GLGT Blog

Financial institutions say that inflation is holding steady and has come down in the last couple of months. However, that has not carried through to food.

Massive layoffs on the coasts, 2 of the largest consumer markets in the United States, have created a completely different scenario.

The new face of inflation isn’t layoffs or economic restructuring. The battlefield now lies in empty shelves and skyrocketing prices: Conventional eggs at $4-$5 per dozen, Doubling the price of iceberg lettuce (whoever thought THAT would happen?), Store employees apologizing for higher prices.

How does Inflation Affect Organic Products?

As lay-offs occur on the coasts, the secondary effect shows up through lower demand for organic products. Though organic market growth and consumption has been solid for several years, the truth of the matter remains: There has always been a price ceiling on organic products. There is a point where the price of the organic product simply isn’t worth the consumer’s value of organic.

When does the PRICE of Organic Products outweigh the VALUE of Buying Organic?

Some examples:

If conventional chicken breast is selling at $4.99/lb., and organic chicken breast is $8.99/lb., is organic still worth it? That’s the first question.   Then organic eggs. Then vegetables. It’s not just one product. It’s ALL of them. As prices rise in both conventional and organic, the question becomes:

Where is the price break to force the consumer to move from buying organic to conventional? “I have to feed my family and can’t afford organic anymore”.  Gasoline and heating costs have risen as well.  “I can’t afford to buy what I used to buy; I have to make changes”.

The answer is different for each individual, but as prices increase, organic demand will generally drop.  However, when economic conditions re-balance (individual incomes rise, gasoline and heating costs decline, interest rates decline), consumers will go back to organic – when they can afford it again.

How does this Affect the Organic Corn & Soybean Demand?

The recent lack of demand in the organic corn and organic soybean market is very much attributed to this issue. Higher prices and fuel surcharges are driving the price of organic meat beyond what many consumers are willing or able to pay. That means less organic feed is needed, and results in a lower demand for organic soy and organic corn; the 2 staples of organic animal feed.

We talk daily with farmers and processors.  Many farmers want to believe the market will rebound. However, farmers are receiving fewer calls this year looking for organic crops. Processors say their needs for organic corn and soybeans are met for many months, some until 2023 harvest.  These conditions have created a very soft and uncertain market.  It’s going to be an interesting winter/spring/summer in our organic markets.