Part 2 for week of May 22
Overview
The Midwest Organic and Sustainable Education Service (MOSES), based in
Spring Valley, Wisconsin, today called on farmers to look closely and
positively at the opportunities now emerging in organic agriculture.
According to MOSES executive director, Faye Jones (715-772-3153),
booming retail sales of organic products over the last decade have begun
to create new demand for organic farm production. "The organic sales
projections, while they vary to some degree from analyst to analyst, are
all very, very positive. Certainly, organic food is still a niche
market, but it is clear that this market will continue growing. There
are some important economic opportunities here for farmers in the
Midwest, particularly organic livestock producers and for those that
raise the certified organic grain that these animals eat."
MOSES (www.mosesorganic.org <http://www.mosesorganic.org/> ), organizes
the Upper Midwest Organic Farming Conference which will take place
February 24-26th in La Crosse, Wisconsin. The conference, now in its
16th year, is the largest of its kind in the U.S., and in 2004, drew
1500 participants.
A recent report published by the industry trade publication, Nutrition
Business Journal**, says that in 2003, organic food sales were $10.4
billion in the U.S., up by 20% from the previous year. This constitutes
about 2% of all food purchases. The report projects that total U.S.
organic food sales are expected to reach almost $24 billion in 2010. It
projects a 13.8% annual increase in organic sales the next 5 years, with
some products projected to have much more significant percentage of
growth than others (48.6% annual growth for organic poultry, 39% annual
growth for organic meat).
The Nutrition Business Journal** projections, while very positive, are
actually conservative when compared with recent projections reported by
the Organic Trade Association. The OTA projections call for US retail
sales of organic products reaching $30.7 billion by 2007 with a
five-year compound annual growth rate of 21.4% between 2002 and 2007.
This compares with a 21.2% growth rate from 1997-2002. (by Datamonitor
as reported by Organic Trade Association
www.ota.com/organic/mt/business). Results of the Organic Trade
Association's 2004 survey of manufacturers including sales growth by
food sector can be viewed at
http://www.ota.com/pics/documents/2004SurveyOverview.pdf
Organic agriculture analysts vary in their assessment of how great the
opportunities are for farmers in the region. Kevin Edberg (651-287-0184)
is the Director of Cooperative Development Services and was formerly a
leader in the Minnesota Department of Agriculture's Marketing Division.
Edberg takes a fairly cautious approach. He says that there is "not a
**While these projections forecast significant growth, they are
conservative, when compared with the overall 20% growth of organic sales
the last decade (77.8% annual growth of meat, fish and poultry from
2002-2003). Researcher Grant Ferrier (619-295-7685, ext. 16) of the
Nutrition Business Journal, used a conservative approach in making these
projections. He looked at organic sales in "more mature markets" such
as those in Europe and sees that growth there has not been as dramatic
as in the U.S. and anticipates the organic market in the U.S. becoming
somewhat saturated.
rampant undersupply" of organic products. "But there are genuine
opportunities out there. The question is whether those products will
come from offshore sources, current U.S. producers, or new U.S.
producers." He believes that there is more of a shortage of organic
animal products than organic grain.
Organic industry analyst Ann Woods of the Organic Alliance
(715-632-2610) is less cautious. She notes Midwestern farmers'
historical reluctance to transition to organic production and points to
the 3-year conventional-to-organic transition period that purely
conventional grain farmers would need to adhere to before marketing
certified organic products as insurance that the organic marketplace
would not become quickly saturated.
Mike Mazzocco, director of the Food and Agribusiness Management Program
at the University of Illinois in Urbana, Illinois (217-333-1816) sees a
significant opportunity for organic grain producers as well as a growing
interest in organic production among conventional grain farmers. He
believes that "Supply (or the lack thereof) is really constraining the
development of new organic products." In early January, Mazzocco led a
workshop in Illinois that looked at opportunities in organic production.
Of the 100 farmers in attendance, more than 80% identified themselves as
conventional producers.
Jim Riddle, of Winona, Minnesota (507-454-8310) is chair of the
USDA's National Organic Standards Board and an Organic Policy Specialist
with Rodale's www.newfarm.org <http://www.newfarm.org/> web magazine.
He leads seminars throughout the country on organic production and says
that, "Many conventional and transitional producers want to know about
the economics of organic production. Fortunately, the University of
Minnesota has conducted research showing that organic systems are indeed
profitable." Researchers at the University of Minnesota conducted a
long-term economic analysis of the profitability of organic vs
conventional cropping systems in Southwestern Minnesota. The researchers
found that the organic system was equally profitable to the conventional
system, even when the organic products were sold at conventional prices.
