LAS VEGAS — Any food or beverage company looking to capitalize on consumer interest in U.S.D.A.-certified organic or products formulated without bioengineered organisms must have a plan, said John Ruelle, senior vice-president of SunOpta’s global ingredients platform.
“Growers in North America don’t grow specialty crops on speculation,” he said Oct. 8 during the SupplySide West conference and tradeshow. “You have to plan.”
The premium consumers are going to pay for such products pays for the management of what is a very complex supply chain.
“I have sales people selling crops I won’t plant until March and won’t harvest until later in the year,” Mr. Ruelle said. “It starts with the seed in the ground. We have to know what the growers are doing with the crop and then we have to monitor what they are doing to ensure it will come off at spec.”
Mr. Ruelle said the market has changed in the past few years as commodity costs have come off their record highs.
“We didn’t have a ton of interest from growers to grow specialty crops when corn was at $8 bu,” he said. “Specialty crops will be sold at a premium and you have to compensate farmers for the yield drag and cost of segregation. It’s a numbers game.”
While some consumers may be confused about the differences between certified organic products and those that are non-bioengineered, Mr. Ruelle said producers are not.
“To be a certified organic producer you have to go through three crop cycles in order to get the land certified,” he said. “You can do non-G.M.O. next year.”
He added that with certified organic raw material prices are based on supply and demand. Whereas, he said, SunOpta does index non-G.M.O. prices with the Chicago Board of Trade.
“Today, a bushel of corn is $3.80,” he said. “But we have not seen a decline in prices for our organic crops. The prices have stayed fairly static during the last five years. It’s an education process for people to understand it is a supply, demand imbalance.”
Despite the increased demand and premiums, Mr. Ruelle said producers are not knocking at his door to make the switch.
“It (organic) is a niche market,” he said. “It is very small and there have not been enough developments to increase yields and manage seed traits to achieve optimal production at the farmer levels. Everyone is chasing the gorilla and not switching to the small, little niche.”