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Organic Imports Questioned

DATE: 09/21/2017

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- USDA's Office of Inspector General released an audit this week of the National Organic Program that found the program was lacking control and oversight of imports coming into the country that were declared "organic."

The audit highlighted that at least some imported food and feed products did not have the paper trail to prove they were actually raised under organic standards. Adding to that, USDA's Agricultural Marketing Service had no controls in place at ports of entry to ensure importers are meeting U.S. organic standards. USDA had not worked with the U.S. Customs and Border Protection to ensure U.S. organic requirements are met and there was an adequate paper trail from importers.

USDA's Agricultural Marketing Service, which oversees the National Organic Program, largely concurred with the Inspector General's audit and stated in response that USDA was taking several actions to tighten controls of imported organic products.

Imports of organics have soared in recent years, but there have been growing doubts over whether those products are actually organic. This is especially true for the spike in imports of commodity crops, including organic feed. Imports of organic corn have risen from 3.1 million bushels in 2014 to an estimated 20 mb this year. Organic soybean imports hit 40 mb last year.

The incentives for importing commodities and dubbing them "organic" can be significant. Cash prices for domestic organic corn currently run from $8 to $9 a bushel while cash bids for organic soybeans are $16.75 to $17.50 a bushel, according to USDA's latest National Organic Grains and Feedstuffs report. Those compare to standard commodity prices under the DTN National Corn Index at $3.04 a bushel and the DTN National Soybean Index of $8.96 a bushel.

The OIG also found that USDA's process for determining equivalency standards overseas lacks transparency. There are documents to resolve differences between U.S. and foreign organic standards, but there is no methodology to disclose how that works to industry. Along with that, USDA "was unable to provide reasonable assurance" that the proper paperwork was reviewed at U.S. ports to verify that products called organic actually came from certified organic farms overseas and businesses that grow and sell organic products.

Further, some of the fumigation actions taken at port to deal with pests effectively converted commodities from being organic. USDA's Agricultural Marketing Service has not established controls at ports to track whether products fumigated with non-organic chemicals are then not sold as organic.

The USDA audit came after the Washington Post tracked a shipment of 650,000 bushels of soybeans earlier this year from the Ukraine and shipped through Turkey that ended up being labeled as "organic" once the shipment arrived in the U.S. The Post found several thousand bushels of corn and soybeans that were being declared as organic once they were shipped, even though there was no evidence they were grown under organic standards. USDA ended up pulling the organic certification of a Turkish company following its own investigation into the situation.

Part of the challenge facing the National Organic Program is that it has a $9.1 million funding level to oversee a U.S. organic industry that pulled in roughly $47 billion in sales and is growing at roughly $3.5 billion in sales annually.

The Organic Trade Association released a statement saying the OIG report supports the group's position that more trade oversight and monitoring are needed to protect the integrity of the program. The group stated that it is pursuing legislative changes in the next farm bill to give the National Organic Program more tools to deal with fraud, such as electronic tracking of shipments.

The entire audit had nine different recommendations for USDA to improve the organic program, which included the need to strengthen control over imports and verify documents at U.S. ports of entry. Along with that, USDA needs to ensure more transparency regarding how USDA and foreign countries determine final equivalency in organic standards. USDA also is now working with Customs and Border Protection on a memorandum of understanding to review National Organic Program certificates at ports. That memorandum of understanding will be in place sometime in the first half of 2018, USDA stated. Along with that, USDA also needs to ensure more controls are implemented at ports to ensure that products needing fumigation at ports are not sold as organic products. The Inspector General's office did acknowledge that USDA organic officials are improving the process to prevent such sales.

The audit was released just after Miles McEvoy, deputy administrator of USDA's National Organic Program, announced last week he would leave his position at the end of September. McEvoy joined the National Organic Program in 2009 after overseeing a similar program in Washington State.

The full audit can be viewed at https://www.usda.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(BAS/AG)

Futures

Previous Open High Low Last Change Close
CORN 350'2 349'6 356'2 349'4 353'4 3'2 353'4
CORN 363'0 362'2 368'6 362'2 366'0 3'0 366'0
CORN 371'2 370'4 377'0 370'4 374'4 3'2 374'4
SOYBEANS 970'6 970'0 987'0 969'0 984'2 13'4 984'2
SOYBEANS 981'0 980'0 997'0 979'4 994'4 13'4 994'4
SOYBEANS 990'2 989'0 1006'0 988'4 1003'4 13'2 1003'4
WHEAT 452'4 452'4 455'0 448'0 449'4 -3'0 449'4
WHEAT 472'0 472'0 474'0 468'0 469'4 -2'4 469'4
LIVE CATTLE 110.100 110.025 111.825 109.700 111.575 1.475 111.575
LIVE CATTLE 116.200 116.150 117.725 115.650 117.425 1.225 117.425
LEAN HOGS 57.325 56.375 56.650 55.675 55.700 -1.625 55.700
LEAN HOGS 57.800 57.025 57.500 56.500 56.625 -1.175 56.625
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