Science in Society Archive

Organic Agriculture Enters Mainstream

Organic Boom Around the World

The challenges of certification and the threats of corporate makeover. Dr. Mae-Wan Ho

What is organic agriculture?

The WHO/FAO/Codex Alimentarius Commission defines organic agriculture as a holistic production management system that promotes and enhances agro-ecosystem health, including biodiversity, biological cycles and soil biological activity; that emphasizes management practices in preference to off-farm inputs, using, where possible, agronomic, biological and mechanical methods, as opposed to synthetic materials.

IFOAM (International Federation of Organic Agriculture Movements) and other advocates give similar definitions [1].

World organic agriculture by area

There are currently more than 26 million hectares of farmland under organic management in approximately 100 countries worldwide, two million hectares more than the previous year [2,3]. In addition, the area of certified “wild harvested plants” is at least a further 19.7 million hectares. This is an underestimate of the actual area under organic management, as not all are certified organic.

In terms of organic area, Australia leads with 11.3 million hectares, followed by Argentina (3 million hectares) and Italy with 1.2 million hectares. In terms of organic farmland in comparison with the total agricultural area, Austria, Switzerland and Scandinavian countries are at the top. In Switzerland more than ten percent of the agricultural land is managed organically.

Organic agriculture increasing rapidly in many countries

Organic production is increasing rapidly across North America The US has the most area in the region and fourth largest in the world, serving both domestic and export markets. USDA figures show organic acreage doubled between 1992 and 1997 to over 1.3 million acres [1]. Production increased to 2.3 million acres by 2001, representing 0.3 percent of cropland and 0.2 percent of pasture.

Canadian organic production is also increasing, especially in grain. Fruits and vegetables are the other primary organic products. Most organic produce is exported, primarily to US. In Mexico, organic agriculture has increased very rapidly. There are now almost 35 000 small organic farms in Mexico growing coffee, bananas, citrus, grains, peanuts, strawberries and other crops; many on contract to US-based firms.

Cuba has been an innovative global leader in low-input sustainable agriculture, yet it has only a small certified organic sector. Since 1997, Swiss-based FiBL (Research Institute of Organic Agriculture) has been collaborating on an organic citrus project, converting citrus plantations, and support the marketing of organic citrus juices in Europe. Cuban farmer receive more than double the price paid for conventional fruit.

Organic production is rising across Latin America, mostly for export. Like those in North America, organic farmers are experiencing increasing problem with GM crops threatening to contaminate their fields and seed supply. Argentina, the second largest grower of GM crops in the world, is also the organic production leader in Latin America. Organic production began in the 1980s with a handful of small farms. By 1992, Argentina wrote national organic rules based on IFOAM and European standards and was a pioneer in developing rules for organic animal production. In 1992, there were 5 000 ha in organic production, in 1998, 231 000, in 1999, 1 020 000 and in 2003, more than 3 000 000 ha. Over 80 percent of its produce is exported to EU, most of the rest to US. Domestic market in Argentina is also growing and it now absorbs 15 percent of production annually, valued at about US $3 million.

In Asia, China, India and Japan are the largest organic producers. Japan is the region’s largest market and buys the majority of Asia’s production.

Global organic market booming

The global market for organic food was about US $26 billion in 2001. Europe and North America together accounted for almost 80 percent of this total with estimated sales over US £20 billion. Europe’s organic market was about US $12 billion, and it has had the most dramatic annual growth rates. Japan was the third largest with estimated organic sales of US $350million. These three markets – EU, US and Japan – continue to drive the global demand for organic food.

German is the largest national market for organic foods in Europe at €3.1 billion, (2003 figures), UK the second largest at €1.60 billion, and France a close third at €1.578 billion [4].

Since 1997, total US food sales have grown between 2 to 4 percent, according to the Organic Trade Association. During the same time, sales of organic foods grew about 20 percent. Total organic sales reached $13 billion in 2004, and projected at $30 billion by 2007 [5].

Certification and Accreditation an obstacle to growth

One major obstacle to growth in the organic sector is certification and accreditation [1]. Products are labelled organic based on certification that they have been grown, handled and processed in accordance with organic standards. These certifications are now generally provided by third parties, which are then accredited to any overlying organization, which may be national, international, governmental or non-governmental.

Certification systems and standards were initially developed by farmers and farmer organizations, and shaped by local conditions and markets. Hence the roots of certification contained both diversity and local control, even though there was a lot in common. As organic agriculture expanded, more specialized certifying organizations have been created, many of these becoming larger in size and scope.

IFOAM has commented on its website that, “The growth of organic agriculture and markets during the last decade has been accompanied by a rapid growth in the number and complexity of private sector standards followed by the burgeoning of government organic regulations. Though the purpose of certification was to foster confidence of buyers and enhance trade, the plethora of certification requirements and regulations is now considered to be an obstacle for the continuous and rapid development of the organic sector.”

For example, there are virtually no mutual equivalence agreements between countries on organic standards. Efforts to establish equivalence among the many regulatory systems have been led by IFOAM together with FAO, the International Trade Centre of the United Nations Conference on Trade and Development, the European Union. There is consensus about standards on major issues – such as the clear exclusion of GMOs – though debate continues on others, such as the use of food additives and processing aids.

