Organic price premiums make it possible for producers to continue farming organically and supply the growing consumer demand for organic food.
Organic production consists of growing and preparing of food, cosmetics and other materials without the use of pesticides, additives, hormones, growth parameters and genetically modified organisms. Regenerative and “natural” practices are organic by nature. The organic seal ensures the most stringent and encompassing form of farming; which is federally regulated and enforced.
The organic consumer market continually grows faster than all other markets, with over $55 billion in US organic food and non-food sales after a 5% growth increase in 2019. Growth in 2020 is projected to increase further.
Globally, the organic food market is valued at over $105 billion, with organic farming practices being implemented in almost all countries. Europe and North America generate the majority of these sales.
- Consumers are driven by:
- Cleaner ingredients and reduction of toxins and chemicals in food to mitigate effects on the body, pets and surrounding environment
- Fresh, whole foods, less processing
- Health and wellness
- Better traceability of organic ingredients, supply chain transparency
- Practices that improve animal welfare
- Labour and social improvements
- Ethical and sustainable practices on the farm
- Concerns around climate change and less environmental destruction
While most producers, food manufactures, food suppliers and input dealers recognize the growing demand for organic products, there is also a need to support and encourage organic practices at the farm level to ensure adequate supplies of organic foods are produced in the local area to meet this growing demand
Price Premiums and Production Methods
It is due to these price premiums that producers are able to continue farming organically and supply the growing demand for organic food. Consumers can promote the production of ethically, sustainably and locally produced food by purchasing organic and locally sourced products. Price is the major barrier influencing purchasing decisions. The price difference is reflected in many ways as described below. The cost supports viable practices.
- Cost of certification to the producer
- Rapid demand in organic food versus supply
- Short supply of organic inputs
- Higher operating costs
- Less acreage per farm (231 hectares on average in Canada) compared to broad acre farms
- Smaller, more diverse farming systems improve level of care fo the land, soil and crops
- Reduced supply density and use of smaller equipment
- Fewer processing and marketing hubs, which are further away and less accessible
- Higher cost and less accessibility of organic food ingredients and additives compares to synthetic versions
- Decreased shelf life by reducing the use of cheap preservatives creating distribution challenges
- Natural living conditions and humane treatment of livestock increasing capital costs for each livestock unit
- Long-term planning and management of soil health and biodiversity is required to achieve comparable yields
- Increased focus on segregation, prevention of commingling with conventional food and substances to ensure organic integrity
- Better traceability, more time required to maintain detailed records
- Less agronomic assistance and more self-training, education and research
There is a certain risk attributed to organic food production, specifically with marketing, local distribution, lack of cost effective inputs and time required for individualized research and record keeping. Organic farmers also say there is still disconnect between the farm and manufacturer. Food manufacturers can improve this relationship with growers by connecting with the farmer during all stages of production. Starting on the farm, food manufactures can advise farmers on changing consumer tastes and product requirements, supply producers with local organic approved inputs to boost yields, and incentivise growers through seasonal grain and produce contracts. These relationships benefit the producer and the manufacturer, through improved yields, guaranteed grain supply, better transparency, promotion of local collaboration and reduced risks. Ultimately this incentivises the grower to continue to produce organically while lowering costs for the consumer.
Covid-19 and Consumer Demand
Covid-19 is a global pandemic that is changing our world and shifting consumer focus in many ways. Organic food sales are surging with expected sustained demand. More emphasis is placed on locally produced food, sustainability, food security, environment, transparency, long-term health and wellness, and home cooked meals.
The pandemic has encouraged change on the premise of several important factors in the food industry.
- Government investment in domestic food production, especially organic
- Encouragement of organic food production to build resiliency in national food industries
- Global trend to reduce pesticide usage and improve soil fertility
- Development and implementation of traceability tools and technologies
Organic production has long-lasting effects on the ecosystem and employs a pro-active approach to reducing pollution and environmental degradation.
- Improves soil health, structure, formation and encourages beneficial colonization of soil organisms.
- Promotes moisture and nutrient retention, reducing soil erosion.
- Less pollution of surface and groundwater through leaching and runoff of synthetic fertilizers and pesticides.
- Decreased requirements for agricultural chemicals, thus reducing the use of non-renewable energy and production of fossil fuels.
- Better carbon storage and sequestration through organic farm practices; crop rotations, residue management, cover crops…
- Creates suitable habitats for wildlife by preserving ecological areas around organic fields, encouraging biodiversity.
- Reduces the load of reactive nitrogen into the atmosphere (N2O emissions from leading sources) contributing to smog, acid rain, ozone depletion etc… Organic production stores and recycles more nitrogen within the soil (University of Virginia, Environmental Research Letters).
Imports, Exports and Organic Integrity
Over 70% of organic raw materials are imported from outside the USA in 2020. Equivalency arrangements are negotiated to ensure similar organic regulations across countries involved in trade. With evolving regulations in various countries, this is becoming more difficult. In order to prevent fraudulent imports, handlers and importers are now required to be certified for organic handling and follow more stringent regulations. Recently, as a result of Covid, some trade opportunities have been lost due to less travel and cancellation of major trade shows. In order to maintain adequate supply chain, ensure good traceability and integrity of organic products it is becoming increasingly important to focus on local supply of organic products. This should be achieved through all levels of industry with emphasis on collaboration between local fertility product suppliers, local producers, local product handlers and local food manufacturers. The domestic sourcing of products in North America encourages our farmers to farm organically while promoting economic growth overall.
Laura Northey. WHY IS ORGANIC FOOD MORE EXPENSIVE? https://www.organiccouncil.ca/9171/
Organic Trade Association. Organic Industry Survey 2020.
Food and Agriculture Organization of the United Nations. Organic Agriculture. http://www.fao.org/organicag/oa-faq/oa-faq6/en/
Leslie Patton and Elizabeth Rembert. Americans Use Pandemic to Get In Shape With More Organic Food. July 15, 2020. https://www.bloomberg.com/news/articles/2020-07-15/americans-use-pandemic-to-get-in-shape-with-more-organic-food