International Developments Relating to Organic Agriculture
March 2005
Worldwide OverviewOrganic Standards and Regulations
Benefits
Consumers
Countries Update
Worldwide Overview
The organic industry has become a profitable and fast growing retail sector in Europe and the US over the last decade. Sales across Europe have doubled since 1998, and consumers in Italy, Spain, Germany Britain and France spent a total of €8 billion on organic food in 2003. In the US, the market for organic foods and beverages has been reported to be growing at 20% each year1. Nevertheless, the organic sector is still a niche in the total food sector. The organic market share in Denmark is estimated at almost 3% of the total food sales, probably the highest in the world. It is followed by Switzerland and Austria with 2% and 1.8% respectively.
Organic food often costs more than other food due to lower yields, more labour-intensive production and expensive materials. In some countries insufficient supply and additional distribution costs also push up the price. For these reasons, organic products seek premium prices in a market dominated by low commodity prices for agriculture and horticulture products. However, the extent of the market premiums varies considerably from commodity to commodity and from time to time according to market conditions. For example, when it can be sold on the organic market, the return for organic milk in the UK is at around ₤2/litre higher when compared to non-organic. Organic beef and lamb attracts premiums of around 14% over conventional equivalents. For cereal crops currently there is a considerable market premium over conventional cereals of the order of 100%2.
More than 24 million hectares of farmland are under organic management worldwide, according to the International Federation of Organic Agriculture Movements (IFOAM) 2004 report. The market for organic products, previously dominated by Europe and America, is now growing in more than 100 countries around the world. Its market value in 2002 was estimated at $US 23 billion and in 2005 is predicted to be valued at $US 31 billion3 - a projected increase of 34%.
Statistical information on organic production in developing countries is hard to find even though they often practise organic management. The proportion of land under organic farming on each continent is as follows: Australia/Oceania holds 42% of the world’s organic land, followed by Latin America (24.2%) and Europe (23%) as shown in the figure below.
Total area under organic management - share for each continent 2004Source: IFOAM report 20044
Organic farming has been increasing at a slower rate than it was five years ago and even in some countries a drop in organic farm conversions has been observed. For example in the Netherlands the number of farmers in the process of converting from conventional to organic methods fell by 30% between 2002 and 2003. The area under conversion also fell by a third to 3000 hectares.
Organic Standards and Regulations
The worldwide expansion in supply of organic products has not gone hand in hand with developments on organic regulations until recently. In fact the lack of clear organic standards and labelling in several countries has been causing trouble for organic producers and consumers. Several products labelled as ‘organic’ and ‘ecological’ have been found in Canadian supermarkets when they really haven’t followed any production standard. They are threatening Canada’s organic industry and “organic fraud” is becoming a growing concern among consumers. Canada has suffered from a poor standard and labelling regulation and now organic farmers are calling for the food inspection agency to announce a national program to produce a strict set of standards and an organic seal by the end of 2005.
New Zealand government-funded initiatives to enhance organic agriculture in the country were reflected in the launch of the New Zealand Organic Standard and Sector Strategy in November 2003. The Standard has not been used yet by New Zealand organic certification bodies such as Bio-Gro or Agriquality, but their plan is to use it in the future. Consumers would be able to recognise the standard and be assured of receiving a product of certified quality and that labelling of products is not misleading.
Despite the government’s efforts to keep a transparent market environment, New Zealand hasn’t been exempt from the organic labelling and standards debate. A survey done by the New Zealand Food Safety Authority in 2004 (NZFSA) found more than 20% of the “organic” fruit and vegetable sampled contained chemical residues. New Zealand's organic food industry is built on a very clear principle that what it sells is not produced with the use of pesticides. Certification schemes in New Zealand are self regulated and only produce that is exported is checked by the NZFSA for compliance.
The US Department of Agriculture launched a National Organic Program in 2002 which sets a national standard for organic products and provides for four levels of organic labelling. These provide consumers assurance of what they are purchasing and eating. The labels range from “100% organic” where all ingredients must be organically produced, “organic” where 95% of the ingredients must be organic, “more than 70% organic” and “less than 70% organic”.
In the UK, a new standard was proposed by the English Soil Association, which regulates the country's organic farming. It is considering setting standards for the amount of fat, sugar and salt that can be added to its recommended products. Organic farmers take care to grow food free from pesticides or herbicides and that animals and poultry are allowed to range freely. But once it gets to the processor, organic food is just as likely as any other to emerge heavily dosed with fat, salt and sugar, which contradicts the idea of "healthy" organic products.
Benefits
During the 24th Organic Conference and expo held in Guelph, Canada in January 2005, the benefits obtained by organic farmers in developing countries were discussed. Chinese and Indian farmers who have switched from synthetic fertilizers back to traditional organic farming have earned more and achieved a higher standard of living. Beside rising produce prices, lowering unemployment and reducing rural emigration, organic farming can reduce health risks posed by excessive use of certain chemicals.
