DENAIR, Calif. — The last time Wendell Naraghi tried to make money from organic nuts, in the 1980s, he failed miserably.
“Basically, we stopped because no one paid me,” said Naraghi, whose father started the family’s large nut orchards here in the Central Valley in the 1940s. “There just was no market premium for organic.”
Today, the problem is turned upside down: Companies can’t get enough organic ingredients to satisfy consumer desire for organic and nongenetically modified foods. The demand for those crops outstrips the supply, leaving farmers like Naraghi racing to convert their land to organic production, an arduous and expensive process.
“Customers are asking for it,” said Naraghi, who is in the process of transitioning 300 of his 3,000 acres of orchards this year. “And we listen to our customers.”
The clamor for organic crops is so intense that major food brands, like General Mills, Kellogg and Ardent Mills, are helping to underwrite the switch. General Mills, for instance, recently signed a deal to help convert about 3,000 acres to organic production of alfalfa and other animal feeds. Ardent offers farmers a premium for crops grown on land while a farm transitions to organic.
“Some of our big flour customers were coming to us and asking what they could do,” said Shrene White, director of specialty grains at Ardent Mills, which is largely owned by Cargill and ConAgra. “They had concerns about not having enough organic flour to back up new products as they expand their presence in organics.”
The amount of farmland devoted to organic food is tiny. In the most recent government tally, in 2011, organic farmland, including that used for grazing, was less than 1 percent of cropland in the United States.
But the consumer demand is accelerating the conversion process. Sales of organic products grew 11 percent last year to $43.3 billion, or roughly four times the growth in sales of food products overall, according to the Organic Trade Association. Sales would have been even higher had supply, particularly in organic dairy and grains, kept up with demand.
“We’re seeing more land than ever before going through transition, both among new growers and existing organic operations looking to expand their production,” said Kelly Damewood, policy director at CCOF, a large organic-certification organization.
Whether this move toward more organic farming means prices will rise in grocery stores remains to be seen. An analysis last year by Consumer Reports found that, on average, the price of organic products was 47 percent higher than that of conventional goods — though the organization noted that its average was skewed by things like organic meats, which can be twice the price of conventional.
“Almost every consumer today says she wants organic,” said John Foraker, president of Annie’s, an organic business that General Mills acquired in 2014. “But the reason she’s not buying it is the price.”
The price difference is a reflection of higher costs of production: Converting land to organic farming — and keeping a farm organic — isn’t simply a matter of planting organic seeds.
Organic growers are prohibited from using synthetic fertilizers and pesticides and instead must rely on practices like crop rotation, cover crops and composted manures to enrich the soil and prevent insects and weeds. Federal organic regulations prefer the use of organic seeds, which are hard to come by, and absolutely prohibit the use of genetically engineered seeds, microbes or sewage sludge.
And forever after, organic growers must file a management plan with their certification agency and keep meticulous records to maintain certification once it has been won. “Managing our organic crops is a lot more complicated than what we do conventionally,” said Tom Nunes, vice president for operations at the Nunes in Salinas, Calif., the company behind the Foxy brand of produce.
Naraghi says labor costs for his organic orchard are about three times what he spends for the rest of his orchards. Weeds must be eliminated by hand rather than with a herbicide, and equipment and tools used in his conventional orchards must be thoroughly cleaned before they can be used for the organic plot.
The organic compost and natural pesticides he buys are more expensive than their conventional counterparts. And because he cannot use a fumigant to kill off the navel orangeworm, a pest that works its way into almonds after they are harvested, he ships the nuts to a freezing facility that normally flash-freezes freshly harvested broccoli, cauliflower and bell peppers to prevent spoilage.
“There aren’t too many freezing plants, and you have to be careful about moisture and odor,” he said. “I know of a guy whose customer returned the nuts he sent because they smelled like broccoli.”
And after all that, yields on organic crops may fall short. Nunes said, for instance, that yields for Foxy’s organic crops are about 20 percent lower than for its conventional ones — although Naraghi said trees on the portion of his property undergoing transition had yielded roughly the same as their conventional counterparts.
But Nunes said the biggest challenge to going organic was the three years growers must spend managing land in transition under organic regulations before products grown there can be sold as organic. “You’re spending more but you don’t get the higher prices,” he said.
Many of the biggest food companies are working to help offset some of those sorts of challenges. Ardent’s plan to help farmers, for instance, pays them more for crops grown on land undergoing the three-year transition and helps them choose rotational crops they can sell to supplement their income.
“One thing that has been very beneficial to us is that folks like Ardent Mills have added value to the crops we’re growing during transition,” said Reed Gibby, founder and chairman of the Gibby Group, an agribusiness based in Burley, Idaho, that put some 2,000 acres under organic management last year.
Gibby began growing alfalfa, wheat, corn, barley and grasses there, and Gibby said some of the farming benefits of going organic quickly became apparent. “Cover crops are great for weed control,” he said. “That’s a practice we can apply to growing conventional crops, too.”
Kashi, the cereal business, has developed a program called Certified Transitional to label products made from ingredients grown on land that is in transition. “We wanted to address the fact that a lot of consumers are demanding increased organic options but aren’t aware of the challenges farmers face in making the transition,” said David Denholm, chief executive of Kashi, a unit of the Kellogg Co.
Unlike other companies moving to secure organic supplies, Kashi is not locking growers into exclusive contracts in exchange for its support, which often comes in the form of a small premium paid for crops grown on land in transition.
“What’s mostly going on is vertical integration, where farmers are signing on to long-term supply contracts,” Denholm said. “But we want to play a role in democratizing organic food, making it available to more people, and we don’t think vertical integration of organic farming will do that.”
Denholm said that, given current trends, as much as 20 percent of cropland in America could be organic in the next decade or so, but land suitable for transition is getting harder to come by.
A couple of years ago, when Lundberg Family Farms, an organic rice and grains business, wanted to add to the 14,000 acres of organic land it had under cultivation, no more organic property was available — or at least at a price the company was willing to pay.
The family eventually bought 1,520 acres in Knights Landing, Calif., from a construction company that had hoped to excavate gravel there but was unable to get a permit. To enrich the soil and discourage pest proliferation, the Lundbergs are growing milo, sunflowers, safflower and beans, and are even trying to grow rice on dry land there.
The field will be ready to grow organic crops next year. In the meantime, though, the Lundbergs are eating the additional costs of planting and cultivating the field — and that has sometimes kept Tim Schultz, director of research and development, awake at night.
“The organic market right now is growing strongly,” Schultz said, “but how do I know today what people will want in four years, when the first organic harvest here will come in?”