Nick Erker: Hey, there. Welcome to Get the Scoop with Smirks Podcast, where bulk ingredient conversation happens. We’re sharing our knowledge and expertise as bulk ingredient importers, tapping into the latest trends we are seeing and commenting on what that means for natural food businesses as they approach ingredient purchasing, product development, and marketing. You’ll hear the latest market reports, ingredient specifications, and product applications from Smirk’s in-house experts, as well as origin stories from our growers and processors around the world. Listen in for the scoop on what’s happening with bulk ingredients.
Nick Erker: Welcome to Get the Scoop with Smirks Podcast. I’m Nick Erker, President of Smirks, and here with me today is our Smirks Executive Vice President, business partner, and friend, Donny Edson. Today we’re going to talk about the history of Smirks and how we got here and give you a highlight on a product today which will be sunflowers. And then we’re going to talk about some of our other market updates. So, thank you for being with us here today. How you doing this morning, Donny?
Donny Edson: Good, Nick. It’s nice to be here. I still wish I had my coffee to get started, though. Could you share about your family and how you guys got started in the food ingredient business?
Nick Erker: Yeah, you know, it’s a fun story. My father had a business here in Fort Morgan, Colorado, where you and I grew up together. And when we went off to college, graduated, said was never going to come back to work for my dad, was never going to move back home. And little do you know, after college I needed a job and a place to live. So, I ended up living with my father and started working with him. And at the time he had Erker Grain Company. And Erker Grain Company was a processor of confectionery sunflower seeds. So, we would sell the farmers the planting seeds, contract their production, buy it back, clean it, size it, and ship the products around the world. So, with that, actually, as my father was visiting one of his sunflower customers in Malaysia, he found a product that they were making that really caught his eye and thought it’d be neat to do that back here in Colorado. So, it was a chocolate candy coated sunflower kernel, just like an M&M, and nobody in the United States was making anything like that at the time. So, my dad came back to the United States, reached out to a customer or a vendor actually in Illinois, partnered with them, they started making the chocolate candy coated sunflower kernels and what became Smirks was born. It was actually in the beginning called Seedsations. That’s quite a mouthful, right? So, Seedsations was what it started out to be. And we were trying to do retail, so we had retail bags of the chocolate candy coated sunflower kernels. We also did flavored pistachios. And then we started doing some of our own roasting right here in Fort Morgan. So, we were doing cashews sunflowers and some pumpkin seeds, and we were packaging off a bunch of those things and doing retail and found that while we were doing the retail stuff, we had a lot of bulk items. So, we started looking for some bulk customers. And when I was in college, I actually started working with my father on the bulk side of things and we picked up a regional grocery chain that we started supplying the bulk ingredients to and fast forward a few years and then you and I reconnected and things just kind of took off from there.
Donny Edson: Yeah, I have some good memories of eating a lot of those chocolate covered sunflower seeds. In the beginning, it was a really cool item and like an M&M and we had endless supply of them knowing Nick’s dad. So, it was a great deal. And I actually spent some summers going around to the different gas stations trying to sell them and even going to the Greeley Stampede, which is a gigantic rodeo here in Colorado. And we set up a booth and we were selling chocolate covered sunflowers in 90-degree heat, which was never a great idea. But it was a lot of fun when you’re in college to be out there doing that. So, I think Nick and I even spent a summer working a potato chip route in Nebraska, delivering potato chips for a company, all with the purpose of trying to sell the packaged nuts and seeds into the gas stations while we were delivering the potato chips. So, we’ve come a long way from back in the day when we were just traveling around all-over eastern Colorado and western Nebraska trying to sell everything for a buck. Where did Smirks come from, Nick?
Nick Erker: As I mentioned, it started out as Seedsations, right? So, the company was Seedsations and kind of found that that name was hard to say. It was really long; it wasn’t really catchy. So, my father at the time enlisted a marketing company’s, help out of Fort Collins, Colorado here. And the marketing company, we tasked them with helping us come up with a name. So, they asked us if anybody had any nicknames. They kind of talked about the feel that we wanted the brand to have, like what we were shooting for, we were trying to accomplish. And my father’s nickname all the way back from high school is Smirk. So, they incorporated my father’s nickname into what became the name of our company today. Any of you guys that know my dad or have had the opportunity to meet my dad, he’s kind of a fun-loving guy and always screwing around know, Smirks fits in really well.
Donny Edson: It’s funny name, how it came to be and what’s really cool is now what it’s become. I don’t think we could ever change our name because everybody knows what Smirks is, but they don’t really know what Smirks is. I guess too so they know what we do, but they don’t know where the name came.
Nick Erker: A name never has meaning until you give it meaning. So, we’ve definitely taken that task on and given Smirks a meaning, and it’s way more than we ever started with. From a packaged consumer good product to now the multitude of bulk ingredients that we bring in from around the globe. So, Donny, I think you and I go back almost to diapers and definitely Catechism Catholic Church.
Donny Edson: Early days.
