More start organic farms as others leave the market


Issue Date: March 17, 2010
Ching Lee

A recent slowdown in the organic market has not deterred farmers who say they have a long-term commitment to the specialty business. But the slumping economy is being blamed for more farms pulling out of organic production, even as the state's largest certifying agency reports continued net growth in the number of organic farms and organic acreage.


Sutter County farmer Mike Van Dyke said he decided to stop growing conventional rice and specialize in organic rice because of the investment he made in materials and equipment, such as the grain drill shown above, which he says is better suited for planting on his loamy clay soil.

Sutter County farmer Mike Van Dyke, who grows organic rice, said he is not about to turn his back on a way of farming that has given him relative stability over the years, though he acknowledged his sentiment may not be shared by all growers.

With the price of conventional rice rising to historic highs in the last two years, some farmers who grew organic rice on the side are now discontinuing the practice in favor of higher yields.

"When the price spikes up like that, I know there are some organic growers who took ground out and went back to conventional, but they're mostly conventional growers who were growing a little bit of organic because the market was good," Van Dyke said.

He also used to farm a mix of organic and conventional rice, but he said juggling the two processes became too difficult because of the different equipment and materials involved, so it made more economic sense for him to focus on what he felt he did best.

It usually takes three years to transition to organic, during which time growers are not using commercial fertilizers or pesticides but still receiving the same price for their crop as conventional farmers do. Van Dyke said it doesn't pencil out to give up organic status for what he sees as a short-term boom in the conventional rice market.

"I can see in the organic side the sustainability is there, whereas the commercial market is constantly on such swings of up and down," he said.

But Joe Carrancho, a Colusa County rice grower who has participated in the organic rice business on and off for the past 20 years, said he's going to "bite the bullet" on his organic certification and convert all of his ground back to conventional because organic "just is not worth the problem."

Organic rice accounts for only a small portion of what he grows—about 96 acres last year out of some 1,200 to 1,400 acres in total annual rice production. Carrancho said he couldn't justify jumping over all the regulatory and financial hurdles needed to maintain his organic certification.

He said farming organic rice became too costly and earned him only about $4 per hundredweight more than the conventional price. Because he farms on marginal ground and controlling aquatic weeds is a battle, his only option is either to fallow his land or do a crop rotation, which would take him out of rice production for one to two years.

"I'm not in any position to do that," he said. "My landlord is going to want about $400 an acre. Plus, I'm going to have to pay all the regular fees. When you look at the bottom line and your organic rice is barely making any income at all and your conventional in the last couple of years has made some good money, the decision doesn't become very difficult."

John Hasbrook, vice president of SunWest Foods—which markets primarily conventional Calrose rice but also supplies organic rice to food manufacturers as ingredients for products such as rice flour and rice milk—said that the company lost about 3,000 acres of organic rice production last year due to growers like Carrancho pulling out.

But he noted that SunWest's organic markets are not only stable but actually increasing, and that organic rice is undersupplied in the state.

"I do not think there's any reason to continue to decrease the organic rice acreage in California. In fact, I would say there's room for expansion," Hasbrook said.

California Certified Organic Farmers, which certifies nearly 80 percent of the state's organic crop acreage, acknowledged that the organization saw substantially more operations withdraw from organic certification last year than previous years.

But Jane Baker, the CCOF marketing director, noted that despite these losses, the number of certified operations and total certified organic acreage in 2009 still sustained an 8 percent growth.

She said farmers who dropped their certification were not necessarily giving up on organic to go back to conventional. Some closed their farms altogether.

"Just like any small business last year in the recession, there were some organic farmers who just struggled to make it and went out of business," she said.

There are many other reasons why farmers abandon organic, said Karen Klonsky, a farm management specialist with the University of California Cooperative Extension in Davis. In a 2008 study that examined this question, she said, growers most often cited regulatory issues such as paperwork and recordkeeping as the main reason for discontinuing organic registration or production. Others said they had problems with production and marketing, while a smaller percentage cited management and price issues.

Because the certification process is an added cost, Klonsky said the main reason for growers to be registered or certified is for marketing purposes, that is, to be able to use the word "organic" when selling their products.

Unlike rice, other conventional agricultural sectors did not necessarily do as well in their markets during the recession. Conventional dairy producers, for example, took a beating last year when milk prices sank to unsustainable levels.

Their organic counterparts, on the other hand, fared better because they had constant price contracts for their milk, which do not change month to month, said Leslie "Bees" Butler, a dairy economist at UC Davis.

While price stability may be a draw for conventional dairy farmers who were financially ravaged by last year's low milk prices, he said producers who are serious about converting should analyze whether organic is a better bet for them in the long run and consider factors such as availability of irrigated pasture and proximity to feed markets and organic processing plants. (See related story, Page 17.)

Butler said some producers may be re-assessing their ability to go organic after considering new U.S. Department of Agriculture pasture rules, which specify how much fresh grass and time on pasture livestock should have for milk and meat to qualify as organic. These new rules may give some farmers more reason to exit organic dairy production if they cannot meet the new pasture requirements, he said.

"The biggest factor to consider is whether it makes good business sense to convert to organic," said Butler. "This will involve costing out all the changes that will need to be made, including the new pasture rules and the significant costs of conversion when you have to produce 100 percent organic milk and sell it at conventional prices for the entire year before you actually can get an organic contract."

For Tehama County cattle rancher Darrell Wood, going organic "has been one of the best things I've ever done." Since he was already in the natural grass-fed beef business before being certified organic in 2006, he said the next logical step was to take the organic status and be paid the extra premium.

"We thought the consumer base that we were selling to wanted that, and we were right," he said. "We haven't seen a drop in sales. In fact, it's increased, probably 16, 17 percent from last year."

William Brammer, a San Diego County farmer who grows a variety of fruits and vegetables, has been certified organic since 1986 and says he can't imagine competing in the conventional marketplace. He currently markets his products through a community-supported agriculture program with 2,500 members.

"So far, the demand is still there," he said. "They're looking for more product from us, so we're still trying to add acreage."

At CCOF, Baker stressed that despite the effects of the economic downturn, sales of organic foods continue to grow—even if that growth has shrunk from the double-digit levels that the sector has maintained for more than a decade.

"Our feeling is that the organic sector is vibrant, and as the economy recovers, it will creep back up to double-digit growth rates," she said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

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