Organic stakeholders grapple with soaring commodity prices amid harsh weather and tightening EU food law

21 Feb 2024 --- From weathering erratic climate conditions to blanket price hikes and stricter food legislation being rolled out across the EU Single Market, stakeholders across the organic food value chain are facing pressures expected to impede ingredient availability. Suppliers and traders speaking to Food Ingredients First at the recent Biofach 2024 trade fair gave first-hand accounts of the broad impacts.

“The chocolate industry has almost tripled in prices and customers are unsure how to react or are unsure about what’s going on,” David Metz, account manager at Tradin Organic, tells us. “We try to educate them as much as possible about the market, tell them how it works, what’s happening in origin and how we need to make sure we have a product available.”

Shortly before Valentine’s Day, El Niño dry spells in West Africa sent chocolate prices soaring to a record high. On February 12, the average global price of cocoa sat at around US$4.4 per kg, a 67.55% increase year-on-year and a 4.48% jump compared to December 2023, as revealed by the World Bank’s International Cocoa Organization.

Additionally, hedge funds piling into the cocoa market since the end of last year added more pressure to the historic surge in prices driven up by the poor harvests in West Africa.

“Even though prices go up, factories need to be kept running,” stresses Metz. “How can we be sure of that? It’s about being close to the source and making sure that the origin is supplying and not defaulting.”

“Let’s say we have a contract for a certain price — like around €2,000 (US$2,161) per metric ton — then out of nowhere the prices go up to €6,000 [US$6,483] per metric ton. How do we make sure the origin farmer is not selling his product twice, to someone else? And then who is he going to deliver to, to us, or to the guy he sold to for €6,000 per ton? It’s good to have boots on the ground to be able to be in contact with them.”

Shortly before Valentine’s Day, El Niño dry spells in West Africa sent chocolate prices soaring to a record high.Raisin prices rising
Price surges have also been recorded in the raisin market, where Metz reveals the average cost of around €2 (US$2.16) per kilo of raisins has risen to €4 (US$4.32) a kilo. 

“Out of nowhere, there was a huge shortage we observed last fall, largely due to bad weather conditions in Turkey and Uzbekistan,” he comments. “It’s also pushed by government organizations who support the Lira, which keeps the currency artificially high, leading to higher costs for the farmers. And this of course is translated as higher prices.”

“Because the price goes up, farmers will tend to hold on to product stock, hoping that the price will go even higher, so they can sell it at an even higher price. So we’re observing a lot of suppliers who default their contracts and we have to find alternative routes to obtain these products.”

Canadian organic farmers turning home
A report by Tridos Investment Management outlines there are two categories of organic food buyers in the EU: regular buyers and light buyers. Regular buyers are a relatively small and loyal group of consumers that have been buying and eating organic food for a long time and are not as sensitive to prices. 

They are responsible for about 50% of the value of sales in the EU, reports Tridos. The other half of sales comes from a substantially larger group of light buyers, who buy organic food more casually for various reasons. They come from a wide demographic, including double-income households, older consumers and trend-seeking Millennials.

Light buyers are sensitive to prices and consider organic food as a “luxury good.” Yet, this consumer group is key to the potential growth of consumer demand for organic food.

“The organic market as a whole is definitely in a bit of a dip right now and there are a lot of factors playing a role,” Jeff Cooper, vice president of trade development at Saskatchewan Trade & Export Partnership (STEP), tells Food Ingredients First. 

“The overall cost-of-living plays a big role and there are a lot of people that want to eat organic, who wish they could, but who prioritize just being able to put food on their table first.”

STEP works primarily with Saskatchewan-based companies in Canada to find them business opportunities abroad. Cooper highlights agri-food commodities of pulse products, like peas and lentils, alongside oilseeds and flaxseeds remain in high demand in target markets of Western Europe, namely Germany and the Netherlands.

“However, in Europe, there’s been new regulations coming in that have made it a little more difficult to do business here, leading some of our guys to look toward more opportunities in North America,” Cooper reveals.

“In addition, logistically, it’s easier to put product on a truck instead of loading it onto a container and worrying about it eventually making it to a market across the water. So there’s a lot of different factors that have played a role in where we’re at today, but generally the outlook is positive with regards to expecting a rebound for the sector within the next 18–24 months.”

Canadian organic farmers, who deal largely in pulse products, are facing tight EU restrictions on imported goods.Glyphosate restrictions in Europe
Cooper remarks that glyphosate restrictions in Europe, which remain relatively stricter than other global markets, are currently causing difficulties even for organic producers who do not use the substance.

The contested ingredient in common weed killers has been a concern for the EU for quite some time. Experts and environmentalists are worried about the chemical’s toxicity and carcinogenicity linked to its regular consumption through the food chain.

“The allowable limits of glyphosate have gotten a lot tighter than they were previously, which makes it difficult for some of our producers to meet those limits, not because they’re using glyphosate but just because it’s used so heavily in Canada that it’s in the air and water,” says Cooper.

“You can be doing everything right and still have a product test positive. And with the extremely low levels that EU regulators are enforcing, it creates a risk of shipments reaching Europe and being rejected, which would be a huge cost to the producer.”

Next to the pesticides debate, European agri-food businesses have been grappling with the introduction of the EU Green Deal, which has led to widespread farmer protests in recent weeks.

On the flip side, environmental and animal protection groups this month have criticized the European Commission’s new plans to “weaken” its agriculture-related GHG emission targets and accused policymakers of favoring discontented farmers over long-term climate change mitigation.

By Benjamin Ferrer