Nick Erker: Yeah, we’ve known each other for a long time, had a lot of fun, done a lot of successful things, got in some trouble together. I think that’s kind of the spirit that we brought into Smirks when needed someone to come and help me. You were ready to move back to Morgan and get things started there, but going back to how we met in school at Catechism and then through high school, Donny was our center for the high school football team. I was actually his backup. So, we actually played football together and were involved in FFA together. Donny had a chicken business. Your chicken business was something that kept us busy quite a while.
Donny Edson: Yeah, I started raising chickens. We started raising them for our family, and we’d raise like 50 chickens and then we’d eat them throughout the year. And one summer, I decided to raise 150 chickens, and I sold 100 of them and made some money. So, I invested all the money back into it, and the next year I raised several hundred. And every year I’d raised more. Until my senior year of high school, I raised a couple of thousand chickens. So, I was always persuading my friends to come hang out. And by hang out, I mean help me with my chicken business. We had some incidents. There was the great rainstorm, I can’t remember what year it was, probably 1998, where it rained like three inches and my chickens were all floating away at one in the morning, and we had to go sandbag the chicken house. Nick and I actually I traded two turkeys that I raised for a pop-up camper that Nick and I took a blowtorch to and created a chicken hauling trailer that we’d use to haul the chickens around inside of behind my GMC, Jimmy. So that was another adventure we did. You know, going through high school, Nick and I constantly were always coming up with ideas and business plans and things. Nick had a DJ business, so he was always doing that. I had my chicken business and lawnmowing business and we were always trying to find a way to make a dollar.
Nick Erker: Know one of the things that has always impressed me about you, Donny, is know, not only trying to make a dollar for ourselves. But the fundraising, know, when we were in high school, that’s one of the things I remember most about us working together was working together on the fundraising for the Cajun boils. All the people that we’d raised money for our competitor in football. There that kid that broke his neck, and we raised a bunch of money for him during that time and all the different causes that we’ve done together. That’s one of my fondest memories, I guess, of high school as I was working together on the Cajun boils. And even since then, you’ve still yeah.
Donny Edson: That was just something that evolved. So, my brother worked at a factory here in town and they would do these Cajun boils. They had a big boiler, so they’d put a pot of water on it. And throughout the shift they throw in some potatoes and some sweet corn and some sausage and some crab legs and some shrimp. And then at the end of their shift, they would dump all the food out on table and have a dinner with it. So, we started doing that as a family on Easter, and it was kind of a tradition we did. So, then we started doing it for our friends, for parties or for birthdays or whatever it was. And as we were playing football growing up, then we started to do it as a team dinner once a week where my mom would cook food and feed 40 of us this Cajun boil. She even collected all of our old T shirts that you could just wipe your dirty hands on your shirt and keep eating, keep going. So, I think our junior year of high school, Nick and I, our high school had gone through a remodel project and there was a lot of asbestos in it. They thought they’d gotten all the asbestos out, but they weren’t quite sure. So, we were going to school there and they had asbestos monitors set up, and one day it caught a lot of asbestos and they shut the school down in the middle of the school year. So, we went several weeks without going to school. But Nick and I were class officers, and we were in charge of putting on the prom, and we had to find a place to rent to do it, and we didn’t have any money, so we decided to have a Cajun boil to raise money. And that was the beginning of the Cajun boils. So, we did them we still do stuff today, but we started doing them in high school to raise money for different causes. And it started with our prom, and then it evolved into when that football player got hurt. And our team, instead of just sending them a card, we decided to raise some money and we went and delivered the money to them, even though we’d never met them before. And that evolved into we started a scholarship and gave out scholarships to our classmates. And it grew and grew and grew. I think I was probably a junior in college when we broke the $100,000 mark that we’d raised off doing Cajun boils. And since then, it’s gotten into these really big fundraisers that we still do today. We did one not too long ago that we raised $90,000 for a family here in Fort Morgan. So that’s still something that I hold near and dear to my heart, is giving back to the community and trying to do fundraisers to help people out when they’re in time of need. And it always is around food. However, we can cook a lot of food and get a lot of people there and then take all their money in an auction. That’s what we do every time.
Nick Erker: And I think the thing with food is really what kind of drew me into Smirks. When I was working with my father at Erker Grain Company, I really didn’t like selling sunflower seeds. The sunflower seeds were really not my favorite thing to do, but the thing I loved was the sunflower kernels. And I actually got my father to open up the sunflower kernel line and continue expanding upon that. And the food side where the sunflower kernels would go directly into human consumption is really what got me more interested in Smirks and kind of brought that whole thing back together. The enjoyment that people get from food. And I think that the foods that we sell today bring a lot of enjoyment to people around the US and other places. From the coconut sugar and different things that we sell. It’s been wonderful to see how those things have evolved over the years.
