Forces impacting the production of organic foods

Abstract

Roughly 20 percent of organic cropland wasdevoted to produce compared to only 3 percent forconventional agriculture in 1995. At the otherextreme, only 6 percent of organic cropland was incorn production while 25 percent of all croplandproduced corn. Only 30 percent of all organicfarmland was in pasture and rangeland compared to 66percent of all farmland. Clearly, these differencesreflect the greater importance of meat and dairyproduction in agriculture overall than in the organicsubsector. In recent years, the organic industry hasgrown not only in volume but in products offered,moving well beyond fresh produce into dairy, snacks,and frozen foods. The estimated growth in retail salesof organic foods averaged over 20 percent a year forthe last eight years compared to only two percent inthe food industry overall, reaching an estimated $4.5billion in 1998. The mix of commodities produced atthe farm level have and will continue to change inresponse to several dynamic forces, including consumerdemand, regulation, and consolidations, mergers, andmainstream entrants at the farm, manufacturing, andretail levels. Consumer demand for organic foods hasbeen spurred by a number of factors including concernsover pesticide residues on foods, food produced usinggenetically modified organisms (GMOs), and hormones indairy and meat products. These concerns coupled withthe overall increase in demand for convenience foodsexplain the phenomenal recent growth of over 70 percent in sales of organic snacks, candy, and frozenfoods. The result has been increased demand forGMO-free grains for snacks, cereals, soy products, andfeed for dairy cows. The recent allowance by USDA forthe labeling of meat and poultry as organic willaccelerate already heightened demand for organic grainand feed from the organic dairy industry. Although thefastest growth in organic foods has been in categoriesother than produce, clearly produce plays an importantrole in the consumers decision on where to shop, anddemand should increase with the overall increase inthe number of organic consumers. Market outlets nowinclude sophisticated natural food store chains,gourmet specialty stores, and e-commerce, allowing fora broadened array of products. Mainstream agriculturalproducers, manufacturers, and supermarket chains haveentered the organic marketplace at a time of lowprices for commodities at the farm gate, fiercecompetition for retail shelf space, and increasinglysophisticated targeting of consumers. Inevitably,these changes in food products offered and in retailoutlets will lead to an organic agriculture thatincreasingly resembles the conventional foodindustry.