Objective – to increase the profit per hectare for the organic farmer

ULDIS GRAUDIŅŠ

What challenges did you face when you became the head of Latvia’s largest organic farming cooperative two years ago?

I came to agriculture from the beer and beverage producer “Carlsberg” group, where I was responsible for sales promotion at the European level for many years. Two years ago, when I started working in the cooperative, I was very sceptical, expecting a hard work of persuasion. I was under the impression that organic grain would be easy to sell but difficult to buy from the farmer. I had prepared that I would have to convince the farmer. The reality turned out to be quite different. The farmer is very open, ready to operate, while selling in organic farming is much more complicated than in conventional farming, where you just take the crops to the port and record the quantity brought. Organic producers are looking for a buyer for each ton all over the world. One of the biggest challenges is finding partners to sell the grown crops to at good prices.

The chairman of our council, Kaspars Bokta, usually emphasizes that farmers take on the hard work, weather risks and loans, but intermediaries skim the cream off the farmer. Market volatility is also a challenge. For example, this year, most of the farmers’ organic turnip-rape were kept in storage all winter. Currently, we have found partners and have successfully sold the crops grown by our members.

Another challenge in organic farming, in addition to sales, is primary production – grain cultivation and yield. We do not grow large crops with organic methods. This is an indicator that needs to be improved. We believe that operating with biological methods can be high yield, can make money. Last year in Sweden, for example, we saw that an organic farmer threshed 7 tons of wheat from one hectare. With the conventional method, a harvest of 10 t/ha is grown. So there is a 30% difference. Organic rapeseed is grown in Sweden at 3.5 t/ha. The yield for canola grown with the integrated method in Sweden is 5 t/ha. Of course, with the organic method, less is grown, but if we look at the price, then the organic farmer can earn as much as the integrated grower.

The average yield in organic agriculture in Latvia is low, we operate quite extensively. we sow, we don’t put anything special on top, we don’t fertilize with the allowed fertilizer and we wait for autumn – what happens, happens. And yields are not very high. Then, of course, we hear the rebuke from various other sectors that organic agriculture is heavily subsidized and this should be changed. We believe that you should be able to earn as much from one hectare when operating with biological methods as when operating with an integrated method. And it is possible. Currently, there is not enough agro-technological knowledge in Latvia, as well as a lack of education in this field – there are no agronomists who manage organic agronomy. You can buy quite a few different fertilizers, but they are quite expensive. Here again is the question of agrotechnology. We have very successful farms that use these fertilizers by incorporating them with the seed. And it gives the greatest contribution to the plant, besides, it does not feed weeds.

The acquisition of agrotechnical knowledge requires support. No university in Latvia prepares agronomists to work with biological methods. Every owner has learned something and is experimenting himself.

We see raising productivity through education as one of the goals of the cooperative. We work intensively hand in hand with the best examples in the world, as well as the Ministry of Agriculture, AREI and LLKC, in order to integrate this knowledge into daily operations and give it to other farmers. When I invite conventional farmers to go organic, I can’t yet show them how to make as much money as they do with the integrated method. At the same time, we see that in other countries organic farmers can earn as much from one hectare as conventional farmers. We need to gather knowledge together and be able to take it to the farmer. The goal of KS is to find the best fertilizing and weed control products and, by engaging a specialized agronomist, develop a professional plan for increasing yields together with the members.

Cooperation between farms is very common in Scandinavian countries. For example, an aggregate belonging to one farm is also used by other farms. We have yet to go for it.

No university in Latvia prepares agronomists to work with biological methods. Every owner has learned something and is experimenting himself.

We have taken care of economically well-grounded organic grain farming. In time, we will evaluate other sectors as well – we see very great opportunities for synergy with animal husbandry. Cereal production, fodder and fertilizer are related things. We started with larger farms and the main crops grown. When the foundation is created, we can put it in place, that is – help smaller farms, pay attention to niche crops, because then there is a team that can help.

What size of farms does Jurgensburg Agro currently unite?

The cooperative currently has approximately 70 members. Farms are mainly 200-300 ha in size. The cooperative operates several farms of 1000 ha and also 50 ha, every owner with any land area is welcome! We operate throughout Latvia. Due to historical reasons, the majority of members are currently in Vidzeme, including Limbaži, Sigulda and Cēsis. However, there are also members in Liepāja county and Latgale. Of course, it is easier to operate where there are more farms, where members can also offer the infrastructure that we use to provide services.

