Specialty markets, including organic and non-genetically modified organisms (GMO), can provide a path to thriving in today’s marketplace, rather than just surviving until the next year, according to Clarkson Grain’s Ken Dallmier.
“It takes an open mind, it takes a quality focus and it takes a desire to think in terms of relationships, rather than transactions,” said Dallmier, Clarkson’s president and chief operating officer, during the Organic & Non-GMO Forum. The event took place virtually in early November due to coronavirus (COVID-19) concerns.
Clarkson Grain, based in Cerro Gordo, Illinois, US, specializes in growing, storing and processing identity-preserved, non-GMO organic and certified transitional corn, soybeans and soy ingredients.
The principle challenge to US agriculture is changing the mindset to thriving on 300 to 500 acres instead of just trying to survive on 3,000 to 5,000 acres, he said. This will require changing the way success is measured from producing 80 bushels of soybeans per acre year-in, year-out to netting $200 per acre.
“Reducing costs per bushel is a race to the bottom. It feeds the ending stocks report, but we know it isn’t sustainable in the long term,” he said. “We need to identify new world markets, new domestic demand that can add value throughout the supply chain, that reduces our dependence on just moving that pile.”
Paying attention to the market and meeting demand signals rather than supply signals is critical.
“Our experience in Illinois is organic and specialty growers can net more than commodity growers can gross per acre in some years,” Dallmier said.
Crop premiums for organic and non-GMO crops are holding steady for the 2020-21 crop year, Dallmier said, and for the foreseeable future they will play significant role in market demand.
“You have to remember this is a contract market and it has grown steadily over the last 20 years,” he said. “Specialty grain production is focused on variety transparency, traceability, and tracking from the field to the final customer.”
At its facility in Mattoon, Illinois, US, Clarkson has 110 grain bins to segregate grain by variety, quality, farmer or even by specific production field.
“Our customers love to come to Mattoon and see 110 pockets of things that we can segregate and ensure that their product and quality is what they’re looking for,” Dallmier said. “The primary difference in thrive versus survive is asking the question what is the customer wanting to buy rather than what can I produce a bunch of.”
When talking with new customers, he said they like to think of it as a relationship rather than just a transaction. Those relationships are critical and a key factor in what differentiates the specialty market, he said.
Clarkson maintains a core group of growers who are fully contracted prior to planting. This allows growers to know the specifications, premiums and prices. It also allows them to go to their bankers with a contract for purchase, rather than a hope for a good harvest, Dallmier said.
Farmers interested in contract production must have an open mind, consider management and quality, have on-farm storage to allow for flexibility, maintain a good weed management program and commit their best ground to maximize profit.
After delivery, soybeans are cleaned, color sorted and packaged according to customer preference. They are generally shipped in containers to food-grade customers in Asia. Some are loaded bulk into containers while others are placed in one-tonne totes and loaded into containers. The containers are trucked to Channahon, Illinois, US, for transfer and rail transportation to the coasts for ocean shipping.
“We are close to the container market of Chicago where five type-one rail lines converge,” Dallmier said. “This allows us to be a reliable export supplier. We have access to containers and reasonable rates to the coast.”
However, this year a 10% to 20% drop in container imports, partially due to COVID-19 and ongoing trade tensions, is making it difficult to secure containers, said Eric Woodie, trade analyst with the Illinois Soybean Association.
“We are essentially finished with the high import season,” he said. “We’re going to have some real challenges in the middle of the country in obtaining containers. Most folks involved in shipping have already seen some rate increases.”
One solution, Woodie said, is to develop a strong logistical plan with several back-up options. Having a good relationship with truckers and container carriers is also going to be vital.
“It’s been a bit challenging but the resiliency in our space is like no other,” Woodie said. “It will be tough, but I think we will definitely get it done.”
Dallmier said Clarkson will rely on the relationships it has built with freight forwarders. The company tries to avoid spot markets for containers because it’s important it deliver on time, every time.
“If you end up with trouble with logistics, that brings that little bit of doubt in the customer’s mind,” he said. “This year it’s going to be a big challenge. We’ve been fortunate in that Channahon is a big destination for containers. If you have good relationships, you can usually work your way through with minimal delays.”
Containers are the best way to ensure customers get exactly what they want, when they want it, Woodie said. There is a continued trend for customers to understand the origin of their products.
“We will see that continue,” he said. “We can’t wait to see what happens from year to year. We have to be working to determine what’s next if a market goes away. We have to meet customers’ needs despite the many challenges that come.”
Being able to trace the origins of a product is a critical part of the specialty market and adds value in marketing, said Eric Wenberg, executive director, Specialty Soya and Grains Alliance (SSGA).
“We appreciate the ‘know your farmer’ idea but for us we’re trying to get people to think about traceability as a method of communication. We can connect now with all the technologies available from the fork to the farm,” he said. “The highest achievement in IP grains and oilseeds is not only growing for the marketplace but growing for the customer.”
Data shows the US is experiencing skyrocketing interest in specialty and premium grains. Southeast Asia is showing interest in the concept of identity preservation as is Europe and China,
“The agribusinesses of Europe are just as large or larger than those in the US and they’re seeing the need to get what they want grown for what they want to produce,” Wenberg said.
Foreign buyers are responding to three key messages: food safety, American grown and verifiable data.
“Customers aren’t saying they want generic assurances of quality. They want a traceable quality that refines their process so they can change an input to improve efficiency,” he said.
Traceability is a value that adds value, Wenberg said, and creates a safe and reliable supply chain solution for feed and food customers around the world. The market is demanding greater transparency and verifiable quality claims and value statements such as sustainability, regenerative agriculture, clean label, gluten free, non-GMO, organic and more.
Key benefits driving identity-preserved traceability include greater consistency and purity due to segregation in the supply chain and greater food safety. Other benefits include higher yields and lower production costs; greater customization to cater to consumer preferences; high-quality, premium end-product applications; and innovative new product lines. To show that traceability does make a difference, Wenberg used the example of tofu. Different soybean attributes can increase the yield of tofu by a significant amount.
“As we can document these advantages to customers, it will be worth it,” he said. “We have to consistently tell the customer they pay more to get more.”
He said nations such as the Philippines are showing greater willingness to pay for non-GMO and organic products for food manufacturing. SSGA data showed that 65% of the groups it talked to said price would play a big role in any decision, but they were open to moving up the quality scale.
“We know organic and non-GMO inputs are in demand. We need to work together as an industry to make it more readily available,” Wenberg said. “We’re going to be talking to the innovators. Our data indicates that for consistency, variability, storage and food safety, these companies are willing to pay more for a product.”