**[Statement of]{.underline}**

Lynn Clarkson

President of Clarkson Grain Co., Inc.

320 East South Street PO Box 80

Cerro Gordo, IL 61818-0080

Tel 217 763-2861

<Lynn.clarkson@clarksongrain.com>

[www.clarksongrain.com](http://www.clarksongrain.com/)

**[Before]{.underline}**

The US House of Representatives'

Agriculture Committee's

Subcommittee on Horticulture and Organic Agriculture

April 18, 2007

Room 1301 Longworth House Office Building

**[Regarding]{.underline}**

Organic Agriculture

Chairman Cardoza, Ranking Member Neugebauer and members of the
Subcommittee, I appreciate your support for our growing organic
community. It is a pleasure to have the opportunity to speak with
government policy makers in position to influence the welfare of this
very dynamic sector of American agriculture.

**Introduction -- Clarkson Grain:** I appear before you on behalf of
Clarkson Grain Co., Inc. Clarkson Grain supplies organic grains,
oilseeds and ingredients for foods and feeds. Based in Illinois, we
purchase organic corn and soybeans directly from farmers from Texas to
Minnesota and from Pennsylvania to the Rockies. We supply organic blue,
white and yellow corn; whole soybeans, roasted or raw; soy oil; soy
flours for foods and beverages; and soy lecithin. We maintain organic
warehouses and processing facilities in Illinois, Iowa and Nebraska.
While we buy open market crops, we typically contract with organic
farmers prior to planting to produce and deliver what we want when we
need it to support regional and national companies delivering an
increasing array of high quality, organically certified consumer
products. Our own products now find welcome commercial homes in
tortillas, breakfast foods, cosmetics, baby food, salad dressings,
chocolate, soy beverages and animal feeds. We serve certified organic
clients throughout the US and Canada as well as parts of Asia and
Western Europe.

**Market driven growth -- History:** Clarkson Grain supports both
conventional and organic agriculture. In the 1970s, 80s and early 90s,
the company focused strictly on conventional agriculture. In the mid 90s
our focus shifted toward organics.

In the early 90's Clarkson Grain supplied high quality food grade
soybeans raised without pesticides to an international company serving
soy food processors in Japan. That company asked one day if we could
supply a container of "organic" soybeans. We agreed and then scurried to
learn what "organic" meant. Several months later, we certified our food
soy cleaning plant in Illinois as organic and did our best to bond with
the small but growing band of organic farmers throughout the Midwest. To
our surprise, Japanese demand for organic food soybeans started growing
rapidly. At that time, US organic soybean farmers found Japanese buyers
paying prices running two to three times that offered for conventional
soybeans. Unfortunately, required rotational crops, primarily corn and
wheat, did not enjoy such strong organic demand and often went to
conventional markets at no premium whatsoever. Then some significant
market waves swept the country. Japanese demand for organic soybeans
seemed to flag. Meanwhile the popularity of organic soymilk began to
soar among Americans. More importantly, the USDA authorized an "organic"
label for meats at the same time that demand for organic dairy products
began to soar. This rapidly growing feed market boosted demand for not
only organic soybeans but also for organic feed grains with corn leading
the march and lots of wheat finding homes in the mix. Shortly
thereafter, the government and the organic community defined "organic"
and brought the US' National Organic Program to life. That created the
security needed to encourage major food, fiber and personal care
companies to move into the organic market. Leading national companies
had been watching consumer choice drive this new market at double digit
figures year after year. With the NOP in place, they began creating
organic products matched by marketing infrastructure. Today every
organic soybean raised in the US has an enthusiastic market home at
prices running two to three times the conventional price; every kernel
of organic corn has an enthusiastic market home at prices running about
twice that of conventional corn. With these and many other crops, demand
has outpaced supply.

**Organic Farm Econ 101:** On Friday morning, April 13, Clarkson Grain
bid about \$3.50 per bushel for conventional corn and \$7.20 for
conventional soybeans delivered central Illinois. At the same time, we
bid \$6.50 bu for certified organic feed corn and \$14/bu for organic
feed soybeans -- picked up on the farm, essentially twice the
conventional price. According to replicated studies by Dr. Delate at
Iowa State, organic corn yields can be expected to run 90 to 92% of
conventional yields; organic soybean yields, 94% of conventional. The
biggest challenge in producing good organic corn lies in providing
sufficient nitrogen and defending the crop against insects and molds.
The biggest challenge in producing good organic soybeans lies in
controlling weeds and grass. Good organic farmers using manure and the
latest technological advances in agricultural equipment meet those
challenges with a cost per acre of no more than their conventional
neighbors. Some of the happiest row crop farmers in the US regularly
produce over 200 bushels of organic corn per acre and gross well over
\$1000 per acre. They do so without contaminating the environment. So,
if organic prices run generally twice conventional prices, if organic
crops yield very close to conventional crops and if organic operating
costs are no higher than conventional costs, why are farmers not rushing
to convert conventional land to organic production?

**Supply challenges**

**Conversion to organic lags demand:** Consumers pay higher prices to
get foods, fibers and personal care products raised without synthetic
chemicals according to the rules of organic certification. They pay more
to get the supply chain to deliver what they want raised the way they
want it. Some wish to avoid chemical residues; some, to avoid hormones.
Many understand that the farmers' back yard is their backyard and want
to leave the farm as free as possible of petrochemicals and the water
untainted by chemical residues. Whatever their reasons, these buyers are
not seeking the cheapest agricultural products. They seek preferred
qualities. The seriousness of that demand makes organics the fastest
growing, legal, unsubsidized sector of US agriculture. Even with
sensational crop prices, that demand is troubled by an increasing
shortfall in the supply of organic raw materials.

