1.5 - A Critical Assessment of the Institutional Structure

1.5.1 Organic Certification

New Zealand has two certification systems - BIOGRO and Demeter - which developed in the early 1980s. The Demeter label was established by the Biodynamic Farming and Gardening Association in 1982, and the NZ Biological Producers Council was formed in 1983 which represented a coalition of different interest groups supporting organic agriculture and created the BIOGRO label as an umbrella label for New Zealand organic produce. Since 1983, the BIOGRO label has become far more numerically significant with between 250-300 licensees using the BIOGRO label in 1997 compared to 40 licensees using the Demeter label.

During the 1980s the NZBPC was largely a voluntary organisation and development of a set of organic standards for inspection under the BIOGRO label only occurred slowly. Through most of the 1980s, organic farms were inspected by volunteer inspectors from the NZBPC and the 'organicness' of farms was as much established by membership of the organic agriculture social movement as it was related to any strict set of standards. This is not to suggest that producers were not following the principals of organic production, rather that the tight networks of social interaction within the organic agriculture movement did not require much recourse to any set of objective standards to establish legitimacy as organic growers and users of the BIOGRO label.

This system was substantially restructured in the 1990s. The NZBPC instituted a fee system for inspection of organic properties and also imposed a levy on the value of farmgate returns (and returns to organic processors). This move towards a more commercial basis for certification culminated in 1994 when a two-tier system was instituted with higher fees for producers with turnover of over $15,000 of certified product and lower fees for producers under this level. While the raising of fees was influential in causing some growers to leave certification, it was only one factor. In 1997, a small-growers group-based certification system was established which offers a more affordable certification system for small growers.

The current certification system involves annual inspection of a property by a BIOGRO inspector. The results of this inspection are discussed at a meeting of the regional inspectors where decisions are collectively made about the certification status of the property.

The BIOGRO Inspectorate audit properties to the BIOGRO standards. The Inspectorate operates independently of the main BIOGRO organisation in order to avoid undue pressures from other members of the industry.

The process of conversion from conventional to organic production usually takes a number of years. Applicants register their property with BIOGRO and after one year of non-use of prohibited inputs are able to apply for >transition= status. At this stage the applicant has to have established a management plan for the property, which is approved by the local inspector, and be working towards the requirement for full BIOGRO certification. Frequently, it takes two years to reach full BIOGRO status, although this time can vary depending on the documented history of the property and the development of accepted management procedures.

The BIOGRO standards have evolved since 1983 and there are procedures in place which enable these standards to be reviewed. Changes to the standards can be made at any time by the BIOGRO board of directors, however, every two years a review of the standards is conducted and all participants in the industry can make submissions for revising the standards during this review. These BIOGRO standards have evolved in dialogue with international organic groups like the International Federation of Organic Agriculture Movements (IFOAM) and the Australian organic agriculture body NASAA. The great majority of exporters have decided to use the BIOGRO standards rather than the alternative biodynamic Demeter label. No exporters are using uncertified produce as it is unable to be sold as organic in any overseas market. The findings of Campbell (1996) and Campbell et al. (1997) show that companies like WFF and the NZKMB have been strong supporters of maintaining high organic standards as this is what is demanded by their customers. One of WFFs customers in Japan even prohibits one input which is restricted but acceptable under certain circumstances by BIOGRO. The BIOGRO standards are held in high regard by overseas markets. Given the recent experience of organic kiwifruit growers in Chile being banned from selling to the Japanese market due to the discovery of a lack of integrity in their certification process, companies like WFF and the NZKMB are very keen to see the maintenance of BIOGRO as a strict and credible certification agency.

1.5.2 Research

There has been only a relatively recent, but complex, history in relation to research agencies and their focus on organic production.