Successful cooperation has been established with the farm SIA “Forest Fox” managed by the chairman of the cooperative council Kaspars Bokta in Zaubes parish of Cēsis district, as well as Zigmārs Logins IK “Ozoliņi ZL” in Lēdurga parish of Krimulda district, where modern, large biological elevators have been built. The range of crops grown by our members, as accepted in organic production, is very wide. Last year, we sold oats, wheat, yellow and brown peas, beans, buckwheat, rapeseed. We are trying to find a market for rye and barley. It is interesting that there is no demand for organic rye, which is very good in crop rotation, it grows well and prepares the soil for the next crops. However, it is a specific culture with consumption only in Northern Europe. These are the questions we work with every day and we are looking for a long-term stable outlet for all the products grown by our members.

What are the characteristics of the organic grain market?

The market is very volatile. Buckwheat costed 1000-1200 euros/t two years ago, 700-800 euros/t last season. Currently – 500 euros/t. There are many processing plants that work with organic grains in the world, but they are mostly small and cannot take a large amount of harvest at once, so several cooperation partners are needed. It is also true that processing companies in other countries first buy local production and later import the required quantity. For this reason, the movement in the market usually starts in December. That is why we are also thinking about developing the processing itself in the future.

There are cultures with which we work more. For example, we have taken care of the pea variety “Bruno” created in Latvia, we propagate this seed in cooperation with the Agricultural Resources and Economics Institute (AREI). We have contracts with “Aloja Starkelsen” and other companies. We are trying to find partners in Latvia and other countries, to conclude long-term cooperation agreements. The benefit of being a cooperative member is that we can take on larger quantities of deliveries without the risk of not fulfilling them. If we have a member in Liepaja, Madona, Limbaži, then we sow the necessary crop according to demand. Some will grow better, some worse, but it will not be the case that we cannot deliver. The cooperative will also always find a way to sell the crop, even when it has been affected by natural conditions. Cooperating with a cooperative reduces the risk for the farmer.

Tell us about the buyers who buy the crops grown by members of “Jurgensburg Agro”.

The market currently has three components. Namely, manufacturing companies in Latvia, including “Dobeles dzirnavnieks”, “Aloja Starkelsen” and others, to whom we sell our products. We wish to strengthen cooperation with Latvian processing companies in the future. The next group of buyers are buyers, traders. We want to reduce the proportion of this group. At the moment, we have to cooperate with everyone, but we must understand that the farmer does the hard work, accordingly, the profit must remain with the raw material producer, not the middleman. And there is also direct sales, exports, when we sell directly to manufacturing companies in other countries. The biggest problem is the logistics cost. If they are acceptable, we can work with almost any country in the world. We want to increase the share of direct export. Only together, by consolidating volumes and knowledge, we will be able to both control and ensure quality at a proper level, which will be in line with the demand of processors.

Every year the sale is a little different. The 2022 sales in the domestic market had the largest share, which is related to the fact that we are the exclusive suppliers of organic peas and beans to “Aloja Starkelsen”. In 2022, the market had high prices for oats, peas and other crops. This year, most likely, it will not be the case – the market will be much tighter, the year will be difficult. In organic production, with worldwide inflation and crises, the consumption of organic products has slowed down a bit. It will definitely recover gradually. The question is when the recovery will take place – in the fall or next year.

This year, our export figures are rising rapidly. This spring, we have already reached a third of last year’s turnover, including 90% export. We sell buckwheat, rapeseed and other crops in other countries. Contracts for the sale of this year’s harvest are more for specific products where the market is not so free. We are looking for such opportunities to conclude a contract. It is often necessary to build long-term relationships with companies in other countries. First of all, you have to fill out a lot of different documents and certificates – it’s quite a burden of record keeping. Each farmer alone cannot do it at all.

Are there differences in selling organic and conventional grains?

