Last week’s organic equivalency agreement between the US and the EU is expected to have a significant impact on the trade of organic products – and many are likely to be finished foods rather than agricultural products, according to organic research firm Organic Monitor.
The global organic research specialist said that the equivalency agreement was a major milestone for the international organic food industry, as the two regions together account for over 90% of certified organic food sales. As trade increases, prices are likely to become more stable, for an industry that is particularly susceptible to supply and demand imbalances, Organic Monitor said.
The trade deal was signed last Wednesday at the organic trade show BioFach in Germany by the US agriculture deputy secretary Kathleen Merrigan and European commissioner for agriculture and rural development Dacian Cioloş. As a result, growers and companies meeting the terms of the agreement will be able to trade freely in both regions from June 1, whereas previously they had been required to obtain separate certifications.
However, although US and European organic farmers are expected to be major beneficiaries of the deal, the two regions only have about a 30% share of global organic farmland.
Organic Monitor said: “By opening up the two largest markets for organic products to each other, the arrangement will facilitate trade of organic foods… Although the largest consumers, Europe and North America are not the main producers of organic crops.”
That could change, the research firm said, as it expects farmers in both the United States and the EU to increase organic farmland, particularly in EU countries that have export-oriented organic food industries. And that in turn could help stabilize ingredient prices for industry, and ultimately retail prices for consumers.
“The biggest winners however will be consumers,” it said. “Supply-demand imbalances are a regular feature of the organic food industry, resulting in frequent price fluctuations. Greater supply, especially of commodities, will have a stabilizing effect on organic product prices. Apart from lower prices, consumers will benefit from wider product variety. European consumers will be able to buy American organic products, whilst popular European foods – such as pasta, chocolates, cheeses, and beverages - will slowly make their way onto US store shelves.”
Organic Monitor said that current bilateral trade between the two regions is estimated at less than 5% of the $59bn global organic food industry.
The agreement could also impact organic production in other regions, it said, as much of the food produced organically in Asia, Latin America and Africa is destined for the US and the EU.