One of the earliest studies was commissioned by MAF in 1982 following representations to MAF by the Soil Association, Federated Farmers and other organisations. This study undertook an analysis of paired conventional and organic farms to determine their production and financial performance. This study (Gunning and Cullen, 1982) concluded that organic farming could have similar production and financial performance as conventional farms but they still had concerns over the future potential of organic farming. In the mid-80s, MAF again undertook a review of organic farming in the Haystead study which similarly compared organic and conventional paired farms. This study terminated before it was concluded, although Haystead was reported as saying that initial findings were positive for organic production (Ritchie and Campbell 1996). At the same time MAF established the Agroecology research programme to focus on issues of significance for organic farmers. A feature of this programme was the establishment of certified organic areas on MAF research stations which provided the base for organic research. In 1991 Nick Lampkin, an internationally recognised expert on organic production, was employed by MAF to run this programme. However, he soon departed after his research bids were unsuccessful when presented to the newly created government funding agency - the Foundation for Research Science and Technology.

The restructuring of the government science system in 1992 resulted in a significant change in research on organic production. The two main government agencies conducting agricultural research - MAF and DSIR - were restructured with their agricultural roles separated into three main Crown Research Institutes (AgResearch, HortResearch, Crop and Food Research). A feature of the restructuring was the establishment of an external research funding agency - FoRST - which facilitated the establishment of funding priorities and managed the selection of projects to meet these objectives. A feature of this change was the shift from the funding of farm systems based research - typical of past MAF organic research - to component research which investigated components of a production system. This shift in focus resulted in a decline in research funding to support MAF organic research programmes inherited by the different Crown Research Institutes. Individual components of the MAF research programmes did survive but often were redefined to reflect different outputs from the previous focus on organic production.

In addition to government research funding, there were a number of other agencies and companies which provided funding and undertook research into organic production. The Kiwifruit Marketing Board, Apple and Pear Board and Wattie Frozen Foods Ltd. all provided funding for research into aspects of organic production while Agmardt, and the Meat Research Development Council (MRDC) also provided funding for projects which were of value for organic production. In addition, Massey University carried out a further comparative studies between organic and conventional production which highlighted environmental and economic benefits from organic production (Reganold, 1993).

Currently there are still few research programmes which undertake research on organic production systems. However, there are a large number which are undertaking research into areas which will be of potential value for organic production. A significant issue during the whole history of research into this area has been the effectiveness of technology transfer systems to enable farmers to adopt research outputs. Many organic producers highlight this failure with some suggesting in the focus groups that this is more of a significant issue than the actual kinds of research being undertaken.

1.5.3 Government Agencies

Outside of research institutions, the organic industry has had only limited contact with government agencies in the past. In particular, the organic industry has received none of the financial support and subsidies available particularly in Europe.

MAF provided assistance into the revision of the BIOGRO standards in 1988 and has held ongoing discussions with the certification agencies in relation to the need for MAF Regulatory Authority assistance in providing government to government recognition of the two certifying agencies; an issue still being debated in relation to assistance for market access.

Tradenz in combination with the Food and Beverage Exporters Council undertook a review of the organic sector in 1992, and in 1995 facilitated the establishment of a Joint Action Group - the Organic Products Exporters Group (OPEG). This group is made up of companies currently or interested in exporting organic products and has organised a number of trade missions and other market development initiatives. The group's activities are supported through a 50 per cent subsidy from Tradenz.

The Ministry of Commerce has been involved in discussions with the certifying agencies about the protection of the term organic in food labelling in New Zealand. To date there has been no significant progress on this issue.

1.5.4 Other "Eco" Labelling Systems

The overall structure of the organic industry is strongly influenced by the certification and labelling system. Five years ago, organic produce was relatively rare in that it required an inspection and certification procedure and an 'audit trail' guaranteeing the integrity of the product through to the marketplace. Such systems are now becoming more common as ISO9000 and ISO14000 criteria are increasingly being incorporated into export products from New Zealand. Consequently, the organic label is increasingly becoming only one of many labels in a particular market sector.