Donny Edson: Yeah, I would agree. And with my background, after high school, I went and got a culinary arts degree and a business degree and moved to California. Started running restaurants out there. It’s actually where I was when Nick and I talked. The only reason this happened to be is I had to go to Vegas for my dad’s 60th birthday. I had to go to Vegas. We went to Vegas for my dad’s 60th birthday. And I kind of thought to myself, you know, if I’m going to do what Donny does in Vegas, I’m going to probably go out a day early and do it, so I’m not doing it with my parents. And so, I went out and had a little bit of fun and called Nick the next day to tell him the story about the fun that I got into the night before. And when I was talking to Nick, I was just deciding if I wanted to move back to Colorado from California to either open a restaurant or start a catering business. And I was telling Nick that it just so happened to be the day that Nick decided he was going to take over Smirks, but he needed somebody to run it. And he said, hey, why don’t you come back and run Smirks? And I remember specifically asking what you do? And the gist of what I understood was you try to sell stuff for more than you pay for it. And then you make a business out of it. And we still kind of use that as our principle now, although sometimes we sell stuff for less than we pay for it, but hopefully more often we sell it for more than we pay for it. And that’s what led me back to Fort Morgan to work with Nick at Smirks. That was in March of 2010 that I started here. Nick and I both grew up in Fort Morgan. We had plans to move the business to Denver, and we kind of just evolved and kept it in Fort Morgan. And then we started families here. And we’ve never left Fort Morgan, and we never will leave Fort Morgan now. It’s part of us. So that’s why the business is still here in Fort Morgan.
Nick Erker: Here in you know, it’s interesting how we repurpose things in Fort Morgan. We were looking for a place. Our first office, Donny, was in a server closet. So, at Erker Grain Company, the first office Donny ever had was just a server closet with the four servers in there, almost no air conditioning and a Rolodex, and he took that and ran with it. And we grew from there into a house. We had a house for an office, which I actually am living in that house right now. And then kind of moved out on our own for a little bit, moved in with one of my father’s companies, and then 2017 bought the office where we’re at today, which was an old liquor store. And we remodeled the old liquor store here. And then I’ve kind of outgrown that. And now we’re working on Smirks 5.0, which is the former country club located at the Quail Dunes Golf Course here in Fort Morgan. So, it’s going to be kind of exciting. I don’t know of another company that actually has an office on a golf course. You literally walk out, and the 10th tee box is right outside our office. That’s going to be a lot of fun. So now we’re never going to want to leave.
Donny Edson: Yeah. And I always thought it’d be fun if I won lotto. I was going to buy that and turn it into an office and work with all my friends. So, I still haven’t won lotto, but here I am. We bought it, and we’re making it into an office, and we’re going to work with all of our friends inside of there. The good thing about that is my office is about 40ft from the first tee and 40ft from the driving range. It’s also a two-minute golf car ride from my house to the office. So, the commute is going to be very nice, very nice. This is right down the 18th hole when I’m there.
Nick Erker: And we’re going to be going ecofriendly with that new Tesla roof generating power for us on the building. You’re going to be able to plug in your golf cart and recharge it with the sun right there at the office and going green one step at a time.
Donny Edson: Yeah, I’m really excited to move into the new office as well. So, some of my favorite memories though were in that server closet. I would say it was often 100 degrees inside of there and I had one little, tiny window that always seemed to face the sun, so it was always hot inside of there. But it was really interesting coming to work at Smirks as kind of employee number one for what we’ve become today. But coming from a restaurant where we had hundreds of seats, and we were feeding sometimes a thousand people a night to this industry was a lot different because there was a lot of downtime and I was so used to being busy. So I remember hoping the mail would show up and hopefully there’d be a check in there so I could leave the office and go to the bank or something, part of the day. Our technology wasn’t really that great. We had QuickBooks and you had to make sure everything was perfect inside of QuickBooks because when you sent an order it took five minutes to upload it and send it. So, if you made a mistake then you had to go back and fix it again. So had a lot of downtime to just call people and get to know them in the industry. And a lot of the people we work with today are people that I just found on the internet or met somewhere, and I just called and BS with them for a while and started to forge these relationships that we have that we still work with a lot of these companies today. That first year was very slow and lonely.
Nick Erker: Well, that’s one of the things I think makes us different and one of the things I really enjoy about Smirks is how you and I have built this off our friendship and we continue to build our business off of friendships, whether it be with vendors or customers. I don’t think there’s a single person where we have a transactional relationship. We really pride ourselves on getting to know our customers and getting to know our vendors and becoming friends with them. And one of the things that I’ve mentioned to a lot of people is that for us, your success, our vendors or our customers success is of the utmost importance. We don’t manufacture anything; we don’t grow anything. We need to make sure that our vendors have the information that they need so they can make educated decisions on production side of things. And we need to make sure that our customers have all the information they need to know when to purchase things or what new ingredients to look at. So just as we’ve built this business off our friendship, I think we continue to do that with our vendors and customers on a daily basis.