If we historically evaluate the sales of conventional and organic crops, the market for organic products has always been less predictable and more volatile. For the past seven years, the highest sales price has usually been in January. Last year was an exception. At the beginning of November last year, the entire market stopped, including the exchange price of rapeseed and wheat, as well as negotiations on contracts in organic agriculture. It was like a stopcock being torn off, and the situation was the same in many industries – atypically, the entire economy came to a standstill. This trend affected organic farming more because the consumer, with increasing expenses for basic services and products, is the first to abandon the consumption of luxury or premium products. In recent years, many farmers have been waiting for December, January, when the price of grain is the highest. Once upon a time, in this season, the highest price in organic farming was right during the harvest.

2023 is the first year when also conventional producers, separating fields and technological processes, are allowed to operate with organic methods. What do you think of these new game conditions?

From one point of view, there is more risk. If there are two different streams, can you really separate them? Judging from another point of view, our cooperative also currently has owners who have several farms, including one that operates with organic methods. If the legislation allows, it can be done. I admit that the certifying authorities will have a little more work, they will have to be able to track several flows. The biggest concern for me is the risk of residues in organic products. If, for example, grain is taken to a larger factory and 50 tons are poured into a tower with a capacity of 500 tons, but the neighbour has misted the crop or the trailer is dirty – everything is ruined! Who will compensate the grain sorting expenses? In organic farming, you have to understand that there are additional risks, additional checks, and it’s more complicated than just taking the grain to the port, and if it’s clean and dry, then there shouldn’t be any problems. Also, when it comes to residues, more and more accurate equipment is used in laboratories. If there is zero tolerance, you can now find residues in grain that could not be found ten years ago.

The price of mineral fertilizers for conventional producers increased three times last year. What happened to the price of organic fertilizers?

Biological fertilizers were not the focus of our activity for the last three years. Nowadays, however, it has become an important condition. We are also becoming distributors of various organic fertilizers this year. Nobody really talked about organic fertilizers before, because organic grain farmers use it very rarely. Quite a lot of permitted fertilizers are used by potato growers. Last year, LLKC held a training on organic fertilizers and the result is a huge increase in consumption. One of our members has been using “Bioefekts” products for several years and also brings compost from the Netherlands. The crops grown by him have very good yield and quality. You have to see his seed drill, it’s a non-standard implement. In front of the tractor, there is a tank with liquid fertilizer, which flows through pipes to the seed drill, where the granular fertilizer or compost is located. The entire mixture is incorporated into the soil during sowing. Such a unit requires a huge investment. At the same time, when operating with biological methods, the investment per hectare is lower than when operating conventionally. Many owners are used to not needing additional fertilizing. If you suddenly have to switch to fertilization, the cash flow changes. Farmers are used to the fact that fertilizer can be received with post-payment. In biological production, such an arrangement has not yet been established. We are evaluating how to sort out this tangle. You cannot demand that the farmer will suddenly find ten thousand euros for fertilizer to put on the field! You have to start slowly or find funding opportunities. It is not so simple. For the time being, organic farmers do not particularly use these preparations, however, interest in organic fertilizers is growing. It is needed. Without biological fertilizer, it will not be possible to increase productivity. Fertilizer use pays off with higher yields.

Will the farmer who invests money in organic fertilizer receive a guarantee that the cooperative will sell his crop at a good market price?

This is our goal. Prices for organic crops are higher than for conventional production. Wheat has one of the smallest differences, still close to 30%. Organic beans, peas, oats and buckwheat have a significant price difference compared to organic crops. If there is an export market, we can increase this price difference even more. There is no market for very many crops that have little price difference. For rye, for example, the difference appears when a buyer is found. In Germany, we talked with the millers of this country about organic food grade wheat. There is a very high demand for them, but a 12% high protein rate is needed. It is difficult to grow wheat with such an indicator in Latvia. The Germans say – you already have only fodder! It is necessary to improve quality in order to earn money. And it can be about both the amount of harvest in tons and the quality of the harvest. For example, during the last year’s threshing season, food quality oats cost 390 euros/t, for fodder – about 280 euros/t. So there is almost a 100 euro or 25% difference in quality. It has been proven that organic crops suffer less than conventional crops under extreme natural conditions.

