News of widespread fraud should cause absolute panic within the industry.
But it doesn’t.
Last year’s Washington Post investigation exposed that 36 million pounds of fraudulent organic grains from abroad were allowed to come into the U.S., putting a major spotlight on this very serious issue.
Making matters worse, the USDA’s Office of Inspector General report in September said that the department’s Agricultural Marketing Service was unable to provide reasonable assurance that imports “were reviewed at U.S. ports of entry to verify that imported agricultural products labeled as organic were from certified organic foreign farms and businesses that produce and sell organic products.”
While these reports certainly caught some people’s attention at the time, they did not draw the type of response that one might expect when the integrity of an industry is called into question.
What they did alert us to was the fact that organic companies were selling food to consumers that had been produced in violation of USDA organic standards, and U.S. organic grain farmers were left holding the bag.
John Bobbe, the Executive Director of OFARM (Organic Farmers’ Agency for Relationship Marketing), whose Minnesota-based organization represents organic grain and livestock producers in 19 states, told me that the lost income to U.S. organic grain producers was approximately $400 million from 2015 to 2017.
While a handful of organic advocacy groups had been sounding the alarm about fraud for a few years, The Washington Post’s investigation forced politicians and an industry trade group to finally take action.
Reps. John Faso (R-NY) and Lujan Grisham (D-NM) introduced H.R. 3871, the Organic Farmers and Consumer Protect Act, which would provide between $15M to $24M on an annual basis to crack down on fraudulent organics. Additionally, the Organic Trade Association (OTA) formed an anti-fraud task force.
The reality, however, is that this bill has been assigned to the House Agricultural Committee but has not been discussed yet, and it is uncertain if and when it will be. It is too early to know whether the OTA’s task force has had an impact, and an email request to the OTA for a status update on this task force went unanswered.
In my conversation with John Bobbe, two other sobering themes emerged.
USDA IS NOT PROACTIVE AND IS BEHIND THE CURVE
* It is questionable whether more money will be enough, largely because the USDA is reactive rather than proactive.
For example, using its wide range of contacts throughout the world, OFARM has alerted the USDA numerous times when it gets information about ships carrying suspected fraudulent organic grains, and the NOP must investigate these claims.
As Miley McEvoy, the former National Organic Program (NOP) Deputy Administrator, told John Bobbe last year, “We don’t track ships.”
* The U.S. is one of few countries that doesn’t require traders and brokers to be certified.
* While the EU is using electronic certificates, the U.S. is not. Furthermore, in 2016, the EU put together a memorandum that outlines a protocol for accepting shipments from high-risk countries, such as Ukraine, Russia and Kazakhstan. This requires advance notification that a shipment is coming, specific documentation, and residue testing on banned substances. The U.S. has no such high-risk memorandum or protocol.
* As of now, there are only 6 auditors at the NOP trying to monitor a $50 billion dollar industry. The fine per incident is only $11,000, not exactly a deterrent for large companies.
SOME FOREIGN COUNTRIES REMAIN A REAL PROBLEM
* John Bobbe believes that international crime syndicates are now involved, especially since there is up to $4 million of profit in each ship. Russia, who is sanctioned against shipping grain to the U.S., could be the culprit behind much of the fraud, he said.
* According to the USDA’s Foreign Agricultural Service statistics, Turkey, one of the countries pointed out in The Washington Post article, has been the top exporter of organic corn to the U.S. for the last five years.
However, the USDA can’t send anyone into Turkey because of the political situation there, and John Bobbe suspects that there is no organic production for export from the country. In fact, it is an importer of conventional grain from the U.S.
According to Mercaris, imports account for 37% of organic corn and 74% of organic soybeans, a majority of which are going to large organic meat, dairy and egg farms to feed their animals.
If history is any precedent, the industry is unwilling to stand up to these powerful companies when controversy surrounds them.
Not only did the USDA completely look the other way in the case of Aurora Dairy violating organic rules, but there was hardly any outrage from the private sector. It was business as usual.
By not forcing the issue with fraudulent organic grains from abroad, U.S. organic farmers will continue to suffer. They will further abandon growing grains and start growing crops other than corn and soy, which only worsens the situation and makes the U.S. more reliant on imports.
And if consumers become much more aware of this problem, they will be furious for having paid a premium for fraudulent products and may no longer see the need to buy organic. The integrity of the seal could suffer irreparable harm.
The other deeply disturbing aspect of this situation is whether organic companies knew that they were buying fraudulent grains.
When asked about this, Bob Stuczynski, a grain farmer in Wisconsin who has been certified organic for 20 years, said, “Some of them had to know. They understand volume and scale.”
Have a great day!
Max Goldberg, Founder
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