Donny Edson: Yeah, I agree too. And it’s interesting how we ended up in the portfolio of ingredients that we’re in. A lot of it does stem back to the early days for the business that we had when we started out. So, my first day, Nick said, here’s a rolodex, here’s the important customers and good luck. So, I just started calling those people. And one of our main customers was actually in the United Kingdom, and we were shipping a millet that was processed in Sterling, and we were exporting the millet to them. And as I got to talk to them and get to know them more, they started to ask me for other ingredients from the United States. And that’s what led us into gluten free oats. So, one time we were shipping almost a load a week of gluten free oats into the United Kingdom, and it was being private labeled for the gluten free sector. Inside the retail chains know, there was five main retailers, and we supplied them all with the gluten free oats through the brand that we sold to. And that was a long time before gluten free had picked up in America. They were years ahead of it in the UK when we did that. And so, when the United States and the US north American market really started to ask for gluten free oats, we were really well established in it. And that’s kind of what opened the door to a lot of the ingredients that we’re in now is whether it was a granola brand or a cereal brand or whatever it was, they all use similar ingredient decks. So, we’d start by selling them oats, and then we’d start finding other ingredients that we could sell to them. And a lot of them use the same ingredients. And even today when you look at some of our core strengths when it comes to sunflower seeds, naturally, because we grew up on but with coconut, with other seeds like pumpkin seeds and chia seeds, a lot of that, evolved from what started to complement the gluten free oats we were selling to everybody in the United States, and it really grew from there. So, it’s interesting when you go back and you see where it all started from and how it’s evolved into what it is.
Nick Erker: Yes so, Donny, we were talking about partnering with our vendors and customers on different things. One of the other things that I think gives us a really unique advantage in this industry is coming from the manufacturing side. Before we started importing and buying from manufacturers and selling to our customers and other manufacturers through Erker Grain Company, we had a lot of experience with quality. We had to manufacture the stuff, we had specifications that we had to adhere to, and always constantly monitoring those things as it was going through production, tracking the lot codes, seeing the products all the way through. And as we got into Smirks, I think that one of the great things that we’ve done as a team is really invested in our quality department and given our quality department the autonomy to make decisions and review things and have items and documents on hand at a moment’s notice. Our understanding from the production side of things with the constraints and challenges that manufacturers deal with on the production side, I think, has really given us an advantage over some of our competitors and how we approach things with our vendors.
Donny Edson: Yeah, I completely agree on that. And it’s been interesting that we’ve got to really live through probably one of the biggest transformations of food safety that’s happened in the food world. When I started, people didn’t even ask for a COA in the first time I think I was maybe six months on the job when somebody asked me for a COA. And I said, what’s that? I said, oh, it’s a certificate of analysis. And I said, oh, what are they analyzing? They said, like salmonella. And I was like, well, salmonella, that sounds bad. They said, yeah, that’s why we need the COA. So that’s truly where it started at for me. And that was in 2010 to when FISMA happened and all the things that came along with that. I think being the generation that we are, we understood the technology side of it. We understood the food safety side of it. And I think most importantly, what the decisions we made as a company was the transparency side of it, where we’re going to be 100% upfront with where our ingredients come from and why. When you look at ingredients, there can be 100 different suppliers for an ingredient, and certainly the finished product might look alike when it’s all done, but it’s how it’s made and the safety that goes along with it. And who’s better? We got to spend a lot of time from 2010 to 2019 traveling the world and looking at factories and realizing that there’s really, really good factories. There are okay factories, and there’s factories that probably shouldn’t buy from. Generally speaking, the ones that you shouldn’t buy from are probably the ones that are the least expensive and the ones that are really the best might charge a premium. But it really makes it so you can sleep at night because you know you’re buying a good product that you can stand behind and that the factory will stand behind it as well. So now when you look at what our quality team goes through to analyze these companies, we just did a presentation for our whole company on, hey, here’s the process. If we choose a new ingredient, here’s every document we have to get, and here’s what we have to analyze them for. Here’s why we want to make sure there’s an X ray when you’re looking at a sunflower seed. Here’s why we want to make sure there’s a kill step when you’re talking about coconut. Here’s why we want to make sure there’s an allergen control when you’re buying chia from South America, because they might be processing sesame. And sesame is an allergen as well in the United States. They may not tell you that unless you ask that, or you go through the documents, and you actually break it all down. So, I think that that’s what our Quality team does a really good job of, as well as our team that will travel to see these factories. If we want to buy from somebody and we’re not sure, we’ll just jump on a plane and we’ll go see them. It’s a lot easier to do that in the beginning than it is after the fact. So, certainly it’s not an easy industry when it comes to making sure stuff’s perfect, because it’s still an agricultural commodity that’s grown in the ground, stored in a grain bin, harvested with a harvester, moved with a tractor and a truck. It’s the same process no matter what you do. But whoever that last person is to touch it, you really want to make sure they have everything in place to be a really good company. And then our quality department does a really good job of making sure that everything’s tested right and is consistent so that we can give documentation and the history and the story of the product to our customers, so they feel safe with it as well.
Nick Erker: Yeah, it’s definitely come a long way. I remember when we started working together, as long as you had something, you could sell it. We had mango one time, I remember that was like three years old, and somebody’s like, you got mango.
Donny Edson: Sure. Yeah.
Nick Erker: Nobody cared what the expiration date was. It was just like, okay. And now a lot of our customers say that they need 60, 70% of the shelf life remaining when they receive the product. So that transformation has been huge, as you’d talked about.
