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Demand for Organic Food Growing Faster than Domestic Supply

  • Demand for organic food growing faster than domestic supply
    Many farmers find initial costs of converting to organic practices intimidating despite higher profits later on
    By Scott Faber
    The Chesapeake Bay Journal - Seven Valleys,PA,USA
    Straight to the Source

Got Organic Milk? That's the question more and more consumers are asking in supermarkets across the nation. | Sales of organic food have grown dramatically over the last decade - soaring from $3 billion in 1997 to more than $10 billion in 2003, according to the U.S. Department of Agriculture.

Sales of organic food have grown by 20 percent annually, and experts predict that the industry's share of the U.S. food market is expected to grow from about 2 percent to roughly 3.5 percent by the end of the decade.

In fact, demand for organic food is growing so fast that consumer demand is outstripping some domestic supplies.

Once a net exporter of organic products, the United States now spends more than $1 billion a year to import organic food, according to the USDA, and the ratio of imported to exported products is now about 8-to-1.

Many of these organic imports are grown in the European Union, where more than 140,000 farmers are meeting Europe's weaker organic standards on 12.6 million acres of farmland.

In contrast, about 10,000 American farmers have made the transition to organic food production on about 2.3 million acres of land, according to the USDA's Economic Resources Service.

"It's a system, and it takes a while to convert" to organic farming, said Greg Bowman of the Rodale Institute in Pennsylvania. "But, farmers are watching their neighbors convert, going to field days, and they¹re seeing that it can be done."

So, why have fewer U.S. farmers made the changes in farming methods that allow them to market their goods under the USDA's organic label?

Bowman says that there has been a long-standing interest in organic farming in the Bay states, and that the number of Bay farmers practicing organic agriculture was accelerated by the passage in 1990 of a federal law directing the USDA to create the now familiar organic label.

But, to meet the organic standard, farmers must abandon the use of synthetic pesticides, growth hormones and antibiotics and take other steps to improve soil quality, such as crop rotation.

Although some farmers see no impact on production from these changes, "there often is a production decrease associated with the transition" to organic methods of farming, said Peter Miller of Organic Valley, a cooperative of farmers.

For some farmers, the costs of a three-year "transition" period - when yields and, consequently, farm sales fall - outweigh the benefits of the "premium" they will ultimately earn. But most farmers see their yields rebound by the time they have completed the transition to organic farming, Bowman said, and many can keep yields high during transition‹but only through careful soil management and crop selection.

The costs of organic production can be lower as well‹because input costs such as pesticide applications are reduced‹but revenue can fall by more than $100 an acre in some parts of the country, USDA studies show. A 2001 study by the Northeast Organic Farming Association found that milk costs fell by 7 percent during transition‹but that milk yields fell by 29 percent.

Once farmers are able to charge the "premium" for organic products, farmers typically recoup these losses.

For example, revenues on organic dairy farms were about 2 percent higher than revenues on conventional farms, according to the 2001 study.

But, the prospect of losing money for three years‹to make more money thereafter‹poses an obstacle to many farmers.

As a result, some cooperatives like Organic Valley and Horizon have been making small "transition" payments to help farmers make the switch. And, at least two states are using USDA conservation funds to underwrite the cost of making the transition to organic farming practices.

Rodale's Bowman thinks such payments are justified when "public dollars are buying healthy farms, healthy watersheds and healthy food and communities." Increasing the number of well-managed organic farmers in the Bay watershed, he said, would have enormous potential to reduce the amount of nitrogen and phosphorous being washed off farm fields.

Another barrier to the transition, according to Miller of Organic Valley, is simply learning the details of organic farm management.

Although many cooperatives and organizations provide technical assistance, relatively few of the familiar faces upon which farmers rely for advice - such as extension agents, soil and water conservation districts or crop consultants­know much about the details of organic farming.

European farmers have since 1992 been eligible for government-financed "green payments" that ease the costs of the transition to organic production. Because European Union and U.S. organic standards are not compatible, relatively few EU farmers can slap a USDA organic seal on their products. But, Miller said, that could change in the coming years.

Demand for organic food is likely to grow, experts say, because consumers are more likely to see organically grown food as a healthy and nutritious option to conventionally grown products, studies show.

A recent study by the Hartman Group, a market research firm that tracks healthy food sales and trends, found that traditional motives to buy organic-concern for the environment-have been eclipsed by concerns about health and food safety. Price and availability, studies show, remain the leading barriers to the purchase of organic products.

The growing industry faced a setback this year when a federal judge ruled that a 1990 law directing the USDA to create the organic label and certification system prohibited the use of ³synthetic² ingredients in organic foods.

The 2002 rule implementing the law required that the ingredients in products labeled as "100-percent organic" only contain organically produced
ingredients. But, the rule also created two other USDA labels - "organic" and "made with organic ingredients"- that permit processors to include limited amounts non-organic ingredients.

Congress last month quietly amended the 1990 law directing the USDA to allow the goods marketed with the "organic" label to include the addition of some non-organic ingredients‹effectively overturning the court ruling. While some organic advocates feared that the inclusion of "synthetics" will erode the credibility of the term "organic," lawmakers were concerned that organic companies faced serious financial losses if the rule were changed.

While Bay states will never boast as much organic production as states like California‹where crops can be grown all year‹experts expect to see more and more Bay farmers make the switch as the demand grows.

Currently, organic dairies in Eastern states like Pennsylvania and Maryland have reached a plateau because of a shortage of farmers willing to grow organic feed grains and the infrastructure needed to store, ship and refine organic feed grains‹a problem that is not limited to dairy farmers.

"Scaling up a regional or local system is fraught with difficulty," Bowman said. "It's always a struggle because you're competing price-wise with people who have a huge market advantage" and well-established
infrastructure.

Scott Faber is a writer living in Washington, D.C.

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