-   The organic dairy industry is thought to be facing demand growth of
    over 40% per year with supply seriously limited by an inability to
    find sufficient organic feed materials. With a serious shortage of
    organic corn, dairy farmers are now scrambling with mixed success to
    find whatever organic substitutes will work.

-   US demand for organic soy foods and feeds is growing so rapidly that
    processors probably consume twice as many organic soybeans as are
    produced in the US. Despite excellent prices and an abundance of
    land and great farmers, these US processors find themselves
    importing organic soybeans from countries such as China, Brazil,
    Paraguay, Bolivia and Argentina.

-   Processors of foods and personal care products are seeking organic
    ingredients needed to support an "organic" market label. The
    ingredient supply businesses supporting such processors are
    scrambling to find enough raw materials to meet demand, searching
    for new processing techniques to avoid materials and process aids
    that would compromise an "organic" claim.

Why are supplies so tight when demand is booming? Why are more
agricultural resources not moving from conventional to organic
production? Why are more conventional row crop farmers not converting to
organic production? The reasons range from simple to complex and cover
lots of territory.

-   It generally takes three years to transition land to organic
    certification.

-   You can't sell your crop on every corner and may find yourself
    dealing with buyers located in distant states.

-   You cannot deliver at any time you choose. Buyers generally expect
    you to store your crop on farm until they need it.

-   Accustomed to the convenience of chemicals, you will need to learn
    new operating protocols. Where a conventional farmer can easily
    contract with a third party to take responsibility for feeding and
    protecting his crop, the organic farmer generally assumes all the
    responsibility himself. As the organic community develops, I would
    expect third parties to offer organic farmers the same supporting
    services as they do conventional farmers. At the moment those
    services are not available. Lack of service support increases
    production risks and farm management burdens.

-   Organic farming takes more detailed management and attention than
    conventional farming.

-   Despite sensational organic prices, the rural community still
    encourages conventional conformity. Few farmers relish the thought
    of being criticized at the "tables of wisdom" found in coffee houses
    throughout rural America.

-   There is unknown risk in moving into unknown territory.

-   Lack of methods of minimizing price risk.

-   Lack of infrastructure support by government:

    -   Weaker crop insurance

    -   Less research and development

    -   Less extension support

    -   Application of commodity rules that do not respect niche nuances

    -   Ag programs that support maximum yield instead of maximum value

    -   Warehouse rules that require hedged positions for crops that
        lack futures markets and cannot be hedged.

-   Strong government support in the form of subsidies for the "ethanol
    tsunami" now sweeping the land

**Infrastructure hurdles:** Permit me to offer an example from Clarkson
Grain's own experience with organic blue corn. Blue corn makes a
wonderful, nutty flavored tortilla chip as well as a great presentation.
Most companies making blue chips use organic blue corn, corn that brings
farmers prices well above \$8/bushel. Unfortunately for blue corn
farmers wishing to participate in various USDA programs, the USDA does
not recognize "blue corn" as corn. Government programs such as those of
the Commodity Credit Corporation officially rely on the Grain
Inspection, Packers and Stockyards Administration (GIPSA) within the
USDA to define "corn". GIPSA recognizes white and yellow corn but NOT
blue corn. To add a touch of insult to injury, USDA grade standards
regard the finest blue corn as 100% damage because blue color is deemed
damage. Consequently the organic blue corn farmer can find himself
locked out of various USDA programs although he is operating without
subsidy and doing what we would like to see farmers doing -- being a
good entrepreneur.

**The "ethanol tsunami":** Organic agriculture is free market,
entrepreneurial, unbacked by subsidies. It is the model for what many
Americans claim to support. At the moment, organic agriculture faces
tremendous competition from the huge subsidies being poured into the use
of corn for making "ethanol". Our biofuel policies are rapidly
rearranging the face of agriculture, diminishing the role of the open
market and discouraging positive responses by farmers to unsubsidized
market signals. Ethanol demand has essentially doubled the price of corn
in the past year, pushing conventional prices above \$4/bu (currently
somewhat lower) and creating competition for land that is raising the
price for almost all crops. Unsubsidized organic agriculture now has to
compete for resources with "ethanol corn" and the modern American gold
rush to produce more and more corn. With conventional farmers enjoying
the prospect of the highest profits they have ever seen, there is less
incentive to trade "convenience" for the huge premiums and higher net
incomes being offered by the organic market.

Today, US demand for organic grains and oilseeds could easily support a
doubling of organic production acres. Organic prices generally double
conventional prices and offer higher net farm incomes than those
available to conventional farmers. Despite buyer preference for domestic
organic production, it is the foreign farmer who seems to be responding
to the US demand. Who would have projected that soybeans, organic
soybeans, would flow into the US from China, Brazil, Argentina, Bolivia
and Paraguay. Such foreign farmers seem poised to take a significantly
higher percentage of the US market for organic raw materials. When and
if the "corn" bubble bursts, those foreign suppliers will have ridden
the organic learning curve and bonded with organic buyers in ways that
will disadvantage US farmers.

**Recommendation:** The Organic Trade Association and its allies within
the organic community have developed and placed before you a series of
well thought recommendations for consideration and inclusion in the next
farm bill. Those recommendations build upon current USDA programs and
support increased organic production and trade. They impact everyone's
congressional district. They do not ask you to oppose any path to the
marketplace. They ask you to support market choice, give balanced
support to organic production and protect the integrity of organic
certification on which the consumer relies. That plan would welcome your
support.

Mr. Chairman, I conclude my comments. I thank the committee for the
opportunity to present and would be glad to join my fellow panelists in
answering whatever questions you may offer.