As the national governments in Europe and North America institutionalise certification and also become involved as accrediting organizations, they may become “gatekeepers” controlling access to these largest markets. It also increases the cost and complexity of certification to the point that small-scale farmers may be excluded.

Price premium is also an obstacle, resulting primarily from the high costs of labour, far greater than money save in reduced inputs such as pesticides and chemical fertilizers. But the higher return to farmers is integral to the future of organic agriculture.

Concentration of production, processing and distribution

The traditional open, fragmented structure of organic agriculture is becoming more concentrated, mimicking the conventional agricultural produce market in mergers and acquisitions, and a trend towards concentration of production, processing and distribution. This has had several negative effects: an accelerated loss of genetic diversity, reduced innovation, less responsiveness to consume and social interests, and fewer decision-makers in the industry[1].

Food industry giants - Archer Daniels Midland, Cadbury, Schweppes, Coca Cola, ConAgra, Dean Foods Dole, Gernal Mills, Groupe Danone, H.J. Heinz, Kellogg, Mars, Parmalat Fianziano, Draft, Sara Lee and Tyson Foods - are buying up successful organic firms. Novartis has “Tender Harvest”, a leading organic baby food brand, produced by its subsidiary Gerber.

The US dairy industry – whether conventional or organic – is highly concentrated. One company, Horizon Organic Dairy, processes and distributes almost 70 percent of the organic milk in the US. Horizon was founded in 1992 to market organic yoghurt, but soon expanded to a complete line of dairy products. Today it is the largest single US organic brand by sales ($187million) and by distribution, even with a 30 to 50 percent price premium. The company has also gained market share through acquisition of many local and regional dairies. Horizon is now buying dairy companies and brands in Britain (Meadow Farms Ltd., Organic Matters Ltd., and Rachel’s Organic) and has made a licensing agreement with a Japanese organic milk producer.

Horizon cut contractually-promised premiums to farmer after it bought out The Organic Cow of Vermont, resulted in decreases in farmers’ incomes by as much as $15 000 per family, even as the company reported a 200 percent increase in profits on net sales of $160 million. Horizon has since been acquired by Dean Foods, the largest fluid milk producer in the US and one of the five largest in the world with $10 billion in annual sales.

Farmers find it hard to deal with big companies, as big companies find it too troublesome to deal with individual farmers.

In the US, half of retail organic sales go through the “core channel”, natural food retailers, including natural supermarket chains, independent retailers, and cooperatives, as well as direct sales. Natural foods supermarkets and supermarket chains (the “supernaturals”) are the most rapidly growing part of this category. The largest chain by sales in the US and in the world is Whole Food Market, with 140 stores and $3.7billion sales. The second is Trader Joe’s, owned by German retail giant Albrecht Discounts. Trader Joe’s has 200 much smaller stores in 17 states, with annual sales of £1.9 billion.  The third larges chain is Wild Oats, with 102 stores in US and Canada and an estimated $946 million in sales. Over the past several years, Whole Foods and Wild Oats have acquired almost all other retail chains of meaningful size in the core channel.

Farmers markets, community-supported agriculture (CSA) establishments and food co-ops remain important outlets for organic foods. There are 2 651 farmers markets, over 1 000 CSAs and 300 food co-ops selling organic foods. Cooperative Development Services, which provides consulting on the food cooperative business, estimates total US co-op sales at $750 million annually (2003). Direct sales, farmers markets and CSAs account for 3 percent of all sales in the US, Health and Natural products stores for 48% and mass market outlets for 49 percent.

Jason Mark writes in the San Francisco Chronicle that [5], “the best guarantee that your food will be produced according to environmental and social principles is to meet the people who grow it. Support your local farmers’ market and become friendly with the vendors there. Or get a subscription with a Community Support Agriculture program, in which you get weekly food deliveries from a specific farm. Those outlets represent the original ethic of the organic food movement.”

Article first published 13/09/05


References

  1. Sligh M and Christman C. Who Owns Organic? The Global Status, Prospects, and Challenges of a Changing Organic Market. 2003,  Rural Advancement Foundation International-USA, Pittsboro, NC http://rafiusa.org/pubs/OrganicReport.pdf
  2. Yussefi M and Willer H eds. The World of Organic Agriculture 2004: Statistics and Future Prospects, IFOAM 6th edition, http://www.soel.de/inhalte/publikationen/x/x_74.pdf
  3. The World of Organic Agriculture: Statistics and Emerging Trends 2005, IFOAM, http://www.ifoam.org/
  4. Richter T. The European organic market between strong growth and consolidation. Current state and prospects. Presentation at Biofach Nuremberg 24.02.2005, http://www.fibl.net/aktuell/termine/2005/biofach/documents/organic-market-europe-2005_000.pdf
  5. Organic Inc. Jason Mark, San Francisco Chronicle, 9 June 2005 http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/06/09/EDGISD5JL61.DTL

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