Where more farms are going green

April 23, 2001 Business Week by Katharine A. Schmidt

Mad cow disease has blown an ill wind toward European agriculture, but it seems also to have wafted some good in one direction: that of organic farmers. Take Gerhard Vogel. The all-organic farm he and his wife run had been doing well even without the health scare; for example, last fall, the Vogels signed a lease to add 50 acres to the 125-acre spread where they raise wheat, rye, vegetables, cattle, and hogs. In recent months, though, farms like the Vogels' have gotten a further boost from the discovery of bovine spongiform encephalopathy (BSE) -- also known as mad cow disease -- in Germany, and from a scandal over antibiotics fed to pigs. Now, the Vogels are advertising in an organic farmers' magazine for a full-time employee to cover the added workload, and they're planning to add chickens and turkeys to the products offered at their farmstead store. Eleven years after taking over the farm from his wife's parents, Vogel says: ''I feel vindicated in the decision to farm organically.''

Plenty of German farmers agree. More and more are running enterprises like the Vogels' farm in Welzheim, about 22 miles east of Stuttgart. On such acreage, weed-hackers replace pesticides, and cows and sheep eat grasses and grain instead of industrially produced feed. While most organic farmers make the switch on principle, they also know they can get much higher prices for organic grain -- and earn more profit if they run a store like the Vogels' rather than selling to distributors.

The umbrella organization of organic farming associations in Germany, AGO, reports that the number of farms being managed by members grew 7.5% over the past year, and the area being farmed organically grew by about 10.5%. Since 1996, the total area farmed by AGO members has risen to about a million acres, from about 750,000. At Bioland, the largest of Germany's organic farming groups, more farmers have called in requesting information in the past few weeks than in the entire previous year. Demand for organic foods at stores owned by Bioland farmers has risen 50% since the mad cow crisis began in Germany, and German natural-food wholesalers are reporting 40% to 60% increases in orders for meat and meat substitutes.

The Food & Agriculture Ministry has high hopes for organic farming as an alternative to the kind of practices that encouraged development of BSE. Agriculture Minister Renate Kunast, a member of the Green Party who took over the post in January, says she wants to see organic farms in Germany rise from 3% of the total now to 10% in five years and 20% in 10 years. She's proposing to boost the money the government pays farmers to switch to organic, and to work with supermarket chains to help natural food get more shelf space. Thomas Dosch, manager of Bioland, figures such goals are attainable. In Austria, he says, 10% of the land farmed is certified organic, while in Denmark it's now 6% and rising rapidly.

The question is, will consumers buy that much organic food? Vogel argues that to reach even 10%, organic farmers must expand beyond farmstead stores. That means getting into supermarkets, where shoppers have shown more zeal for bargains than for grass-fed beef or unsprayed apples. Organic products usually cost 20% to 30% more than conventional food. ''It's not as if the supermarkets haven't tried. Customers just didn't respond,'' says Tilman Becker, a marketing professor at Hohenheim University. As organic farmers multiply, marketing and distribution costs will fall, but Becker thinks that, at most, 5% of German farms could be run on organic principles within 10 years. Still, if health problems like mad cow continue, one thing appears likely: It's the little spreads, rather than the big agribusiness farms, that will be raking in the cash.

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