When working with unsuitable agrotechnology, the plant also gives some kind of minimum yield. But this yield minimum is stably small. We need to ensure that yields are consistently high. Of course, when working with biological methods, the soil is biologically active, the organic matter should also be more and increase. When working with biological methods, there should be an accumulation of nutrients. It should be taken into account that every year, every field is different and also every owner works differently. Working with biological methods, in my opinion, is much more difficult than with conventional methods, because you have to take into account many more conditions, you can control something less. Conventional farming is like an antibiotic. We monitor the plant, fix the disease, give medicine. If the plant withers, we give something else. We can quickly respond to what the plant needs. Biologically, we act more prophylactically, as with vitamins. This means that in the long term, health must be maintained at a high level, and work must be done in a more nuanced way.

The breeders at the Priekuļi Research Center emphasize – there are not enough seed breeders in Latvia. How does the cooperative meet this challenge?

We have several seed breeders. A lot depends on the owner’s knowledge. It must be understood that good seed material will give a better yield and resistance to diseases or anything else that is important to the farmer. Breed characteristics are very important. One variety will behave better in one soil, the other in another. Many farmers still do not appreciate – in order to maintain and reproduce the breed, it is necessary to invest work and financial resources. Therefore, certified seed is also more expensive than non-certified. Conventional farmers mostly understand – high-quality seed is needed to grow a high-quality crop. In organic production, we are still going for it.

I wouldn’t say we don’t have enough seed growers, rather not enough demand. Everything in the chain is connected – if there was a demand, then there would be more seed growers or they would multiply more, and there would also be more seeds of local origin. We know that from 2037, seed propagated by conventional methods will not be used in organic agriculture. It seems like a very long time, but knowing what needs to be done to prepare the seed, it is not so far away. There are countries that set a certain percentage of organically certified seed by law, and the seed must be renewed every year. One example is Germany. Certified seed also loses its properties. It can be grown for four to five years. The use of certified seed is also one of the conditions for raising productivity.

Organic farmers may also sow conventional seeds, if organic seeds are not enough. How do you evaluate this opportunity?

The seeds offered in the organic seed register are insufficient. There are farmers who on purpose wait for the seed from the register to be sold out and then ask for permission to sow conventional seed. But the farmer must also understand why he often buys conventional seed. The farmer believes, and partly rightly so, that this seed is bigger, stronger in the first year to grow. Others say that the organically grown seed is more seasoned, hardened and better suited to harsh natural conditions. If we increase productivity by using fertilizers, including manure, we have to go the other way – we need high-quality and well-nourished seeds. Also, one of our members, by experimenting, investing in the soil and fertilizing, has come to the point that the quality of his organically grown seed is as good or even better than the conventional seed that no longer needs to be bought. There is also a stone in the field of seed growers – we also need strong organic seeds, those that have been fed, grown in good soil. It is not enough. For this reason, conventional seeds are bought. If we want to grow extensively, without fertilization, then organic seed would be better because it is suitable for such conditions. In order to increase productivity, fertilize the land, it is necessary to switch from conventional seed to organic, but it must be fed and grown in suitable conditions.

In the Association of Seed Growers, we have discussed the fact that there should be state funding for studies of the suitability of various seeds for Latvian conditions, recommendations for the most suitable cultivation technologies. In other countries, we have seen farmers pay a few euros from each hectare of cultivated land to researchers to study various challenges that are important to them. We in the cooperative have not yet evaluated such an option. We Latvians, on the one hand, trust, but on the other hand, we do not trust. In Sweden, there are consultants who go to farmers, there is research, including technology and seeds. Farmers pay them for this service. And trust. If there is no funding in Latvia, nothing will happen. Support for research must come from the ministry or from farmers. It is already discussed. If it comes from the Ministry of Agriculture, it is also farmers’ money. In my opinion, it would be best if we managed to convince the farmer to pay for the service rendered to him. If the money is simply deducted from the area payments, the farmers will not trust where the money will go, that it is used for the purpose. There must be an offer that comes from AREI, from cooperatives, from LLKC. Currently, there is no one taking the first step.

What are the future plans of the cooperative?

To grow rapidly and provide an ever-increasing basket of benefits to its members. Very soon we will hire and teach an agronomist who will help with advice on increasing productivity. In the coming years, we intend to double the cash turnover of the cooperative. We want to continue to be the largest cooperative of organic grain growers.

In the cooperative, we focus on sales and raising productivity. The main goal of our activity is to increase the organic farmer’s profit per hectare – both by increasing the yield and getting a better selling price, and also by helping to procure spare parts and other products needed for work at the best prices.

Read the article in the May 2023 magazine “Agrotops”