Donny Edson: Yeah. But again, I think being transparent with the customers and making these relationships and explaining it to them goes a long way. You’re being much more proactive than reactive in the beginning when you’re setting this up for people on things. So, when somebody does need 70% of the shelf life, it is possible as long as you put it together the right way from the beginning. So, I think that’s one of the important things that we do now. In addition to that Nick, there’s a lot of things you have to watch that happen that are out of everybody’s control. So, I think the importance of being a problem solver or having a plan should a problem come up with things that you might never think of, like a typhoon in the Philippines. And if you’re only buying your coconut from the Luzon region in the Philippines, which has been hit with typhoons every three or four years that have been catastrophic, then what do you do once you run out of coconut and that factory shut down because of the typhoon, or all the coconuts are ruined because they blew off of the trees or whatever it is. So, I think one of the things we’ve done over the years is try to set up different geographical locations to buy ingredients from when possible. Certainly, there’s some items that only come from some regions but when you look at something like coconut, we started with the Philippines because that was where everybody wanted to buy coconut from. That was the main player. And it wasn’t until, I don’t know if it was 2014 or 2015 when that really nasty typhoon hit. That was the first time we onboarded Sri Lanka. And Nick and I flew to Sri Lanka and started looking at factories. And once we went to Sri Lanka and started looking at factories, we had a million questions too about how they were doing things there compared to the ones we’d been to in the Philippines where it’s very, very established. So that’s when you find the good companies in Sri Lanka. And after Sri Lanka then we went to Vietnam. We realized how good the factories were, a couple of them in Vietnam. Then we went to Indonesia. So now we have geographically we have options all across the globe which might not only fall into Mother Nature, but when you’re coming off COVID that helped us a lot where maybe the Philippines were on a complete lockdown and Sri Lanka was on a complete lockdown, but Vietnam wasn’t, and Indonesia wasn’t. Or after COVID as we’re going through right now, maybe when ocean freight rates are ten times what they are in one country compared to another country, you can buy from that other country and pass the savings on to your customers as well because you have the options and they’re approved for everybody, and you’ve done the work ahead of time. So, I think that’s one of the things really to think about is what’s your backup plan? What are you going to do if a problem happens? What’s going to happen with that? And now we’ve seen the industry shift too, where it used to be we only want Philippines to when we went through COVID they said look, if you can get it from Indonesia, we’ll set up Indonesia. If you can set up Vietnam, we’ll set up Vietnam. We just don’t want to run out of product. And that was I think, an important thing when we went through that madness of the last three years that you did have options for different places to get things and the customers didn’t run out of product.
Sunflower Product Feature
Nick Erker: All right Donny, so we’ve talked about a lot of different things so far today. And one of the things that we’d promised our viewers and listeners is that we were going to talk about sunflower kernels, give them a product highlight today. So, with that, why don’t you tell us a little bit more about sunflower kernels.
Donny Edson: As with every Get the Scoop with Smirk’s Episode, we’ll do a product feature where we deep dive into a specific product or product category. In today’s episode, we thought it fitting to talk about Sunflower, the business that Smirks started with. Even today, our sunflower business continues to be very strong. Sunflower is a product that’s widely available both as an organic and conventional ingredient, and there are a lot of different ways to use sunflower, and there’s a lot of different kinds of sunflowers, too. So, let’s start talking about where they’re growing, where they come from, when they plant them, everything like that.
When you look at the Northern hemisphere, whether it be Bulgaria, Ukraine, Russia, the United States, Canada, China, they’re all primarily planted in the spring and harvested in the fall. The further south or closer the equator you are in the Northern hemisphere, the sooner the harvest will happen. So one of the things that Nick and his family did really well was partner with different factories in the United States and in Canada so that they’d have harvest times that started as early as late July and went all the way through November when they got up into Canada, which gave them some competitive advantages when marketing products, especially if there was a short crop and everybody was waiting for the stuff to get harvested. Then they had some of the first stuff they could ship to market. In the United States, sunflowers got really popular when they were roasted and salted inside the shell. I think everybody’s familiar with David’s or Biggs or Spitz, different kinds like that. The sunflowers are grown inside of a shell. It’s called a confection sunflower or a striped sunflower. So, it’s a gray sunflower with a white stripe down the middle of the shell, and inside of those are the kernels. The shell itself works really well to carry flavorings on it, whether it be salt or dill pickle or jalapeno or all the crazy flavors you’ve seen out there. And even today, still I see brands popping up with new flavors of sunflowers. One of the big trends that’s really happened since I’ve come on in 2010 is how big of a sunflower seed you can get inside of the shell. When you look at a company like Biggs, it’s because they use the biggest size of sunflower that there is. When you look at some of the other companies, they use a smaller size of sunflower, but maybe the kernel is bigger inside of it or there’s more meat inside of it. There are so many variations for how you can do it with what we refer to as an in-shell sunflower seed.
Smirks focuses mostly on sunflower kernels, though. The way sunflower kernels work is they take the shell off of the sunflower. So, Nick, you can kind of jump in, and explain that process a little bit, because you’ve lived it before about how they get the kernel outside of the sunflower.
