Market Access & Traceability
It is one thing to observe that there are growing markets for food originating from specialized farming systems, and quite another to tap into them.
The grading system alone doesn’t enable grain to be sold into fast-growing new markets, because it doesn’t communicate anything new about production. Grain traders often conclude, therefore, that nobody’s willing to pay for segregation of grain with novel attributes.
The new information that the markets want with grain is about food safety and field activities – what type of seed was planted, when and how much chemical was applied, and how healthy are the surrounding waterways and wildlife habitats. Of course, there is massive demand coming also from markets to trade carbon sequestration on farms, but those payments aren’t widespread yet and the science remains unsettled.
This report covers some of the steps to be taken along the way to trading carbon in farming, and the mechanisms for monetizing ecosystems value in bulk grain. First, let’s review how the different farming systems work:
Conventional farming focuses on maximizing yields to optimize profitability, and commodity sellers are price takers.
Certified organic farms do not use prohibited chemical crop inputs in order to achieve the certification, which is validated by audits, and offers (usually) higher prices.
No-till farms rely on chemicals to terminate weeds and the previous year’s crop so that the next one can get established without tilling the field. A small number of North American companies have built value-added marketing claims on no-till grain production based on the associated reduction in soil erosion.
Regenerative farms deploy some combination of the principles: soil armor, living roots, planned grazing, biodiversity, economic and community wellness. Value chains are short; looming demand is large.
There is no definition for sustainable agriculture. People either believe that it is or they believe that it isn’t, and minds rarely if ever change on this question.
It is frustrating indeed how badly the production and marketing messages have gotten mixed up across the food chain - and the list above only covers field crops. There are equally-confusing definitions for livestock, egg, and dairy production, such as ‘cage-free’, ‘grass-fed’, and ‘confined animal feeding operation (CAFO)’.
Drawing on learnings from animal protein supply chains, let’s explore the traceability and lab testing mechanisms in the works for grain to maintain access and tap into new markets.
Lab-tested attributes validate scientific outcomes. The most serious attribute that needs to be proven to maintain market access for grain is that shipments contain less than the allowable limits of heavy metals and pesticide residues. The most opportunistic new demand segments are seeking ‘nutrient-dense’ food ingredients. The markets for these 2 attributes require laboratory analysis and test results to access.
The second category of attributes coming to market are field-traced. Private platforms for carbon credit-style payments already require information about field activities, as do new government programs such as the On Farm Climate Action Fund (OFCAF). Certified organic market premiums also command field records, but they aren’t validated, and can be impossible for end use consumers to access.
Lab-tested market attributes are commonly traded already. In markets where the maximum residue limits (MRL’s) on glyphosate are relatively low, (Japan, Europe, and the U.S.), companies often need to provide lab test results as part of the contract execution documents.
Testing, correlating, and quantifying nutrient density is a lot more complicated, but hand-held devices for use in comparing produce in grocery stores, are in development. It can be done in grain in labs for a fee.
Consumers in the market for nutrient density in food link the more complex flavors of meat from livestock that graze (compared to a grain-based diet) to elevated nutrition in the pasture mix, and to balanced nutrients and healthy biology in regenerating soils.
New Markets for Traceable Grain Crops have gone largely untapped, in an industry culturally programmed and commercially invested to blend away records about grain. This is becoming a costly oversight and an exciting new commercial opportunity for first-movers.
Here are some recommendations for traders interested in looking into this further:
Start with identifying pockets of early-adopters of soil health practices (cover cropping, intercropping, nitrogen use efficiency, and rotational grazing).
Send people to learn about soil health at the conferences and meetings happening across the Prairies. Note attendance at these would suggest there are a couple thousand farmers already deep into the regenerative movement in Canada… but they aren’t the same ones on a typical elevator’s target customer list.
Acknowledge the early success and deep knowledge of ecological farming practices by asking questions and studying the answers, offering compensation for time and data, and visiting the farms in person.
Consider the list of global food companies rolling out regenerative agriculture commitments: Pepsi, Nestle, ADM, McCain, A&W, Maple Leaf, Unilever, Danone, Patagonia, Bimbo, General Mills, Oatly, and more. Surely within this group of giants, there exists commercially-viable purchasing interest that will offset the costs of providing segregation and field data.