ORGANIC TRANSITIONS: EXPENSES, PRICES & AVAILABILITY

Christine Blank

In the organic farming community, the strong survive.

Although organic farmers achieve much higher premiums -- as high as 100% to 200% for some crops -- than conventional farmers, they must first go through a three- to four-year transition period in which they are paying higher costs for inputs but not receiving premium pay.

During this time farmers use more expensive manures, fertilizers, organic seed and organic feed for meat and dairy producers, along with other items not used in conventional agriculture.

"Some would assume that farmers are getting very wealthy off of these prices, but it's just that the [conventional] prices are really low," said Martin Kleinschmit, sustainable agriculture specialist with the Center for Rural Affairs in Lyons, Neb.

"For a field to qualify for organic production, it has to be free of any unauthorized pesticides and chemicals for three years. The operator had to learn a new set of practices, and do quite a bit of paperwork, and he didn't get more for his crop during those three years," Kleinschmit added.

The time and expense associated with transitioning from conventional to organic also lead to less availability of certain products, affecting selection at the shelves. Grocers saw an example of how the long transition affects supply earlier this year when dairy producers were unable to keep up with the demand for organic milk. Some supermarkets were experiencing a 50% increase in consumer demand for organic milk over last year, surprising dairy companies. While many, such as Organic Valley in La Farge, Wis., immediately began aggressive campaigns to attract more conventional producers to organic, they have to wait three to four years for those businesses to make the transition.

In many cases, livestock and dairy producers have changeover periods of up to four years. The land on which the livestock grazes must be in transition for three years, then roughly another year is added on top of that. During the latter period, the animals are treated holistically, without the use of antibiotics and growth hormones.

"You're paying for organic feed, but you don't get a penny more for the milk," said Clark Driftmier, senior vice president of marketing for Aurora Organic Dairy, Boulder, Colo. "That's a very significant hurdle. We, and everyone else who does it, have to find a way to budget that."

Driftmier and others talk about this irony during the transition time, when cattle are being fed organic but producing conventional.

"It's great news that more people are interested in organic food, but transitioning to organic is a three-year process that cannot happen overnight," agreed Jule Taylor, director of milk supply for Horizon Organic Dairy, Boulder, Colo. "Helping farmers transition to organic is the only way to meet consumer demand."

To that end, Horizon provides financial support to farms during their last 12 months of transition; then, once the farm is certified, it offers a sign-up bonus to those farmers.

After the organic dairy shortage was publicized this year, Organic Valley began offering all transitioning farmers a premium of $2 per hundredweight on their milk.

"The thing about transitioning is that [farmers] are still getting conventional price, but they're probably not getting yields as good. After a while, they will get comparable yields, but not at first," said Jim Pierce, certification director for Organic Valley.

Organic Farming Costs More

In addition to transition costs, organic farmers face several other challenges that make production more difficult and expensive.

"In certain parts of organic, crops are especially difficult to produce. Berries, for example -- you don't have the same fungicides," Driftmier said.

The requirement to rotate crops also leads to higher costs. "You can't plant soybeans year after year. You've got to rotate that ground or leave it fallow," said Rod Crossley, an organic consultant based in Montrose, Calif.

"You're not using all your acres -- about one-fourth of the land is soil-building crops -- so they don't contribute to your income," Kleinschmit added.

Economy of scale also plays a role. Organic farm operations are generally smaller than their conventional counterparts, so their cost efficiencies are not comparable. Even with large manufacturers now involved in organic production, such as Dean Foods, ConAgra, Kellogg and General Mills, the "source of the raw ingredients comes from smaller farms," Driftmier said. Again, it contributes to higher costs for end products.

"Organics operates in a less-efficient system overall than conventional right now," Driftmier said. "If people were hoping by now the premiums would disappear, no. It's really in an embryonic form -- 20 to 25 years old -- compared to traditional agriculture," he added.

Supporting Organic Farmers in Transition

To help mitigate transitioning farmers' expenses, the organic industry has tried various support programs -- such as providing them with a slight premium for transitional products -- but most were short-lived. However, farmers are getting some assistance through private-company initiatives, such as Organic Valley and Horizon Organic's dairy premiums for transitional farmers.

There's even some help from the government. For example, the Center for Rural Affairs, through state grants, helps farmers transitioning to organic. "We will work with farmers in Nebraska to pay $50 per acre for cropland, if they meet organic program regulations," Kleinschmit said.

The Nebraska aid comes with the stipulation that, after three years, the transitioning farmers must obtain organic certification or face penalties.

While organic certification is not the farmers' biggest cost -- averaging $500 or more a year, depending on the size of the farm or herd -- some agencies are eager to help with those costs.

The U.S. Department of Agriculture's National Organic Program has assisted organic farmers in 15 states with an Organic Certification Cost Share program in recent years. Farmers eligible for the program are reimbursed up to 75% of their certification costs, up to $500.

And Woodbury County, Iowa, this summer launched the first program of its kind in the United States: Farmers who convert to organic operations are eligible for real estate tax rebates. The county board said U.S. supplies of organic dairy, soybeans and grain are not meeting current demand, and developed the plan as a way to entice farmers to make the switch. At the same time, the board hopes to protect farmers and farmland from falling victim to increasingly large agribusinesses that dominate the industry.

"The policy will promote the return to smaller-acreage farms, requiring additional labor, while providing a greater return for their agricultural production," said Rob Marqusee, Woodbury's director of Rural Economic Development, in describing the program's benefits.

Good Advice

Tell customers why organic foods can be more expensive:

There's a three-year transition period, when farmers must use more expensive organic farming materials and learn new farming practices. These steps tend to increase the products' overall cost.

Organic milk is especially expensive to produce because farmers must give their livestock certified organic feed, which is at least twice the cost of regular feed, for nine months prior to organic certification.

Organic producers typically operate on a smaller scale than large farms, so the same cost efficiencies don't exist.

Required organic crop rotation means farmers cannot plant all their acreage with the most profitable crops, such as organic soybeans.