Identity-preserved (IP) grain production is increasing, and will likely continue to increase, at a phenomenal rate each year. In this and future articles, I want to define what IP grain production is, show specific examples of it, the paradigm shift going on in agriculture, the importance of IP grain contracts, and the benefits and risks of it.
What is IP grain production? The process by which a crop is grown, handled, processed and delivered under controlled conditions, whereby the end user is assured that it has maintained its unique identity.
We are in the beginning phase of a major paradigm shift in agriculture, according to Randy Schwake, director of business development at AgMotion. For most traditional commercial farmers, the pattern has been, and continues to be, “get bigger or get out.”
Margins have been shrinking and farmers have been forced to run large, efficient, high-volume businesses to turn decent operating profits.
Tough competition from farmers in Brazil and Argentina, who have access to lower-cost land and labor, has also entered the picture.
The paradigm shift has been to grow specialty and IP crops that require more management, but also offer higher returns. Instead of growing what's easy, you grow what the consumer wants. Making this change is a fundamental shift in how you run your business, but provides opportunity.
As U.S. food and feed processors change to provide customers with the inputs they want, the list of IP grain production opportunities continues to grow. See the table below for a partial list of the opportunities that we see right now for IP production of corn and soybeans.
Farmers are gaining some valuable insights into IP grain production as more and more begin to grow IP grain. As you might expect, some farmers have had good, profitable experiences, while others have had disasters.
This summer I had two IP grain examples brought to my attention.
The first was from an organic farmer who had just harvested 160 acres of oats. The cash price was $3.50/bu. The 80-bu/acre yield plus the 100 bales of straw at $1.50/bale resulted in a record gross income per acre — with very few input costs.
The second was from a farmer who grew high-oil corn. He took the LDP early. However, when he wanted to sell, the buyer wouldn't take it. “I eventually dumped it all at the bottom in early July. It was a disaster,” he said.
Now that harvest is wrapped up, it's time to start planning ahead for next year. If you're interested in IP grain production, consider the following:
Attend meetings and learn all you can before you decide to make the shift.
Find someone who has grown IP grain and see what's worked.
Go slow. Try IP grain on 80 acres and make sure that the seed you buy will work in your area.
As I continue to write more on IP grain production, I would like to hear from those involved with it about how it has worked for you. See below to contact me.
Alan Kluis is president of NorthStar Commodity Investment Co. If you have marketing questions or want more information, write: NorthStar, 1000 Piper Jaffray Plaza, 444 Cedar Ave., St. Paul, MN 55101; call: 800-345-7692 or e-mail: email@example.com.