Service tracks regional organic prices
Feed producer Diana Ambauen-Meade said she’s often skeptical of the organic price data published by USDA.
The agency’s information seems to reflect the Midwestern market for organic grains, rather than the prices found in the Northwest, she said.
“I have not found those numbers to be all that accurate,” said Ambauen-Meade, whose Scratch and Peck Feeds produces organic and non-genetically modified products in Bellingham, Wash.
To find out what other grain buyers in the area are paying, she participates in a market data service operated by the Mercaris startup.
Organic buyers like Scratch and Peck Feeds submit their purchase prices to Mercaris, which then compiles average price data for its subscribers.
“It gives a picture of what the prices are out there, other than what is put out by the USDA,” Ambauen-Meade said. “I just think it’s good to have more than one guide to look at.”
Mercaris aims to provide more transparency for organic buyers and sellers, said Kellee James, the firm’s CEO.
Conventional grain prices are generally much lower than the price paid for organic crops and information is more widely available, she said.
“It’s a different market and a different game than organic,” said James, who founded Mercaris company in 2012. “I saw a gap in that very little data was provided.”
Subscribers receive average prices that are weighted by volume, as prices tend to be lower for buyers who make larger orders.
They can also compare prices for various delivery dates and in different regions.
“It gives a lot more detail than what was previously available,” James said.
Aside from providing organic growers, manufacturers and analysts with price signals, the data service may improve crop insurance for organic crops, she said.
The crop insurance program overseen by USDA pegs organic prices at 50 percent above the conventional rate, when in reality they can be three times higher, James said.
“We think better data can create better risk management products,” she said.
Mercaris is also organizing online auctions for organic grains to directly connect buyers and sellers.
While prices will ultimately be dictated by market conditions, the auctions can reduce “transaction costs,” like the time spent calling brokers or suppliers, James said.
“Markets work better if information is more available,” said Larry Lev, an agricultural economist at Oregon State University.
Greater transparency doesn’t necessarily mean organic prices will fall. If more buyers come to the market, it may push prices up, he said.
More sophisticated financial tools can illuminate the market for some organic crops, if they are traded in large volume and are fairly uniform, like eggs, said Lev.
Such tools don’t work well for crops that have a lot of variation, or that trade in relatively small volumes, like hot chili peppers, he said.
“There’s just not enough supply and demand to make an interesting market where you get this transformational effect,” said Lev.
Auctions or exchanges also don’t fit well with highly perishable crops, like fruits and vegetables, he said.
“When things are not storable, supply and demand are much more rapidly changing,” Lev said.