down again, but I cant see any reason why it should decline."

Faced with limited home supplies, an increasing amount of Mr Nortons business is importing raw materials from the Continent. "We must be bringing in about 50% of our requirements," he says. A network of organic merchants, brokers and farmers scour the continent for supplies. "Weve had grain from just about every country in Europe. Our end-users are typically small operators with very specific requirements. Meeting their needs can be a major operation in logistics."

A certain amount of grain is shipped each year from further afield, however, involving container trade from Australia and Canada. "Most milling grists include some imports," says Mr Norton. "Home-produced just does not have the protein levels for breadmaking."

Trading at such distance does increase the risks, though generally he is confident that the controls on organic production are as stringent overseas as in the UK. "We could do residue tests, but they are expensive and not always conclusive. It is not easy to cheat the system anyway. If it was, then the price of organic wheat would not be three times the price of conventional." &#42

ORGANICGRAIN

&#8226 UK production about 38,000t.

&#8226 Animal feed is main market.

&#8226 Prices up to £210/t this season.

&#8226 Market looks strong.