The most important point of interest is the potential relationship between organic labelling and other forms of 'green' labelling - either as part of ISO14000 or through Project 98 in New Zealand. As there are few examples of a non-organic 'green' label operating in New Zealand it is hard to assess what the relationship between these two types of label might be. Campbell et al. (1997) provides a preliminary analysis of the first such example of two 'green' labels operating in one commodity type. This is in the kiwifruit industry where the entire kiwifruit crop in 1997 was produced under either 'organic' or low-input 'Kiwigreen' systems. At an infrastructural level, Campbell et al. (1997) argue that there are significant cross-over benefits between organic and Kiwigreen systems, and rather than providing a substitute for organic production, Kiwigreen has assisted a greater number of growers to fully convert to organic production as well as increasing access to pest monitoring facilities and increasing the availability of 'soft' sprays. The main issue still at stake is in the market where some predict that low-input systems will strongly undermine consumer demand for organic produce. It is as yet unknown whether Zespri International will market Kiwigreen fruit under its own label, but if it does Campbell et al. (1997) predict that one of the four following scenarios will arise:

  • reduced market share: Kiwigreen will capture some consumers who hitherto have purchased organic kiwifruit purely to obtain a product free of chemical residues. These consumers will prefer Kiwigreen due to its lower price compared to organic.
  • separate niches: the two labels will cater to separate market niches and will develop in parallel.
  • increased market profile: as the amount of market promotion for specifically organic kiwifruit has been nearly non-existent, the arrival of a 'green' marketing campaign for Kiwigreen may actually attract consumers to organic kiwifruit who were previously unaware of the existence of such a product.
  • market halo: in this scenario, organic products might prove beneficial for the marketing of Kiwigreen products by operating as a keyhole product that enables marketers to couple highly desirable organic fruit with Kiwigreen product. In this scenario, organic fruit creates a market halo for its supplying company and has a positive spin-off for other categories of non-organic fruit.

Evidence from the three main markets for organic produce support different scenarios. In the USA, the growth in purchasing from natural foods stores has been based on the simultaneous provision of organic and 'spray-free' products in the same store. Both categories of product experience increasing demand in parallel to each other.

In the European market, the low level of promotion of organic products from New Zealand might lead to the 'increased market profile' scenario - although this is fairly speculative.

In Japan the experience of WFF in using organic vegetables as a keyhole product to create a market halo for other non-organic products has been a feature of their market development over the last five years. This has occurred despite the expectation that Japan would adhere to the 'reduced market share' scenario due to evidence that Japanese consumers are motivated by food safety concerns which would be more cheaply satisfied by low-input products.

In conclusion, preliminary evidence suggests that three of these market scenarios may be emerging - separate niches, increased market profile, and market halo - while the negative scenario of reduced market share is not yet borne out. This would suggest that there will be benefits to New Zealand in pursuing both organic and low-input labelling systems. This kind of issue is being discussed as part of the Project 98 initiative, but no specific plans have yet been made public.

1.5.5 Input Suppliers

The move to organic production results in a change in the type and amount of inputs used in a farming system and often a change in the supplier of inputs. This change can also have other implications such as the removal of information and support resources - a characteristic of many conventional farming input suppliers. In the development stage of organic production major difficulties in obtaining inputs permitted under the certification standards are faced, with spatial distance and relatively small markets being impediments to companies developing suitable distribution networks. A result of this is the difficulty of purchase and resulting high cost of many inputs. With growth in the organic industry (e.g. organic kiwifruit) specialist input suppliers do appear which decreases these problems. With the increase in demand - particularly around the WFF and NZKMB developments - traditional input suppliers have often become involved in the supply of inputs for organic farms, thereby forcing out some of the smaller niche suppliers.

1.5.6 Finance Institutions

There is some anecdotal evidence to suggest that banks and other finance institutions have played a role in farmer decisions whether to convert to organic production. Campbell (1994) discovered some preliminary information that one bank was refusing to support farmer attempts to convert to organic production in the 1980s and, as such, provided a barrier to conversion that has not previously been recognised. However, the focus group research indicated that many growers had received support from their local bank managers about converting to organic production.