The United Nations International Fund for Agricultural Development (IFAD) conducted a study in 2003 which showed similar benefits for farmers in six Latin American countries. However, it pointed out that small farmers who want to change to organic farming need security of tenure, access to family labour and support organizations to help them with training, loans, and collective marketing.
Consumers
On the consumer front extensive literature and surveys have studied public perception of organics. In the US consumers are willing to pay a premium for organic foods, but such factors as health, food safety, level of organic ingredients and where buyers shop impact on just how much that premium will be. Survey data found that concerns over consumer health and food safety were the top determinants by which consumers buy organic products. Some shoppers were willing to pay from 37% to 52% more for such attributes as non-genetically modified, locally grown, pesticide-free and 100% organic ingredients. Researchers also analysed demographics in the surveys and found that consumer willingness to pay for organics increased with consumer age, household income and the number of children in the household. Female consumers also were willing to pay more for organic foods. The leading reason consumers do not buy organic foods is because of price. Lack of variety, inferior taste and poor appearance also were reasons consumers gave for not purchasing organic foods.
With organic regulations now standardized in the US, more consumers may be switching to organic products. It has been suggested that by 2009, retail sales will be valued at $US 19 billion. A survey showed that 40% of respondents frequently or occasionally buy some organic foods. In addition, 32% said they would pay 10% more for organic foods; 6% said they would pay 25% more; and 1% said they would pay 50% more.
The Dutch Ministry of Agriculture is also planning a research project to find out how much consumers are influenced by price when choosing organic food. A discount will be available over organic food for a limited period, so it can be seen whether the narrowing of the price differential with conventional products results in an increase in sales.
The consistent consumer demand for organically produced foods plus its increasing availability from retailers indicate that organic products will keep expanding in the future. The agriculture sector has generally moved to reduce the use of agrichemicals, which may be boosted by growth’s interest in organic production.
Countries update
With the aim of promoting the organic sector, the Dutch government has put forward long term investment plans. It plans to invest €61 million to increase the area under organic farming in the next five years from 2.1% (at present) to 10% by 2010. It is also giving top priority to increasing demand for organic food. It has set a target of 5% of total domestic foods sales by 2007. This means that the retail demand would have to increase by 30% per year, but it has been rising by only 6.5% per year in the past few years.
Other countries have joined the Netherlands’ initiative to increase organic farming. For example, Sweden is targeting a 15% increase in the area under organic management, about 400,000 hectares of all agricultural land, by 2010. Sixteen percent of Swedish farmland is currently eligible for EU environmental aid, but only half of this is certified as organic. For dairy, beef, lamb and egg production, the new goal is to have 10% certified organic by 2010, doubling current levels.
In China and India organic production is growing steadily. The value of Chinese organic exports grew from less than $US 1 million in the mid-1990s to about $142 million in 2003, with more than 1,000 companies and farms certified. India reported 2.5 million hectares under organic farming with 332 new certifications issued during 2004.
In France, a survey carried out by the French consumer research institute (CSA) found there has been a 7% increase in market penetration compared with 2003. The number of certified organic hectares has increased in the past four years, from 370,000 in 20005 to 509,000 in 2004, and the number of organic farmers has increased from 9,260 in 2000 to 11,177 in 2004. However, organic farming remains marginal with 4% of the food market in value terms and 1.8% of the total agriculture area.
In the UK, the government’s Organic Agricultural Plan aims for 70% of all organic food consumed in the country by 2010 to be home grown. Despite total sales now comfortably past the ₤1 billion mark, there has been little progress in organic import substitution. Organic imports remain at 56%. There has been a 70% drop in the level of “in conversion” land, which indicates a decline in new land passing into organic management. Oversupply continues to mar the organic dairy market, with 38% of the organic milk sold into non-organic markets. On the policy/aid front, the new Organic Entry Level Stewardship replaces the Organic Farming Scheme payments from March 2005, and at ₤60 per hectare, subsidies will be double what non-organic farmers receive.
The US organic retail market has been growing by 20% per year for the past several years. In 2003, US retail sales were at $US 13 billion and it is expected that in six years later retail sales will be at $US 19 billion.
In 2003 Latvia introduced an Action Plan to promote organic production. Since then, Latvia has recorded an 80% increase in the area under organic management, from 24,400 ha at the end of 2003 to almost 44,000 ha in December 2004 - although this still represents no more than 2% of Latvia's total farmland area. The number of organic farmers also increased by 90% from 550 in 2003 to 1040 in 2004. Beginning last year, the government has provided area aid payments for organic farmers in the context of the country's national agri-environmental programme.
1http://www.packagedfacts.com/pub/977845.html
2http://statistics.defra.gov.uk/esg/pdf/orgbus.pdf
3http://www.agric.nsw.gov.au/reader/about-organic/organic-farming-potential.htm#World
4It is important to consider that the percentage of land area certified organic does not equate to share of production.
5http://www.organic-europe.net/country_reports/france/default.asp
Contact for Enquiries
[an error occurred while processing this directive] Contact this person
