Organic Import Fraud

OMAHA (DTN) -- Demand for organic feed in the U.S. is a growing market but, in at least one case, a foreign exporter has been caught labeling a large shipment of soybeans as organic when they were not.

Stemming in part from a report by The Washington Post, the USDA National Organic Program has yanked the organic certification of a Turkish commodities exporter.

According to the USDA, Beyaz Agro falsely marketed at least 597,025 bushels (16,250 metric tons) of soybeans that were fraudulently sold in the U.S. as organic. Beyaz Agro, which is based in Turkey, along with Hakan Organics, based in Dubai, United Arab Emirates, and Agropex, based in Virginia, each had a hand in shipping and marketing the soybeans.

Recognizing the risks to the industry, the case has prompted the Organic Trade Association to launch a task force on global organic supply chain integrity. The group sees the case as a symptom of a larger problem.

"This situation has revealed a gap in the system, and so we are really looking at it from several different perspectives, different avenues to address the fact that this grain got through," said Gwen Wyard, OTA's vice president of regulatory and technical affairs.

One gap in the system is that third-party commodity brokers and importers of organic commodities are not required to be organically certified, Wyard said. OTA is looking to see if a rule change at USDA, or language in the farm bill, might require those brokers and importers to be certified.

"We see that as an area we need to look at as a way to shore up oversight," Wyard said.

The case involved soybeans delivered to the U.S. on Nov. 12, 2016. They had been grown in Ukraine before being sent to Turkey, then they were shipped to the U.S. However, the soybeans had been fumigated in Ukraine with aluminum phosphide, which is a prohibited substance under USDA organic rules, yet the soybeans were still marketed as organic.

Organic producers in the U.S. have long been concerned about the credibility of imported products. Organic feed imports have been on the rise in recent years as protein producers seek to tap the organic meat market. However, feeders have been attracted to the import market because the grains and oilseeds often undercut domestic producers.

There is a large incentive to fraudulently declare grain or oilseed as organic. The DTN National Soybean Index for cash delivery was $8.68 on Wednesday. However, the USDA National Organic Grain and Feedstuffs price report shows a price range for soybeans right now at $17 to $18.

Imports made up nearly 80% of the U.S. organic soybean market in 2016.

Organic imports from Turkey have soared in recent years, increasing from 14,000 metric tons of soybeans in 2014 to 165,000 metric tons last year. Organic corn exports out of Turkey spiked even higher, going from 15,000 metric tons in 2014 to 399,000 last year, according to a Washington Post report last month.

The Post tracked three shipments or "organic" soybeans in an article last month and highlighted how the soybeans and corn started coming out of Romania and Ukraine as regular soybeans but were deemed organic by the time they arrived in the U.S. The shipper was Hakan Organics out of Dubai.

Hakan had imported four shipments of soybeans from Ukraine to Turkey while Beyaz provided false information to an organic certification agent about another batch of soybeans from Russia, claiming those beans were organic as well. Based on false information, Beyaz was given certification to ship soybeans not identified as organic. Yet, by the time the soybeans were delivered to port in California, they were represented as organic. Investigators eventually discovered certification documents had been altered.

USDA did not detail how much was paid for the fraudulent soybeans.

USDA issued an order citing violations of selling soybeans treated with a prohibited substance and revoking the organic certification of Beyaz Agro. The company chose not to appeal USDA's decision.

OTA is establishing its farm-bill platform and protection of annual funding for the USDA National Organics Program. NOP has about $9 billion in annual funding but is now overseeing a $40-billion-plus industry. Wyard said OTA would like to see more funding for enforcement activities at NOP and technology upgraded to move transaction certificates electronically to improve international tracking and data collection.

"We need funding for NOP to make sure they can keep pace with the growth of the industry," Wyard said.

Washington Post article: http://dld.bz/…

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

Follow him on Twitter @ChrisClaytonDTN

(BAS/CZ)

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