The package of support offered by the Trump Administration to US farmers impacted by retaliatory tariffs could transfer more than $7 million to the nation’s organic farmers, according to a report by Mercaris.
Earlier this month, the US Department of Agriculture announced its Market Facilitation Program, an initiative to distribute $12 billion in financial assistance to farmers “directly impacted by unjustified foreign retaliatory tariffs, resulting in the loss of traditional export markets.” In order to be eligible, producers must have had average adjusted gross income of less than $900,000 between 2014 and 2016.
An initial release identified soybeans, sorghum, corn, wheat, cotton, dairy and pork as the program’s focus and a subsequent statement expanded the list of eligible crops to shelled almonds and fresh sweet cherries.
In its monthly organic market update report, Mercaris – a Maryland-based company offering analysis and auctions relating to organic and non-GMO commodities – said that though the MFP funds will also be distributed through support to potential importers and purchases of food commodities, organic producers are most likely to benefit from the program’s direct payments to farmers.
“Mercaris estimates the US organic sector is likely eligible for about $7.2 million in total MFP compensation, averaging nearly $4,000 per eligible organic producer in MFP compensation,” the firm said. “Calculating the benefit to be paid due to the MFP is fairly straightforward: simply multiply the relevant MFP rate by 50 percent of this year’s harvested production.”
Mercaris senior economist Ryan Koory told Agri Investor that support from the MFP will be welcomed as a one-time source of support by most organic producers, many of whom are likely to devote the extra money to investments in storage or other infrastructure.
“I don’t think it [MFP payments] changes the fundamental economics. We are talking about an amount that comes out in the wash, in terms of making it a more or less attractive investment,” said Mercaris founder and chief executive Kelle James. “Maybe it’s the investor-owned farmland that has the ability and sophistication to make sure they apply for that and make sure they go and get what they can.”
Competition from foreign suppliers played no role in motivating the support for organic producers within the MFP. But elsewhere in the report, Mercaris notes that US organic corn producers have been faced with increased competition from imports.
“It appears ships from Romania routinely deliver more organic corn to the US than actually originate from Romania (per official trade statistics),” Mercaris wrote. “The jump in export activity can be attributed to Serbia’s emergence as a major source of US organic corn imports.”
Koorry explained that Argentina and Canada have long been consistent sources of US organic imports, but that supplies sent from Black Sea ports are thought to have originated from a variety of Eastern European countries. There had previously been reports of fraudulent organic corn being imported from Serbia, Koory said, so when Mercaris noticed a dramatic uptick in organic imports from there in data released over the summer, it reached out to the USDA, which confirmed that the corn was in fact organic.
“There’s a negative patina that has developed around these imports, but it is really important to watch whenever you see a sudden shift like that and really take the regulatory agencies to task and make sure that they do verify that these are indeed legitimate imports,” said Koory. “Imports are such a significant part of the supply picture within the US, you don’t want to do without them. You do want to make sure that they are genuine, certified USDA organic, because if they are not, they are undercutting the people who are participating in the industry and really upholding the standard.”
Though it was unclear if any of those operations were from farms in Eastern Europe that had received overseas capital, Koory said foreign investment in the region’s agricultural sector was common. James added that there are at least two instances of Japanese investors backing organic grain production – Marubeni’s Columbia Grain and Blue Grass Farms of Ohio, which is owned by Mitsui.
“Japan already has a lot of experience in importing non-GMO soybeans from the US,” said James. “You can imagine it’s a short leap to go from there to organic soybeans and other organic crops.”
Because consumer demand for organic food continues to expand, James said, domestic investors such as The Andersons, Cargill and Pipeline Foods are also making investments into the infrastructure required to supply the ever-growing number of brands focused on organic offerings.
“You can absolutely see some of the institutional investment capital – rather than just individual farmers – deciding to convert land. That is absolutely happening,” James said.