Demand for Organic Food and Beverages Continues to Outpace Supply

Just a few short decades ago, the organic food movement was limited to a few forward-thinking farmers and food producers who saw potential for a new niché market, serving consumers who desired foods free from pesticides, industrial solvents and additives. With a growing public perception that organic food is safer, more nutritious and generally tastes better than foods produced by conventional methods, the demand for organic food and beverages has surged, leaving organic food producers clamoring for more access to organically grown and raised crops and livestock.

According to the Organic Trade Association (OTA), U.S. sales of organic food and beverages grew from $1 billion in 1990 to an estimated $29.22 billion by 2011. Additionally, organic offerings represent 4.2 percent of all U.S. food and beverage sales, a trend expected to continue through 2013. Some estimate that organic sales now total over $35 billion. Because of this growth, the OTA contends that the organic sector is one of the few industries that continue to add jobs to the U.S. economy.

In March of this year, the National Organic Program (NOP)—a USDA agency responsible for administering and enforcing the regulatory framework governing organic food—published its latest list of certified organic operations in the U.S. The list includes some 17,750 certified USDA organic farms and processing facilities, representing an astounding 240 percent increase since the NOP began tracking this data in 2002.

Likewise, the international organic sector is experiencing record growth due to urbanization, higher levels of education, and a growing middle class in countries once plagued by poverty such as China and Mexico. This past February, the Research Institute of Organic Agriculture (FiBL) and the International Federation of Organic Agriculture Movements (IFOAM) presented their latest statistics on organic farming, which found that organic food sales reached $62.9 billion worldwide—a $4 billion increase since 2010. The study also found that 1.8 million farmers in 162 countries grow organically on more than 37 million hectares of agricultural land worldwide.

What’s more, of the 1.8 million farms that grow organic crops and raise organic livestock, approximately 80 percent are located in developing countries, according to the market research company Organic Monitor. Countries with the most producers are India, Uganda, Mexico and Tanzania, and the countries with the highest growth rates are China, India, and Spain.

“Two-hundred-thousand new organic farmers—this is good news for the environment and for the social and economic development of rural areas,” said IFOAM president and Australian organic farmer Andre Leu.

USDA Certified Organic Operations

Domestic, 2002-2012

*Foreign operations may also be certified to be the USDA organic standards

But while organic farming continues to grow at an impressive rate worldwide, demand for organic food and beverages is far outpacing supply. Meanwhile, the cost to import organic foods from overseas remains prohibitive to many U.S. organic food processors and retailers. According to the USDA’s Foreign Agricultural Service (FAS), the United States spends more than $1 billion each year to import organic food, and the ratio of imported-to-exported products is now about 8-to-1.

So, why aren’t more American farmers taking advantage of this seemingly enormous opportunity to meet the demand of such a rapidly growing market? The answer is simply cost. The OTA says that prices for organic food mirrors the costs for conventional food in terms of growing, harvesting, transportation and storage, but since organically produced foods must meet stricter regulations, the process requires more management and labor, adding cost. For many U.S. farmers, this cost burden outweighs the benefit of dedicating acreage to organic farming.

One glimmer of hope for organic farming is a revised Farm Bill with provisions to encourage more organic farming in the U.S. These provisions include funding for organic research and extension activities; data collection on the organic sector; a cost-sharing program to offset organic certification costs for new or small farms; continuation of the federal organic regulatory agency, the NOP; a cost-sharing program to aid organic farmers in implementing conservation practices; and organic crop insurance. The bill was approved by the Senate but shot down by Democrats in the House due to deep spending cuts on food stamps for low-income families. The bill is expected to be revised and brought back for a vote by Congress before the 2008 bill expires this September.

There is no doubt that the organic food movement is here to stay. As people become more and more choosey about the food and beverage products they consume, organic food producers will be challenged with meeting the demands of this ever-growing market.