Nick Erker: So as Donny was mentioning, on striped sunflowers, they come in all different sizes. So, when you harvest a sunflower and picture the flower. The seeds that are on the outside of the flower are the bigger seeds, and the closer you get to the middle, the seeds get smaller. So striped sunflowers do get hauled. They call it hauled when you remove the shell for sunflower kernels. But the majority of sunflower kernels come from oil sunflower seeds, or what is called bakery. And those are just small black seeds. When you’re hauling a sunflower, you bring the sunflower in, you’re going to clean it, get the sticks and other things out of the products. And you want to get a uniform size. So run it through a sizer or a cleaner that has some screen in there where the big seeds will stay on top of the screen. The smaller seeds will fall through the screen. So, once you have them cleaned and sized, then you take them to what’s called a huller, and it’s basically a big fan blade. And the sunflower seeds in their shell fall into this fan blade, and the fan blade hits them, throws them against the outside of the machine, and there’s a cone below the huller that’s called a cyclone. And with air and gravity, the kernels fall to the bottom through the cone, and the shells get sucked out by air at the top. So, it’s really interesting how you actually get to the sunflower kernel, and you can make them from striped or oils. And the majority of them of sunflower kernels do come from oil sunflower seeds.
Donny Edson: I think, too, you bring up a good point. Sunflower oil, that is really the driving force for sunflowers. The majority of the sunflowers produced in the world are what we call oil sunflowers or black oil sunflowers. And they’re little, tiny black sunflowers. The shells are black, but the shells not as thick. Right, Nick? The kernels are a little bit bigger inside of there. It’s not as thick as a confection sunflower with the shells.
Nick Erker: Yeah, that’s right. With those small black oils. As you were talking about the oil market, the crude oil actually dictates a lot of the sunflower kernel prices, because if you’re going to take that material instead of crushing it for oil, and you’re going to remove the shell and use it for a kernel, you have to pay a competitive price to get that. So, the oil price will actually dictate sunflower kernel prices. But in regard to the processing yeah, the shell on the black oils is thinner than the shell on the striped sunflowers.
Donny Edson: Yeah. And interesting thing about the oil and how it follows the crude oil market, I mean, one thing we should definitely touch base on is what happened with Russian invasion of Ukraine last year. Ukraine being the biggest grower of sunflowers in the world, and Russia being the second biggest grower of sunflowers in the world. Is that correct, Nick?
Nick Erker: Of oils, yeah, of oil sunflowers.
Donny Edson: So, when that invasion happened last year, the markets, they doubled overnight for everything from sunflower oil to the sunflower kernels as well because there was so much uncertainty in what was going to happen with everything. In the end, what happened was Ukraine actually had one of their biggest crops in history last year. So, they still had the material to get rid of, but it was just a matter of getting it out of the country and into the processing facilities. So, we saw the market double and then we saw it fall to levels below where it was before the invasion because there was so much sunflower. And at that time, they were going into another harvest. So, it’s very interesting.
Nick Erker: Well, at the beginning of the Ukraine invasion, it was really interesting too, because we don’t buy a lot of sunflower kernels from Ukraine. Actually, I don’t think we buy any sunflower kernels from Ukraine, but Bulgaria is a big supplier to us, and our Bulgarian manufacturers stopped shipping because they were worried about the supply during that time. That was a very interesting time for us.
Donny Edson: Yeah. And another thing is the sunflower oil is a widely consumed oil everywhere in the world, primarily in that region, because it’s so accessible to everything, where they don’t grow as many soybeans or corn to make vegetable oil as they do with sunflower. So sunflower oil is the main thing that they use to cook with over there. So, it was an interesting thing. We know. I think another important thing when you think about why people, maybe in Europe and the United States, use sunflower oil so much, is sunflowers are non-GMO. There is not a GMO variant of sunflowers. There are hybrid sunflowers, and that’s where they will plant a sunflower next to another sunflower so they can cross-pollinate and create a new variety, but they’re not genetically modified at all. One of the innovations we’ve seen in the last decade, maybe a little bit more than a decade, is where they took the black oil sunflower, which has a lot of kernels and gets a good kernel yield. They took the confection sunflowers, which has a big shell, so you get a bigger kernel inside of it. And they made a hybrid out of those that’s referred to as a con oil. And the benefit of the con oil is the yields are much like a black oil sunflower. So, you get more product off an acre when you process it, but the kernels are bigger, like it would be on a confection sunflower. So that’s some of the innovation we’ve seen with sunflowers over the years. I know Nick’s been a member of the National Sunflower Association for a long time in the United States here, and they’re one of the driving forces behind that.
Nick Erker: And not only that, a lot of the research is done by the third-party seed companies, but a lot of it comes out of the meetings that the National Sunflower Association has and is driven by our customer demands. One of the other things besides the con oil that I think was a big development that I saw towards the beginning of my career in sunflowers was the high oleic sunflower kernel. So, in the oils, you have different versions of oil, different makeups of the oil, and you have low oleic, middle oleic, and high oleic oils. And that has to do with the shelf stability of the products. We’ve seen the high oleic sunflower kernel has a great application when you’re roasting it because of the stability of the oil, It has a better shelf life and will stay fresh for a longer period of time than if you were using a low oleic or just a standard oil sunflower.
