Your farm: organic cereals in demand

There are just under two weeks to go until the deadline for applications to the Organic Farming Scheme (OFS). In last week’s paper, we looked at the main points to consider before applying to the scheme.

With cereal production being one of the main enterprises to be prioritised for inclusion in the current tranche, this week we take a look at the market potential of the enterprise. Dan Clavin from Teagasc said there is a very good demand for organic cereals nationally. Analysis he carried out in June shows 7,500t of organics cereals are produced in Ireland annually. However, there is demand for over 24,000t. This demand is coming from organic livestock production, organic brewing and organic milling and can be broken down as follows: 3,000t from organic dairy farms, 7,500t from organic beef farms, 5,000t from organic poultry farms, 1,800t from organic sheep farms, 200t from organic pig farms and 6,500t from porridge, flour and distilling.

So, three times more organic cereal production is required to meet the annual demand. The organic cereal sector in Ireland remains small, making up less than 1% of all the cereal production land area in Ireland, and it has not grown significantly since 2012.

This is one of the main reasons why a strategy group for the organic sector recommended reopening the OFS and giving special priority to tillage farmers.

If the numbers remained minute, it could be negative for the sector long-term as millers would probably focus on sourcing organic cereals from abroad and the importation of expensive organic cereals from abroad will increase costs of production on livestock farms.

Dan said out of all the main enterprises apart from horticulture, tillage can potentially offer the best return over conventional farming. Table 1 shows the difference in costs of production between conventional oat production and organic oat production. Input costs are lower for organic producers mainly because they are prohibited from using sprays.

Fertiliser input costs are also usually lower in organics as the organic standard does not allow for chemical fertiliser applications. This of course affects yield potential of the crops but Dan says despite the reduction farmers can still make a better margin than conventional oat production.

The greater margin is down to a combination of lower input costs and higher prices paid for the organic oats. Good levels of soil fertility through use of organic manures and use of legumes in the rotation are also key to boosting yield. To calculate the margins, a net price for organic oats was input as €380/t and €200/t was input for conventional. “Even at a yield of 3t/ha, organic oats returns a healthy margin,” explained Dan. He said his calculations include the OFS payment of €170/ha but he stressed that even without these payments organic oat production returns a good margin, especially when higher yields are achieved. Dan said organic cereal production does take time and experience to maximise yields without conventional inputs. But he says there is a good return available for tillage farmers interested in converting and who are willing to follow best practice and the organic standards. Oats is not the only cereal that commands premium prices.

Organic wheat, oats and barley are making €400/t this year and combi-crops are selling up to €450/t. These crops are mainly in demand from cattle farmers but malting barley and wheat are also in demand from the brewing industry.

Price premiums for all organic crops are very beneficial because crop rotations are essential for organic cereal production.

Farmers interested in converting to organics should contact an organic certification body immediately. This is required before an application can be made to the scheme.

We asked John Flahavan, managing director at Flahavans, a milling oat company based in Waterford, for his opinions on the re-opening of the scheme. Flahavan’s buys most of the organic oats in the country.

Were you happy to hear that the OFS opened and has a ranking system favoured towards cereal farmers?

Yes, we were delighted to hear of the reopening of the OFS. There has been huge growth in the demand for organic oats over the last number of years and we haven’t been able to match that with supply in Ireland. I was a member of the Organic Focus Group and also the more recent Organic Strategy Group, run by the Department. Both of these committees recommended reopening the OFS. We have also been talking about the opportunity at Teagasc organic farm walks which have had a tillage element to them.

How much organic oats do you buy per annum?

We are buying around 5,000t per annum.

Why is there such a market for organic oats in porridge compared with conventional?

The taste profile of the organic oats is a bit different from the conventional. Some consumers prefer the taste difference, but others may not. As well as this, for the consumers who like to buy organic, the price premium of organic oats over conventional is not that significant, whereas in some other food categories the organic price could be a multiple of the conventional price.

Are they used in other products?

We sell all of our organic porridge oats under the Flahavan’s brand. We do not produce private label or store brand porridge oats.

Are your products just sold domestically or are they exported?

We export about 60% of the organic oats we produce. The majority of this goes to the UK market. Flahavan’s is now the number one brand of organic oats in the UK. While there are some uncertainties around Brexit, we believe that this will continue to be an important market for organics.

What price are you paying farmers for organic oats this year on average and is there much of a premium compared to conventional oats?

We have paid a base price of €380 per tonne this year. This is approximately +75% over the base price for conventional oats and in some past years it has been more than double. This has worked out well for farmers. Although the yield from organic oats will normally be slightly lower, the inputs will be a fraction of the input costs of conventional oats.

Do organic farmers have to sign up to a contract with the company before they sell their oats to Flahavan’s or can any registered organic farmer supply oats to you?

We are looking to take on new growers but we would like the farmers to contact us beforehand. There is an approval process and we would encourage farmers to sign up to an ‘intention to supply’ contract.

Are you confident there will be a market for organic oats in the future?

We are quite confident of the market demand as it has been in continuous growth for the past number of years, especially in our export markets.