Pipeline Foods has expanded capacity at an organic soybean crushing facility in Missouri, an investment designed to address a bottleneck highlighted in a Rabobank research report distributed this week.
In July, the Minnesota-headquartered company purchased Malden Specialty Soy, a soy-crushing facility located in southeastern Missouri focused on processing organic and non-GMO soybeans into meal and oil. On Monday, Pipeline, which is backed by Amerra Capital Management, announced investments in new equipment and infrastructure that have doubled capacity at Malden Specialty Soy.
Neither statement identified the current or expanded capacity of the facility and Pipeline representatives did not return messages seeking further detail.
“Malden is the company’s first large specialty soy processing facility. It will also be an anchor for the food and ingredient division, producing hexane-free organic and non-GMO soybean meal as well as mechanical expeller-pressed oils,” Pipeline said in a statement. It also announced the opening of a regional office in St. Louis and the hire of former Bunge Milling vice-president Wade Ellis, as director of food and ingredients.
In a research note circulated Tuesday, Rabobank’s senior consumer foods analyst Nicholas Fereday wrote that while demand for organic products continues to rise – by 9 percent in 2016 to reach $47 billion, according to the Organic Trade Association – skepticism among farmers and the high cost of transition have left just 0.56 percent of US farmland certified as organic.
As a result, Ferreday wrote, domestic supply of organic corn, soybeans and, to a lesser extent, wheat, has failed to keep pace with booming demand stemming largely from the increasing popularity of organic meat and dairy products.
“With the current consumer focus on supply-chain traceability and locally sourced products, and with the USDA recently revoking the license of two Turkish organic grain exporters for violating organic certification rules, pressure on creating additional domestic supply of organic grains is rising.”
Rabobank’s report also highlighted the fact that it is currently cheaper to send corn and soybeans across oceans than it is to truck them across the US, making transportation and logistics another major factor keeping US farmers from meeting demand for organic grains domestically.
“As the organic sector itself is still developing, a currently underdeveloped knowledge-sharing network on successful organic farming practices has made some farmers less confident that they would be able to successfully get through the transition period.”
Late last month, Pipeline announced the launch of its Farm Profit Program, a set of initiatives designed to help address both the knowledge and financing gaps that keep farmers from making the three-year transition to organic production, and, ultimately, US supply of organic grains and oil seeds.
Eric Jackson, Pipeline’s chief executive, explained to Agri Investor last month that in addition to advice and help with applications for organic and transitional certifications, the program will in some instances offer loans to support farmers as they transition to organic. Jackson said that Pipeline plans to self-fund the program this year as a trial before using the Farm Profit Program as the basis for a debt fund the company hopes to raise from impact investors in 2019.
Douglas Hensley, president of Iowa farmland broker Hertz Real Estate Services, told Agri Investor that, while US farmers have certainly monitored the increase in organic demand, growth has started from such a low base that the sub-sector still lacks potential for the scale current economics require.
Hensley also highlighted the transportation and logistics issues cited by Rabobank, saying that many farms are located too far from large organic demand centers to make the cost of conversion worth it.
“Like any developing market, those people who are willing to go to those ends, some of them will be successful and some of them won’t be,” Hensley said. “One of the owners of our company is personally involved in an organic farm, and has had success. But, the conversion is very time-intensive and the overall marketplace just hasn’t been something that has been big enough to significantly impact the commodity-based system, yet.”