Donny Edson: Yeah, that’s a good point. We have customers that prefer the high oleic kernels if they’re doing a baking application like you’re mentioning to keep the product a little bit more stable. Also, I know the high oleic kernels work really well inside sunflower butter as well too, to keep them from going rancid.
Well, let’s just do a quick recap what we’ve talked about with the sunflowers so far, Nick. We’ve talked about the in-shell sunflowers, with the confection sunflowers that are used for the snacking purposes, where you can roast them and salt them, put them in a bag and enjoy them at a baseball game. We’ve talked about the black oil sunflowers that are used to make sunflower oil. We’ve talked about the con oils which are used to make kernels. We’ve talked about the high oleic sunflowers.
Now let’s really talk about what Smirks focuses on and that’s sunflower kernels. That’s kind of the main thing that we work with is sunflower kernels when it comes to the sunflower sector. And when we get into the sunflower kernels, there’s different kinds. The two main varieties you’re going to hear though are bakery kernels and confectionery grade, with bakery kernels being a smaller kernel. They’re measured by how many kernels are in an ounce. And generally, we find with the bakery kernels, the size or the kernel count per ounce is right around 650 kernels plus or -50 kernels. Then we get into kernels that are more in the 550-count range. And that’s what we refer to more as a confectionery kernel. And the smaller the number, that means there’s bigger kernels. So, if you get into a 350 count, that’s going to be a really big sunflower kernel. And there are certain people who use that. When I first started out in the industry, everybody wanted a really big kernel. But as prices got more expensive and as the innovation happened, most people settled around calling that 550-count kernel their confection kernel. And the applications that we see with that are primarily going into roasting, whether it’s getting roasted and put into a package or getting roasted and put into a trail mix, getting roasted and put into a cereal. Whatever the application is with that, that’s what we see mostly happening with those 550-count kernels or those confectionery-grade kernels that we see. Certainly, there are still our customers, especially some of the retailers, that like a bigger kernel. When you’re looking at the bag, they want the sunflower to be really big inside of there. So that’s what you might see some of the bigger kernels going into.
With the bakery-grade kernels, the main applications go into bakery. I think the name says it all. So, when you start looking at breads that have sunflower kernels inside of them or granolas or bars, things like that, that is the primary application that you see with the bakery-grade sunflower kernels. The other application that the baker-grade sunflower kernels go into, or sometimes what happens, the kernel breaks in half and you have broken pieces, is bird food. One of the biggest markets for sunflower kernels in the United States is the bird food market. Birds love sunflower seeds, and bird food processors really like sunflower seeds too, because they’re pretty inexpensive compared to other ingredients. So, I think that using the sunflower kernels inside your bird food mix really helps a lot. It’s a nice filler, it looks nice, the birds like it, and it’s not quite as expensive if you were to use something else as well on it. Innovation-wise, though, that we’re seeing a lot with sunflowers right now. Sunflower butter has been around for a little while and it’s starting to get a pretty good name for itself. And there’s some good innovation happening with it too. But sunflower butter is an allergen-free butter. We’re seeing a lot more in the schools for people who want something that’s not peanut butter that they can take and use sunflower butter with jelly on a sandwich for the same application. We’re seeing sunflower butter be packaged in straight retail packs as well. And I’m seeing fun things happening with some of my customers. If you can imagine that tahini is made out of sesame, they can make a tahini and sunflower mix where maybe sunflower is a little bit less expensive than sesame. And you put the two together and it makes a really nice flavor. And you can use sunflower butter that’s mixed with tahini together for any of these Persian recipes that you would normally use tahini for inside of. So that’s some of the fun applications that we’re seeing going on with sunflower butter right now.
Some of the other things that are happening is taking the kernels and grinding them into a flour to use in a baking application. So, we’re starting to see a lot of crackers being made with sunflower mill or sunflower flour, where they’ve ground the sunflower kernels into a flour and they’re using that to make grain free crackers. Again. It’s an inexpensive ingredient to use when you compare it to something like a nut or an almond. In fact, if you were to look at the price of sunflower flour compared to almond flour. It’s probably half the cost when you look at it. And it’s new and its innovative and it’s something different that’s not on the shelf. So, I think that’s some of the really cool things that are happening with it.
Another thing that’s happening is people are starting to make a protein out of sunflower kernels, where they will take the sunflower kernel, they’ll expel the oil out of it, and you’re left with protein. You’ve removed the fat and you have all the protein that’s left inside of the kernel now. And then they use that inside of applications that people want more protein inside of. So again, it can be just for a regular food that somebody’s trying to get a little bit more protein out of, or it can actually be for the nutraceutical world where they want more protein for a shake or something like that as well. So that’s some of the innovations we’re seeing happening with sunflowers.
