Forces impacting the production of organic foods

Karen Klonsky
Publication Date: 
Roughly 20 percent of organic cropland was devoted to produce compared to only 3 percent for conventional agriculture in 1995. At the other extreme, only 6 percent of organic cropland was in corn production while 25 percent of all cropland produced corn. Only 30 percent of all organic farmland was in pasture and rangeland compared to 66percent of all farmland. Clearly, these differences reflect the greater importance of meat and dairy production in agriculture overall than in the organic subsector. In recent years, the organic industry has grown not only in volume but in products offered, moving well beyond fresh produce into dairy, snacks, and frozen foods. The estimated growth in retail sales of organic foods averaged over 20 percent a year for the last eight years compared to only two percent in the food industry overall, reaching an estimated $4.5billion in 1998. The mix of commodities produced at the farm level have and will continue to change in response to several dynamic forces, including consumer demand, regulation, and consolidations, mergers, and mainstream entrants at the farm, manufacturing, and retail levels.
Consumer demand for organic foods has been spurred by a number of factors including concerns over pesticide residues on foods, food produced using genetically modified organisms (GMOs), and hormones in dairy and meat products. These concerns coupled with the overall increase in demand for convenience foods explain the phenomenal recent growth of over 70 percent in sales of organic snacks, candy, and frozen foods. The result has been increased demand for GMO-free grains for snacks, cereals, soy products, and feed for dairy cows. The recent allowance by USDA for the labeling of meat and poultry as organic will accelerate already heightened demand for organic grain and feed from the organic dairy industry. Although the fastest growth in organic foods has been in categories other than produce, clearly produce plays an important role in the consumers decision on where to shop, and demand should increase with the overall increase in the number of organic consumers. Market outlets now include sophisticated natural food store chains, gourmet specialty stores, and e-commerce, allowing for a broadened array of products. Mainstream agricultural producers, manufacturers, and supermarket chains have entered the organic marketplace at a time of low prices for commodities at the farm gate, fierce competition for retail shelf space, and increasingly sophisticated targeting of consumers. Inevitably, these changes in food products offered and in retail outlets will lead to an organic agriculture that increasingly resembles the conventional food industry.