Organic Supply and Demand

Organic ingredients are ramping up to meet processors' needs. Advance planning is the best sourcing ingredient.

By Kathryn Trim

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Devise your own plan

The key word here is "plan." Most organic farms are small, family-owned operations where each acre is carefully planned and planted based on strategic estimates. Thus, unlike conventional agribusiness operations, many organic farms usually do not end up with a huge surplus to sell at spot market come harvest time. This leads to the appearance of a lack of supply, when it really comes down to a lack of planning on the part of the buyer.

Organic suppliers are more than happy to meet the need, but in order to do so they have to plant the seed. Many organic ingredient suppliers are developing higher stocks of inventory that are readily available at short notice. But to get what you need, for larger orders especially, buyers should make arrangements with suppliers before growing season to ensure the needed ingredients are planted.

"To best way to ensure supply is through proper forecasting and communication with suppliers. In some cases, this may mean having to plan up to 18 months in advance of when the product is needed," says Holly Givens, OTA public affairs advisor. For example, last year there was an oversupply of white corn, and ingredient buyers were able to by it readily on the spot market, Givens said. Based on the previous surplus, this year the farmers planted less; meanwhile manufacturers, who took for granted there would be plenty on the spot market, didn't contract with suppliers. Planning could have prevented this issue.

Even more category growth was anticipated after Wal-Mart made a big commitment to organics last summer. Will organic ingredient supply be able to keep pace with demand?
Even more category growth was anticipated after Wal-Mart made a big commitment to organics last summer. Will organic ingredient supply be able to keep pace with demand?

"We can have as much as you want as long as you let us know before growing season," says Joe Lombardi, business manager at National Starch Food Innovation (www.foodinnovation.com), Bridgewater, NJ., which markets Novation organic functional starches. "There's sufficient acreage available, but if we don't put the seed in the ground then larger orders may have to wait till the next growing season."

Communication is a big part of successful sourcing. "It's about asking the right questions about supply and availability up front. A client needs to have an idea about how much they will need early in the process and when they will need it by," says Camille Nava Janssens, director of sales for Marroquin Ingredients. To make sourcing even more efficient, her advice is to track and share sourcing information interdepartmentally, and perhaps even to create a sourcing database on the company server.

Planning and communication can happen at many different levels. For some it may be as easy as calling the supplier. Other times you need to go to farmer directly. "Sometimes you have to get more active lower in the chain to get what you want," says Bob Anderson, president of the organic consultant group Sustainable Strategies and founder of Walnut Acres, one of the first nationally distributed organic product lines. When there was an oat shortage, Anderson helped companies work with oat cooperatives to ensure they had the raw material and then work with their preferred processor to get the quality desired.

Those new to the organic industry may want to get a little help, at least in the beginning, from a consultant or broker. Someone who knows the intricacies of the organic supply chain can help you find, plan and communicate with producers.

Anderson and others like him have helped many processors find what they need from producers around the globe, and brokers like Marroquin Ingredients have invested years working as a liaison between processors and producers to develop and import specialty ingredients such as organic yeast. The OTA lists consultants on its "Organic Pages" web directory. OTA also offers an "Ingredients Wanted" forum where processors can post ingredient requests (www.theorganicpages.com/topo/ingredientsourcing.html).

The final step in the plan of action is to make the commitment. "When you find what you need, lock it in," says Anderson. "If you wait till the spot market, you may be too late or you'll pay a premium that will eat away at your margins."

This commitment often involves some risk sharing or co-venturing, including contracting with farmers or suppliers at some level. Because these are smaller operations, if one processor backs out on an order that the farmer based his crop on, it could bankrupt him. Givens suggests that, depending on the volume, processors might want to go so far as to help farmers convert to organic. It takes three years to convert land to organic. During that time, farmers must farm organically while they're only getting conventional prices.

"The organic community is still a small community and we are still building infrastructure as we go," adds Givens. "By working with farmers, you're encouraging growth and by making this commitment you will be ensuring that they will have a market for their product when they are done with their transition."

New ingredients meet demand

Like any business, the organic supply industry operates on supply and demand. If enough processors tell ingredient suppliers they want an organic version of something, then the ingredient suppliers will respond. "It is not a question of if the supply could be available, it's about if there is enough demand to justify the time and money it cost to make that product," explains Marroquin. "As demand grows, more players will step up to meet it."

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