Although it may seem counterintuitive, now is an ideal time to consider transitioning your operation to organic. That’s because while organic fertilizers tend to be premium to conventional fertilizers when all fertilizer prices go up, that premium drops to a much smaller basis, relatively speaking. The sky-high conventional crop prices more than offset the cost of the organic fertilizer premium.
For the transition years when you’re selling a conventional crop while using organic inputs, you could potentially be looking at a net profit, not a net investment. The two-year transition period of cash usage is one of the primary barriers to organic transition. At Midwestern BioAg, we are working with lenders to provide financing to help support growers in environments when the transition period represents a net cash investment. These can defer principal payment to the full organic years when cash flow has improved.
Nobody predicts that these market conditions will last 5+ years, so by the time the conventional crop prices come off, you’re able to sell a certified organic crop and realize the typical premium. As of the last year or two, the average organic crop price can be two times the conventional price. Yield drag for transitioning operations is typically 0-20% vs. conventional farms. This is primarily due to the farmers’ willingness to adopt practice changes. We estimate that half of the drag is due to insufficient fertilizer program, the other half due to insufficient labor. A farmer that is willing to adapt to the needs of an organic system can maintain their yields and potentially triple their per-acre profitability.
We focus on soil health. One of the biggest impacts of that is maximizing nutrient-use efficiencies. It’s common for growers to build up their P and K reserves when prices are lower so they can cut back their spending during times like this. But studies have shown that only 10% of soil P and K is actually plant-available. There are soil organisms that solubilize that P and K and raise those percentages, up to 80-90% for P and 30-40% for K. That’s our wheelhouse. That’s what we do. We can help you access more of those nutrients near-term and create a sustainably profitable farm for the long term.