When the organic products were sold at organic prices, the organic
system was much more profitable.
Bob Scowcroft, Director of the California-based Organic Farming
Research Foundation (831-426-6606) agrees that there is definite growth
potential in organic agriculture but takes a more cautious outlook. He
cautions "We're in a mini-boom right now, which will probably be
followed in a few years by a mini-bust." He urges farmers to expand
organic production, but to do so modestly, perhaps increasing their
organic production by 5% per year. He suggests farmers adhere closely
to organic farming principles, maintaining crop rotations and biological
and economic diversity. "Don't go out there and do fence row to fence
row organic grain production." Scowcroft is also concerned about how
U.S. organic producers will be affected by the growing investment in
organic agriculture by the 11 dominant global agribusiness corporations,
9 of whom already have organic divisions.
NOSB Chair, Riddle, has worked as an organic producer, certifier, author
and instructor for the past 25 years and is gratified to see the growth
and popularity of organic agriculture. He projects continued demand for
the wide range of agricultural products that can be grown organically in
the Midwest. "As consumers learn more about Mad Cow Disease, genetic
engineering, frog deformities caused by herbicides, and environmental
degradation caused by conventional farming practices, they turn to
organic food, which offers a safe, healthy, flavorful, and ecologically
sound alternative."
MOSES' Jones is confident that the market for organic foods will
continue to grow and is pleased to see how consumers are rewarding
organic farmers for their efforts and commitment. "It's very
encouraging to see organic producers beginning to derive some financial
benefits from the marketplace. What is important is that their care of
the land and livestock translates into many more benefits for the rest
of society -- money and resources kept closer to home in rural
communities, less toxic substances in the air we breathe and in the
water we drink, food without antibiotic residues, more biodiversity on
the landscape and healthier soils. And new research is beginning to show
nutritional benefits (higher anti-oxidant levels) from
organically-produced food as well."
Key Midwest Organic Farming Sectors
Dairy
Nationally, organic dairy products represent 3% of total dairy
sales. Total U.S. sales of organic dairy products in 2003 were $1.38
billion, according to Nutrition Business Journal**. The publication
projects annual growth of 15.6% from 2004-2008 for organic dairy
products, reaching $2.81 billion in 2008.
La Farge, Wisconsin organic dairy processor, Organic
Valley/CROPP, saw sales increase by 33% in 2004, going from $156 million
in 2003 to $208 million in 2004. Projected Organic Valley/CROPP sales
for 2005 are $259 million, a 25% increase.
To put the Nutrition Business Journal** numbers in perspective, a 15.6%
increase in 2005 alone ($216 million) is greater than all of the organic
dairy sales by Organic Valley/CROPP in 2004, in essence requiring the
equivalent of a new Organic Valley/CROPP every year (analysis by Kevin
Edberg).
In terms of price, Organic Valley/CROPP dairy producers were paid more
than 25% more than their conventional counterparts in 2004, a premium of
$4.16 per hundredweight. This premium was actually considerably less
than in previous years as the conventional price per hundredweight of
milk reached levels not seen in recent years.
Tim Griffin of Organic Valley/CROPP (888-444-6455 ext. 285) believes
there will be the need to double their milk production to meet demand in
the next 5 years. Organic Valley/CROPP currently has 689 organic
farmer-members in 20 states. 50% of all of Organic Valley/CROPP's
production is from the Midwest. 65% of their producers are in the
Midwest.
Poultry and Beef
Organic poultry sales were $46 million in 2003. Nutrition Business
Journal** projects an annual growth rate of 48.6% which means a doubling
of sales by 2005 and increasing 4-fold by 2007.
Organic beef sales were $10 million in 2003. Nutrition Business
Journal**projects annual growth rate at 39% through 2008. This means
$26.85 million in sales, more than double that of 2003 by 2006.
Organic Valley/CROPP also now sells organic meat and poultry and has
been running want ads in regional newspapers calling on producers to
supply them with more organic poultry, hogs, and beef.
Organic industry observer, Lynn Clarkson, of Clarkson Grain
(www.clarksongrain.com) in Cerro Gordon, IL (217-763-2861) compares the
current 5% of market share which organic fruit and vegetables have in
the U.S. with the much smaller market share held by organic dairy, meat
and poultry. He notes that organic rules for meat were only adopted by
the USDA in 2002 and that the approval of these rules will help expand
this market dramatically. Clarkson anticipates organic meat, dairy, and
poultry to have 5% market share by 2010.
Produce and Soymilk
Organic soymilk sales were $927 million in 2003 with an 11% annual
growth rate projected by Nutrition Business Journal** from 2004-2008.