One of the other ones that’s really caught on in the last few years is grain-free granolas. And that’s where you make granola out of something that doesn’t contain grains, grains generally being oats. So, they’re trying to find something they can put into the recipe that’s somewhat similar to the price point of an oat. Maybe just a little bit more, but not a whole lot more. Sunflowers really fit perfectly in that they are one of the least expensive ingredients when you look at something to use for that. So, if you can imagine taking a sunflower seed and adding it with some pumpkin and cashews and then seasoning it like a granola and baking it off, you end up with a grain-free granola. It’s very crunchy, it’s got a lot of texture and it just tastes great. It’s just something a little bit different. So, we’re seeing that happen too, where people are making grain-free granolas with sunflowers being one of the main ingredients inside of it because of the price point of it.
Nick Erker: Thank you, Donny, for that update on sunflowers and all that information. There’s a lot of information on what seems to be a simple, you know, one of the things we do here at Smirks is we don’t have just one ingredient. We cover a lot of different ingredients. And as part of the Get the Scoop with Smirks podcasts, we’re going to bring you, our listeners, an update on other market news that is affecting the bulk commodity world. So, without further ado, let’s dive into our Get the Scoop with Smirks Market Update.
Smirk’s April Sunflower 2023 Market Report
Donny Edson: Here is our Get the Scoop with Smirks April Sunflower Market Report. To begin with, there are four origins that we track for the Sunflower market in North America, which includes Canada and the United States. Eastern European market which includes Ukraine, Russia, Bulgaria, and several other countries around there. Argentina and China. As the main product we work with is sunflower kernel. We primarily focus on the EU and the North American crop.
Let’s begin with what’s going on in the EU. In tracking the last five years of historical pricing, the market is still trading higher than it was at its historical lows, which were in 2018 and 2019. In fact, the price is still almost 50% higher than the lows we saw a few years ago. However, there are many factors that indicate we may not see those lows again. Five years ago, the cost of production was considerably less. In addition to this, five years ago there were more processors as they were being subsidized by the EU to build processing facilities. That is not the case today as there are only a few players in the market that are very reputable. The peak of the market happened in the end of March 2022 when we saw prices that were double where they are today. However, this peak only held for a few weeks and the sunflowers have been on a downward trend since this happened. Demand for the kernels is not too high right now, which adds to downward pressure. Demand is down for a couple of reasons. People were already stocking more products because of COVID delays last year. Forecast models were not accurate for anyone, as the data we were all working off of was not accurate through COVID. The invasion of Ukraine sent a panic wave through the market that there was a chance that sunflowers could become near impossible to get. This led to panic buying and buyers who were already long on contracts went even longer. So today people are working through the bad positions that they got into and this has kept the demand down. Importers and wholesalers are just buying spots as needed. No one is taking long positions because of the high rates of interest right now, along with the high costs of warehousing, meaning no one is going to be buying super large volumes at one time. Demand in the EU is not very high for the reasons just mentioned, but also because of the economic situation in the EU where they are much worse than other countries, particularly because of higher inflation and the very high expense of energy. Consumers who might normally buy a loaf of bread covered in seeds are opting for bread that is just made with flour. As the costs have gone up so much, as the EU sets the tone for the market, other markets have dropped pricing as well.
We see pricing for new crop from the USA down about 20% from last year for the first indications we are getting. Planning indications for the US show less acres going in, but it has been very wet in the planting areas, so there could be more product coming online. There’s still pressure from very good corn and soybean prices for acres as well. Argentina did face a very hard drought, which in a normal market could come into play, but as demand is not there, this is not being that much of an issue. The organic market is following suit with the conventional market and we are seeing pricing that is the lowest in the last two to three years for new shipments from origin. There is ample supply as well. Available now from Origin would be a good time to consider booking your Q3 and Q4 needs.
Ocean freight is coming back to realistic levels as well. The EU and South America have been the last two origins to lower rates, but all indications are it will be very reasonable again. One note to consider is that although prices are dropping at origin, people are not keeping as much stock on hand right now. So spot prices in the US may not reflect the levels at Origin immediately. Booking for contracts further out will help you to capture some of the price savings. Sunflower Oil is also dropping a lot as many people are long contracts from panic buying last year as well. The market is bearish at the moment. In summary, it has become a buyer’s market, particularly when planning ahead and taking advantage of lower prices from origin and the lower freight rates coming down the line. Spot purchases in the USA will likely not reflect prices being offered from origin as importers are holding more pricing inventory and the cost to do business has gone up considerably.
Nick Erker: So, for all those people out there that have always wondered how Smirks came about and where the name came from, I think Donny and I have done our best to try to give you a little bit of history on the company today. So, we appreciate you joining us on this episode of Get the Scoop with Smirks and learning about our origins. Look forward to seeing you next time.
Nick Erker: So that’s it for this episode of Get the Scoop with Smirks podcast, where we bring you the latest market reports, insights into bulk ingredients, and their origins, as well as in-depth product information. So, if you have any questions, or feedback, or just want a sample to taste for yourself, visit the smirks.com website or email us at whatsnew@smirks.com. Never miss a future episode. Be sure to hit the subscribe button wherever you listen to your podcast. Thanks so much for tuning in.