Managing
Another potential issue for U.S.
processors to be aware of is that the
depreciation of the dollar has made
U.S. organic ingredients attractive to
buyers in the European market. This
fact has not been overlooked by U.S.
farmers and they are working with
their U.S. certifiers to add EU certifications. If just 5 percent of U.S. organic ingredients are lost to overseas markets, U.S. manufacturers will be looking at higher prices and shorter supplies in the 2008-2009 market. Quite
literally, the U.S. will end up increasing the importation of organic ingredients to meet higher domestic needs,
just as U.S. exports of organic ingredients increase. Thus if you rely on
domestic ingredients as part of your
company’s mission, it’s better to tie
things up with U.S. producers now
rather than later.
The ERS data shows that price
determines 85 percent of all ingredient decisions. However, the need to
secure a quality supply of organic
ingredients does temper price considerations. Existing organic companies
have had to walk a fine line between
the search for lower prices and the
need to keep organic farming economically viable. Driving prices so low
that farmers cannot make a good
return on their organic crops is a zero
sum game. Push too hard and the
farmer will sell to another company;
pay higher prices and it’s hard to compete with companies that have relied
on cheap imports to meet costing
price points. Like the conventional
market, organics has been enticed to
find ingredients in China. However,
due to the recent problems with
imported conventional ingredients,
organic suppliers are also being told
“No ingredients from China.” Along
with the continued increase in the
value of the Yuan, China is no longer
the bargain basement to the world.
That does not mean that the
search for organic ingredients around
the world has slowed. The new sleep-
ing giant for organic may be India, where large regions of farming
land have been designated as organic zones where conventional farming is prohibited. It makes economic sense for developing countries to
reduce or eliminate the importation of conventional farming chemicals and instead use renewable resources to grow organic crops that
can be sold at higher margins.
“D“Driving prices so low that farmers cannot
make a good return on their organic crops
is a zero sum game.”
Ensuring Quality
Once the contract is signed, it’s important to stay in contact with
your supplier. Both domestically and internationally, farmers are by
nature optimists; no matter how bad things look, they always hope
that the harvest will be good. As a buyer you need to be a realist, and
know the difference between a farmer’s hopes and real crop conditions. Visiting the fields several times during the growing cycle will
limit any surprises at harvest time. But what if your company is not set
up to do domestic farm visits? And how are you able to verify crop
conditions overseas? Domestically, you can ask for a shipping point
Natural & Organic
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Nexcel Natural Ingredients
Division, Spectrum Foods Inc.
2520 S. Grand Ave East, Springfield, IL 62703
(217) 391-0091, #11 • (217) 391-0096 fax
info@spectrum-foods.com • www.nexcelfoods.com
