MINNEAPOLIS — The organic market is growing. All farmers and marketers need pipelines to connect production and consumers.
That’s the idea behind Pipeline Foods LLC, a Minneapolis-based company that after only three years is approaching $300 million in gross revenue and counts itself among the top five companies handling organic and non-GMO grains and ingredients. The company is 100% focused on developing the non-GMO and organic food supply system. They have 11 facilities across the U.S., Canada and South America.
“The growth appears to be both recession-proof and pandemic-proof, so far,” said Neil Juhnke, senior vice president of physical operations.
One saving grace for organic is that 70% of the products are sold through retail store chains, and 30% through food service and restaurants.
“There’s actually been an uptick in organic demand through the early stages of the pandemic,” Juhnke said. There was no significant reduction during the recession of 2007 to 2009.
Pipeline Foods annually buys grains from about 1,100 farmers in Canada and another 1,800 in the United States. They draw from 18 states, but about 80% comes from the Dakotas, Minnesota and Iowa.
The majority of crops are corn, soybeans, yellow peas, wheat, barley, oats, dry beans and variety of pulses. There are specifications within those categories, including variety.
About 80% are long-established organic producers, but they’re always looking for new suppliers, and have several initiatives to help them get started.
The company is focused on North America and Pacific Rim countries, for non-GMO and organic, identity-preserved traceability. Juhnke said about 60% of Pipeline Foods’ products sold are for feed and 40% for food, but the value is the opposite — about 60% food and 40% feed.
The company was founded in 2017 by Juhnke and two investor/partners. Juhnke, a mechanical engineering graduate from North Dakota State University, for five years was chief operating officer for Northstar Agri Industries, a canola processor with a processing plant at Hallock, Minn., and before that an operations executive with American Crystal Sugar Co. in Moorhead, Minn.
Initially, Pipeline Foods acquired one of the founding partner’s business in merchandising organic grains from Canada. They bought two elevators in Saskatchewan, have established a facility in Bowbells, N.D., that accesses organic grain both from Canada and North Dakota. They store, blend and ship organic wheat and other small grains including durum and barley.
In 2019, Pipeline Foods purchased SunOpta’s corn and soybean business, including Minnesota locations at Hope, Blooming Prairie, Ellendale, and Moorhead, as well as Cresco, Iowa. Before that, Pipeline already had a footprint on the Canadian prairie provinces, North Dakota, southwest Iowa and Argentina. (SunOpta kept sunflower plants including North Dakota, and in Minnesota in Breckenridge and Crookston).
Separately, they also bought a facility from ADM in southwest Iowa, at Atlantic, Iowa. They converted half of that facility to organic corn, connecting to all seven Class I railroads in the U.S. and Canada.
The Hope, Minn., facility had been the centerpiece for the formation of previous owner SunOpta, of Ontario, Canada. It had been converted to only non-GMO and organic crops in 2015.
Hope is one of the largest of its type in the nation, including a food grade soybean cleaning process, with two grades of cleaning capabilities, as well as a food-grade corn processing facility. The rail-served shipping point is able to sell organic feed grains.
Raquel Hansen, a former SunOpta employee whose family farms in the area, is now a vice president of food ingredients, based at Hope.
Hansen said farmers transitioning into organic can have a primary focus in corn and soybeans or wheat, but ultimately they’ll be growing several types of crops for rotation purposes.
“We’re seeing both young and old transitioning,” she said, with reasons ranging from profitability or human health, or sustainability. They’re seeing smaller acreage farms transfer, to produce more revenue per acre, to huge farm operations transitioning a portion of their farmland.
To be successful, new organic farmers “need to have a stable balance sheet to start with,” Hansen said, adding that operations will have to deal with decreased yield and other growing pains. “The first couple of years can be kind of rough.”
Conventional soybeans may be $9 to $11 per bushel and organic soybeans can be $18 to $24 per bushel, depending on whether it’s feed grade or food grade. Prices for organic, non-irrigated crops typically are two to three times conventional prices.
“We’ve noticed that over the years if prices drop below ‘2X’ and below, there generally isn’t enough incentive for organic farmers to overcome some of the other challenges, so acreage will stagnate and drop,” Juhnke said. “If the valuation gets much above ‘3X’ it has a dampening effect on demand growth.”
Pipeline Foods is active in attempting to address concerns about organic integrity, especially as counterfeit imported feedstuffs have been discovered.
The company works with three organic certifying bodies — one in Canada and two in the U.S. The company also tests for pesticide residue and GMO tests, verifying that organic grain from a particular country matches that country’s production levels. Juhnke said the company hopes penalties for U.S. farm organic fraud are significant enough to “help honest people stay that way.”
The company strongly supports the Organic Trade Association and the National Organic Program, which is part of the U.S. Department of Agriculture. Company officials were on a task force in writing organic updates in the 2018 federal farm bill. The company was the first in the country to be certified under the OTA’s new Organic Fraud Prevention Solutions program.
To help new organic producers, Pipeline Foods has formed a division called Farm Profit Program, which find resources for farmers considering switching from conventional farming to non-GMO and organic. The company’s website features links to podcasts on organic production.
“We can introduce them to insurance companies that provide insurance for organic crops, and lenders with loan products to bridge the three-year transition gap for going to organic,” Juhnke said. “We step in as the marketing partner. If a farmer requires long-term agreements for their organic crops, we want to and do provide for all of the rotation crops in the organic crop plan.”
Organic crops require a minimum of three years of rotation.
For Midwest farmers, they need to grow something other than corn and soybeans, Juhnke said. That might be winter wheat, yellow peas or oats.
“Thankfully, there are non-GMO markets where you can benefit for some premium pricing during those three years,” he said. Some retail companies even pay a farmer a premium during the transition.
Pipeline Foods serves some of the largest consumer products companies in the world that sell organic, sustainable, or crops grown from “regenerative” methods, which involve organic matter and carbon sequestration. Their Corporate Impact Program matches growers who do certain practices to customers who will pay a premium for “regeneratively grown crops.”
“Everything we do is all about the supply chain and transparency, all the way back to the farmer,” Juhnke said. Pipeline focuses 100% on what advocates label as a “clean label” market — organic, regenerative ag, and other non-GMO markets — promoted for safety and security to consumers, many who are younger who distrust government regulators or distrust conventional food systems or have concerns about health of soil or the economic/physical health of farmers.
“When we load a rail car full of organic wheat in one of our facilities, let’s say in Bowbells, N.D., we can tell the customer exactly which farms that wheat came from. It may be five farms, it may be 50 farms, but we trace it all the way through our system,” he said. The company verifies the crop has been produced organically by certified growers, whether they’re going to a tofu manufacturer in Japan or a chicken farmer in California raising organic poultry.
Pipeline Foods also provides “efficiency and scalability” to the markets. Canadian farmers had been trucking organic wheat to Colorado to sell to millers. The company’s elevators can now ship the grain via rail, reducing cost and carbon dioxide footprints.