WHERE NEXT FOR ORGANICS?

From croplands to chicken coops, organic manufacturers get their hands dirty to anticipate looming shortage

By Adi Menayang contact

- Last updated on GMT

Related tags: Organic food, Organic farming

Photo: iStock
Photo: iStock
Companies from Chipotle to Costco are creatively coming up with ways to keep their organic supplies steady, but mid-sized, natural category veterans are concerned about the big fish jumping into a small and shrinking pond.

The natural and organic product sector is expected to continue to grow​, a double-edged sword trend that has entities like the Organic Trade Association (OTA) happy that more Americans are embracing organic products, but concerned over potential supply shortages.

“One of the biggest challenges facing the organic market going forward is the supply crunch for retailers involved in fresh produce, ingredients and food products that are certified organic,”​ Laura Batcha, CEO of OTA, said at a briefing in Washington, DC​, December of last year.

In 2015, the Wall Street Journal reported​ that sales of organic food tripled to $32.3 billion over the decade through 2013, and federal data show certified organic farm acreage climbed about threefold.

Recently, the Seattle Times reported​ that Costco is supporting organic farmers as a way to secure its supply of organic goods. The program includes, among other things, lending money to farmers to buy organic farming land and contracting with Nebraskan farmers to raise cattle on organic fields. The warehouse club joins companies like Chipotle Mexican Grill, who’s providing financing to help farmers turn from conventional to organic.

Getting down and dirty

Meanwhile, manufacturers like Pacific Foods​ and Nature’s Path​ are going beyond supporting existing organic farmers and suppliers by getting their own hands dirty and investing in their own organic farmland. 

Chuck Eggert Pacific Foods
Chuck Eggert, CEO of Pacific Foods.

“We started growing [organic] butternut squash because of availability,” ​Chuck Eggert, CEO of Oregon-based Pacific Foods, told FoodNavigator-USA. “We’ve been doing this for almost 30 years, and back then, even if you wanted to do an organic product there [weren’t] enough supplies around. So we started growing our own [butternut squash] and then we started encouraging others to do it.”

Similarly, Washington-based Nature’s Path purchased farms in Saskatchewan in 2008 and Montana in 2014 to help increase not just the supply of organic grains and legumes to meet demand, but also to increase organic farmland in North America.

 “As an independent, family-run company, we have the freedom to put our money where our heart is, in support of sustainable agriculture—beyond just making organic products,” ​Arran Stephens, co-founder and co-CEO of Nature’s Path, told FoodNavigator-USA. “We live by the mantra ‘always leave the earth better than you found it.’”

Animal products: a whole different monster

Pacific Foods is known for its portfolio of organic soups and broths, and as more farmers started growing butternut squash organically, the company ceased its squash farm and started planning to self-supply other soup ingredients that were scarce in its organic variety: Animal-based ingredients.

“It was a good news and bad news thing—the good news is that we didn’t know what we were doing so we weren’t afraid to try something new, the bad news is… we didn’t know what we were doing!” ​Eggert said.

After trial and error (and hiring the right people), the company now owns around 4000 acres of farmland in different parts of Oregon to raise cattle and grow feed organically. As a result, Eggert said the company can now steadily supply itself with organic meats, broth, and dairy products.

“We can actually trace all the ingredients that we feed our animals to our source, and that’s important to us too,” ​Eggert said. “We’ve been doing this for a long time but we’re seeing a big paradigm shift in the market, [consumers] wanting to know more and more of this information.”

Not just for the ingredients

Farming animals is less seasonal than crops, so Pacific Foods is focusing on their cattle and poultry efforts to keep their farmers as full time employees. “We didn’t like the concept of having to hire people and then fire them,” ​Eggert said. “And the animal protein is how we felt was the best way for us to be effective in animal welfare.”

Environmental stewardship aside, focusing on animal products was also an economic strategy for Pacific Foods, especially as the supply of organic milk lags demand​. “We made sure we had a good source of organic milk,” ​he added “so we’re adding value there.” 

Milk Shortage
According to USDA data, Americans spent about $5.1 billion on organic dairy in 2014. Farmers are struggling to meet the demand, Bloomberg reported.

For Nature’s Path, growing grains and legume organically in rotation is a way to heal the land. “Grain crops take nitrogen from the soil, whereas legume crops fix nitrogen and add many benefits to the land,”​ Stephens explained.

“We can’t speak for the supply needs of all organic companies, but we feel that purchasing and converting organic farmland is beneficial in itself to help ensure there is organic farmland for future generations of both consumers and farmers,” ​Stephens added.

Will it be the new norm?

But does a manufacturer’s decision to buy its own organic farmland make sense economically, and will it remedy the supply shortage issue? “There can be some economic reasons to directly control farmland to assure it is "organic compliant,"assure it is allocated to production of organic crops,”​ Dr. Glynn Tonsor, an Associate Professor at the Department of Agricultural Economics at Kansas State University, opined.

Arran Stephens Natures Path
Arran Stephens, co-founder and co-CEO of Nature's Path.

“Ultimately the net economic rationale of this is relative to the alternative - how feasible is it for firms to get this same outcome (with certainty) without allocating the same fixed resources towards land purchase,”​ he added.

He also added that as larger operations move into the organic space, “there are likely economies of scale that encourage increasing size of operations in organic systems just as there are in non-organic systems. Accordingly, if there truly is demand for organic food, it is usual to suspect the average size of organic producers to increase over time.”

But Eggert voiced some concerns about bigger companies entering the space.  “The demand for organic isn’t elastic,” ​he said. “When you get the Costcos of the world coming in—they don’t realize there’s a limited supply [and that] the period of time it gets to be organic is so long. There’s a self defence mechanism to protect ourselves from both limited supply and big companies buying into the market and we get pushed out.”

He was quick to add that it’s “really good people like Costco are getting involved.”

He also noted that as more players farm their own organic goods and enter the crowded space, more challenges will arise in the already difficult organic farming method: “It isn’t for the faint of heart.”

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2 comments

Transitional Products aren't Organic - So no easing shortage.

Posted by Sean Mallett,

As an organic farmer, I feel your pain with the transition years George. In order to get land certified organic they must be free of GMO's, and synthetic fertilizers and any of the "cides". It's just part of the commitment process for the farmer and cleansing process for the soil. The transition period we've all had to go through to become certified organic.
A Transition label will be a BAD idea: It will confuse consumers.
It will weaken the current organic label.
It will create too many loopholes for people to abuse, through perpetual transition.

The transitional label will be a disaster, I do not support it.

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Certified Transitional Label to ease Organic Shortage

Posted by George C Kalogridis,

Within the next 30 days the USDA will begin reviewing an application from the Organic Trade Association for a Certified Transitional Label under the Process Verified Program (PVP).
The biggest hurdle farmers face is the low prices they receive during transition to Organic. The goal is to pay farmers during their transition a premium for years 1 & 2 of the mandatory 3 year transition to Certified Organic.
Consumers will have a clean label when they chose to buy Certified Transitional products since the new Transitional Label will follow all the Organic regulations (except this covers years 1 & 2) and be verified by the same organizations that currently do Organic Certifications.

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