Organic produce (vast majority fresh) sales were $4.3 billion in 2003.
Annual growth rate projected by Nutrition Business Journal**at 11%
through 2008
Demand and Price for Organic Grain
Lynn Clarkson clearly believes that there is a need for more domestic
organic grain production, particularly for feeding the growing organic
meat market. Clarkson Grain deals in conventional, organic and
non-transgenic grains. It began trading grain in the organic
marketplace in 1991 and today operates 25,000 tons of dedicated
commercial organic storage backed by several times that in farm storage
(from their website)
Lynn Clarkson encourages grain producers to move into the organic
marketplace. "For a long time, we've been looking at at least double or
triple conventional prices for organic. Today, in Decatur, IL, the
conventional price for corn is $2/bushel while organic, on the low end
can get $4.10 to $4.75. With soybeans, conventional beans today are at
$5.10 per bushel with organic beans getting $11.50-12 and even more,
$18-20 per bushel for food-grade beans (for soy foods)."
Clarkson differs with those organic grain producers who are holding out
for prices as high as $20-25 per bushel for soybeans. "I think that
there is a "sweet spot" in the marketplace for feed-grade organic beans
at about $10-15 per bushel." He suggests that that price is cheap
enough that livestock producers will not need to shop around for
alternative protein sources and also low enough to ward off global
competition.
OFARM (Organic Farmers' Agency for Relationship Marketing) www.ofarm.org
<http://www.ofarm.org/> works to make sure that organic producers
secure a good price for their products. Their director is John Bobbe
(920-825-1369), based in northeast Wisconsin. Bobbe believes that
weather conditions in the U.S. and organic grain imports will play a
significant role in the demand for organic grain products. With respect
to price, OFARM's established target prices for organic grain producers
for 2003-04 were $10-12 per bushel for feed grade soybeans, $16-20 for
food grade soybeans, and $4.25-4.75 for corn.
On January 6, 2005, Farmers Co-op Elevator in Houston, Minnesota was
paying $1.70 per bushel for conventional corn and $4.85 per bushel for
conventional soybeans (telephone inquiry 507-896-3141).
South Dakota State University researchers Thomas Dobbs and Nicholas
Streff examined the prices farmers received for organic corn, soybeans,
wheat and oats from 1995-2003 and compared them with conventional grain
prices for that period. On average, during this period, organic corn
prices were 196% higher than conventional corn prices, while organic
feed-grade soybeans were 266% higher than conventional soybeans. A
complete copy of this study is available directly from Dobbs at
[log in to unmask] or from MOSES' Doug Nopar at [log in to unmask]
U.S and Global Organic Acreage
2001 acreage in organic certification in U.S. was 2.35 million
acres-57%cropland, 43% rangeland/pasture. This is .3% of US farmland.
Catherine Greene of the USDA's Economic Research Service
[log in to unmask] (202-694-5541) anticipates updated estimates of
organic acreage and production volumes to be completed later this
winter.
Global organic acreage is 59 million acres (24 million hectares)
(as reported by Organic Trade Association
www.ota.com/organic/mt/business)
Australia-24.6 million acres
Argentina - 7.4 million acres
Latin America - 14.3 million acres
Europe - 13.5 million acres
North America - 3.7 million acres
Economics of Organic Production
Profitability of Organic Cropping Systems in Southwestern Minnesota,
Paul R. Mahoney, Kent D. Olson, Paul M. Porter, David R. Huggins,
Catherine A. Perillo and R. Kent Crookston, Renewable Agriculture and
Food Systems 19(1)(2003):1-12.
Abstract. In spite of concerns, Minnesota's dominant cropping
system is the corn-soybean rotation using synthetic pesticides and
chemically processed fertilizers. Using experimental data from 1990-99,
this study compared the profitability of organic versus conventional
strategies. Net return (NR) was calculated from actual yields,
operations, inputs, prices, and organic premiums. Yields and costs were
lower for the 4-year organic strategy. With premiums, the 4-year organic
strategy had NRs significantly higher than conventional strategies;
without premiums, the NRs were statistically equal (p=0.05). Thus, the
4-year organic strategy was not less profitable nor its NR more variable
than the conventional strategies in this study.
From http://www.apec.umn.edu/faculty/kolson/research.html
************************************************************************
****
Vicki Morrone
Organic Vegetable and Crop Outreach Specialist
Michigan State University
C.S. Mott Sustainable Food Systems
303 Natural Resrouces Bldg.
East Lansing, MI 48824
517-353-3542
517-282-3557 (cell)
517-353-3834 (fax)
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