The role of finance institutions needs to be more clearly understood both as an institution which applies very conservative risk assessment criteria to new farm developments and as a potential barrier to conversion for some farms.

1.5.7 Company Structures

There are a wide range of companies involved in the trading and export of organic products and these companies actually provide much of the infrastructure for the industry. Three basic company structures can be identified.

  1. Large companies (e.g. WFF), and those organisations with statutory powers (e.g. NZKMB), have had a significant influence on the growth in organic production through support for growers and the establishment of effective distribution systems often operating in parallel to their conventional operation. These two organisations have diversified into organic production based on a combination of market signals, grower support for organic production, and the presence of internal champions in the organisation. The scale of their operations and resources have resulted in significant growth. Conversely, in other sectors (e.g. Meat, Wool, Dairy) a lack of similar support and focus by the respective dominant companies or statutory bodies has resulted in an apparent stagnation in organic production in their respective sectors. In summary, the large players have the size and scale to either strongly promote or strongly inhibit the development of organic production.
  2. Other sectors (e.g. fresh vegetables, honey) have a number of entrepreneurial sized companies which currently service export markets. These companies are actively seeking to identify competitive advantages over competing companies. Such companies have been active in marketing organic variants of their conventional product lines which has resulted in rapid growth in both organic fresh vegetable exports (e.g. squash) and honey.
  3. A third group is made up of smaller companies which may also include larger organic growers. These have developed a supply base and wish to develop overseas markets for their product. Features of this group include:
  1. small volumes of product traded
  2. long learning curve before exports eventuate
  3. the servicing of the New Zealand market prior to targeting export markets

Two other models for organic industry infrastructure found overseas but not successfully in New Zealand to date are:

  1. the specialist grower co-operative company which coordinates the volume and marketing of organic products
  2. box schemes involving the subscription of consumers to a weekly 'box' of organic vegetables from a supplier or group of suppliers. The box is filled with whatever vegetables are most seasonally appropriate.
1.5.8 Knowledge Systems and Extension of Organic Techniques

Producing according to organic methods requires organic growers to develop a new set of production skills. In Canterbury, Liepins et al. (1997) noted that organic growers used a variety of sources of information to learn about organic production. Primarily, growers used books, newsletters and informal networks to learn about organic techniques and skills. When industry bodies organised field days and seminars these were well attended but they were not a frequent occurrence. In contrast to this, formal discussion groups and consultants were not widely used by growers to access knowledge about organic production. Neither was the Christchurch Polytechnic (which runs organic husbandry courses) considered to be a significant knowledge source by most commercial organic growers (Liepins et al. 1997).

Campbell et al. (1997) identified that the impetus for developing skills in organic production for kiwifruit in the Bay of Plenty differed from the pattern identified by Liepins et al. (1997) in Canterbury. The most obvious difference was in the prominent role of the Bay of Plenty Polytechnic and industry discussion groups to extend knowledge about organic production in recent years. During the formation of the organic kiwifruit pool and in the first years of high recruitment (1990-1994), growers who entered organic production recollected that they learnt their skills from; personal experimentation, polytechnic courses, a packhouse discussion group and the Kiwigreen programme. These two cases - Canterbury and Bay of Plenty - indicate that there are no generalised solutions as to how one might best extend knowledge and new techniques in organic production. In fact, the opposite applies as organic production is extremely sensitive to localised knowledge sets and problem solving. The only common feature to both cases is that state agencies have played a minimal role in promoting knowledge of organic production and the current situation is entirely due to a combination of personal networking and investigation, industry activities and local tertiary institutions. A final consideration is that the Kiwigreen programme (a non-organic IPM system) in the Bay of Plenty proved very useful in extending pest management techniques to organic growers.

Previous Page TOC

Contact for Enquiries

Kay Brown
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0695
Fax: +64 4 4 894 0746
Contact this person

 
Display a printer friendly version of this page Print friendly




Biosecurity New Zealand Web Site

New Zealand Fast Forward