Organic farming is now a $3.53 billion industry, according to the newly released 2011 Certified Organic Production Survey from the U.S. Department of Agriculture’s National Agricultural Statistics Service.
And unlike conventional agricultural products, the survey found organic crops — in particular fruits and vegetables — account for the largest portion of organic sales.
“When you look at the crop side of the equation, vegetables are the lead commodity at $1.1 billion and they’re followed by the fruits at $494.8 million,” said Hubert Hamer, chairperson of NASS’ Agricultural Statistics Board.
Total 2011 organic crop sales equaled $2.2 billion, meaning vegetables made up half of crop sales, and fruits accounted for a little less than a quarter.
In contrast, the 2007 Census of Agriculture for all farms showed that vegetables, melons, potatoes and sweet potatoes totaled only about 10% of crop sales and fruits, tree nuts and berries comprised about 12%.
Barbara Haumann, a spokesperson for the Organic Trade Association, said this difference could be explained by high consumer demand for organic produce.
“When the groundswell of demand is coming for organic fruits and vegetables, it just makes perfect sense,” said Haumann.
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At the same time, as the organic market has expanded to keep pace with consumer demand, retailers have had to adjust how much more they can charge for organic produce as compared to conventional.
“As production has increased and you’ve had to tap into that slightly broader base than the true diehard organic consumer, it starts to put pressure on the pricing,” said produce consultant Dawn E. Gray, Dawn Gray Global Consulting, Vancouver, British Columbia.
While consumer demand may be driving the organic produce category overall, Gray suspects a big reason why organic vegetable sales outpace fruits is that the cost of converting to organic is lower for vegetables.
Similarly, conversion cost is a big factor in the comparatively low volume of sales for organic livestock, poultry and their products, which added up to $1.31 billion, or a little more than one third of the 2011 total. In the 2007 Census of Agriculture livestock, poultry and their products accounted for about 52% of sales.
This difference can partially be explained by the fact that organic standards for produce and other crops had already been developed in many areas before the USDA adopted national rules, while in many cases standards for livestock and poultry hadn’t, said Haumann. There is also a bigger investment involved for livestock and poultry farmers to meet all the USDA organic requirements so the industry has been slower to make the switch.
High costs for farmers also make organic meat more expensive for consumers. However, Haumann said the sector is expected to keep expanding as demand grows.
“One of the things we’ve been seeing is, when consumers are polled, they’re very interested in this category. So it definitely is a growing category,” said Haumann.
The 2011 survey also looked at where organic farms sell their products. The vast majority of sales — 81% — go to wholesalers, while 6% go to consumers and 13% go directly to retailers like supermarkets and natural food stores.
Industry experts agree this is because retailers are buying organic products from wholesalers, rather than directly from farmers. Gray said wholesalers are better equipped to deal with the needs of retailers, who may only want a small selection of organic products.
“They don’t want a full pallet,” said Gray. “They want partial pallets. That’s very challenging for most producers to be able to do. But the wholesalers, that’s their business, is to manage those supply chain logistics. That’s the most cost effective way to continue to supply into retail at this stage.”
Overall, the multi-billion-dollar sales reported in the 2011 survey mean that “organic ranks fifth among commodity classes and is larger than peanuts and cotton combined. So in other words it’s certainly a major player in American agriculture,” said Haumann.
Taken as a whole, the data will allow government entities to consider the impact of organic when deciding federal crop insurance and other policy issues, and will provide a basis for further research and decisions within the industry.
“Really from our point of view in Washington we feel … organic truly deserves a seat at the policy development table,” said Haumann.
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