Farmers in the US are being forced to leave the organic market because it is too costly, compounding supply shortages already faced by food manufacturers, according to a new report.
The cost of feed among other issues means that organic farming is proving uneconomical for some, particularly in the dairy sector, and they are leaving the industry, said Jim Wedeberg, director of the Organic Valley Dairy Pool co-operative.
Meanwhile demand for organic products continues to grow but this is threatening to “deluge” the supply-strapped organic industry, according to the Nutrition Business Journal Report on Organic Markets 2008, to be published next month.
Careful planning, sourcing and contracting have helped many manufactures weather the current supply crunch but despite such measures, some sectors, including dairy and meat, are still being hit hard, it said.
Organic feed prices have soared in recent months and Organic Valley, made up of more than 1,200 farmer-owners in the US, said it has seen dairy and livestock producers decide to get out of organic husbandry and agriculture altogether. They are also struggling to replace them because converting to organic “simply isn’t financially appealing these days”.
Wedeberg is quoted in the report saying: “It’s the most critical time I’ve seen as far as cost and availability of feed.”
Like organic food increased demand for organic feed is said to have brought shortages and higher prices, among other factors.
Another company, Aurora Organic Dairy, said it has seen corn prices jump nearly 60 percent and soy and oat prices between 10 and 30 percent, which were compounded by a sharp rise in fuel costs. To address this Aurora is encouraging self-sufficiency by growing your own feed supplies or locating closer to feed sources.
The report said: “Manufacturers, retailers and industry analysts all agree that the most significant damper on the bright future of US organics is the worsening supply squeeze confronting the industry.
“While more nuanced challenges linked to consumers’ perceptions about health, taste and sustainability; government regulations and support of organic farming; new technology such as cloning and nanotechnology; and even recession will continue to shape the industry’s evolution, the supply issue is the pivotal factor facing US organic companies right now.”
Demand and supply
The limited availability of raw organic materials means that some companies are not achieving their potential because supply can’t keep pace with demand.
CEO for Annie’s Homegrown food company, John Foraker said: “We could have grown our organic business and our organic-positioned products much faster at any time over the last five years if there had been a much broader availability of supply.”
The report also highlights US Department of Agriculture claims that organic farming is the fastest growing sector in the US, although its most recent data is from 2005, and this suggests that organic agriculture is only a fraction (0.5 percent) of total agricultural acreage.
The government offers grants to make the transition to organic easier but this is described as “spotty” from one state to the next. There are also provisions in the 2007 Farm Bill which would help with costs such as getting organic certification. But the final version of the Bill is yet to be agreed.
Companies are already looking outside of the US to source organic products. SunOpta announced this month that it is expanding its global organic supply chain to help tackle shortages with a new agreement to acquire the Pure Nature Organics brand.
The company is looking to diversify and develop its supply sources for organic broccoli, green beans, edamame, asparagus among other vegetables and fruits, primarily in Central America.
The Organic Trade Association (OTA) reports that US organic food sales have grown between 17 and 21 percent annually since 1997. That compares to between two and four percent growth for total US food sales during the same time period.
However, a recent report from The Hartman Group indicated that the organic trend has reached a plateau as consumer interest is waning and attention turns to other food categories such as fresh, local and fair trade.
The report added that this does not mean that the organic market is expiring as concerns for quality and health mean that consumers are drawn to fresh organic categories which offer the perceived benefits of being hormone or pesticide free. These include dairy, fruit, vegetables, prepared foods, meats, breads and juices.