Organic Gold Rush
Organic Gold Rush
Forty years ago, when John Haberern joined the Rodale Institute, an organic farming research organization in Kutztown, Pennsylvania, professors at the local agricultural university, Penn State, dismissed him and other organic pioneers as "the counterculture kings of the compost heap." Times have changed. The same professors and deans who wouldn't return calls a decade ago are now contacting Rodale to partner on major grant proposals. And agriculture agencies from a number of countries, including Egypt and Ethiopia, are talking to Rodale about developing nationwide organic-farming programs. "It's a good time for organic agriculture," said Haberern, who is now Rodale's director, during a recent phone conversation.
Spurred by unprecedented consumer demand for healthy, environmentally friendly foods, organics have carved a noticeable stronghold in the conventional foods market, especially in Europe, where organic food now accounts for 3 to 5 percent of sales. This bull market is buoyed by the concerns of people who are fed up with the way most food is grown: British mothers worried about mad cow disease; French families concerned they may be eating foods that contain genetically modified ingredients (GMOs); California parents frustrated by what their children are being served in school lunches; chefs in the culinary vanguard looking for greater variety, freshness, and flavor in their dishes; farmers everywhere tired of applying expensive and toxic agrochemicals to the fields around their homes; conservationists trying to reconcile agricultural and environmental goals; food companies like SEKEM, Egypt's largest tea producer, demanding premium ingredients for their products in a nation that takes tea very seriously.
The growth of the organic market is now reshaping the face of modern agriculture. Millions of hectares of land that were once sprayed with chemical pesticides and fertilizers, coated with sewage sludge, or planted with genetically modified seeds, are now being farmed using ecological interactions to boost harvests. Farmers are rotating crop varieties and composting to return nutrients to the soil, for instance, or attracting beneficial insects to reduce pest outbreaks and disease. But, as production of organic food scales up to meet growing demand, a rift is developing in the organic landscape: small-scale organic farmers, processors, and retailers-the current lifeblood of alternative agriculture-are watching closely as giant farms get certified and multinational food conglomerates rush to unveil organic brands. As the organic market continues to skyrocket to a larger scale, some farmers and consumers are beginning to look a lot more closely at what "organic" really means.
A Bull Market
Driven by a $25 billion global market for organic products, the total area of farmland devoted to cultivating organic crops has grown to an estimated 11.5 million hectares-roughly the size of Cuba. Although this is still well below 1 percent of the world's cultivated area, the growth trajectory dwarfs that of conventional foods. In every nation for which data exist, farmers are bringing between 10 and 40 percent more land under organic cultivation each year, and a recent U.N. survey found commercial organic food production in every inhabited nation on the planet.
The global organic explosion revolves around Western Europe, where organic area has ballooned 35-fold since 1985-increasing roughly 30 percent each year (see figure, page 24). Organic area now accounts for nearly 3 percent of all the farmland in the European Union. In Sweden, Denmark, Finland, Italy, and Switzerland, it accounts for 5 to 10 percent. In Austria, the organic share has reached 10 percent, and in some Austrian provinces it has reached 50 percent. Europeans are spending nearly $10 billion on organic products each year.
Australia, with 5.3 million certified organic hectares, is the nation with the most organic area. But compared to Europe, this land is relatively low yielding-used mostly to raise pasture-fed beef for export to Japan, where the organic market is now worth $3.5 billion. In the United States and Canada, organic area in cultivation has grown between 15 and 20 percent each year during the 1990s, and now stands at roughly 550,000 and 1 million hectares, respectively. Organic crops now grow on 0.2 percent of U.S. croplands, and in 1.3 percent of the fields in Canada. Retail sales of organic produce and products in North America have registered similar 20 percent annual growth rates since 1989, and were estimated at $10 billion in 1999.
Statistics for the developing world are spotty, although anecdotal evidence points to rapid growth. In Argentina, the total area devoted to organic production jumped 7,000 percent since 1992 to an estimated 350,000 hectares today. Argentina exported more than $100 million of organic products in 2000. Over 7,000 small farmers in Uganda-up from 220 in 1995-now produce about 10 percent of the organic cotton on the world market. Under the green food development plan, Heilongjian Province in China has expanded land cultivated in organic foods to half a million hectares. Most of this production is pegged for export, though domestic markets are emerging as local awareness and demand increase.
On both sides of the Atlantic, a series of food safety, ecological, and other troubles associated with the conventional food sector has also inspired strong demand for organic food. Among the British, recent concerns over genetically engineered crops caused a flood of consumer inquiries about organic and an avalanche of farmer applications for conversion. In just the last two years, the United Kingdom's organic acreage surged eightfold, from 50,000 hectares to 400,000 hectares. The well-publicized recall of genetically engineered Starlink corn inspired a similar reaction in the United States.
While consumer demand has driven growth in organics around the world, Europe's sector is outpacing markets elsewhere because it has enjoyed broad government support. Eighty percent of the growth in EU area has occurred in the last six years, spurred by the 1993 establishment of a common EU definition for "organic" and subsequent EU-wide policies to provide financial support for farmers to convert to organics. After the first reports of "mad cows" in Germany, the new agriculture minister pledged to increase organic production from 2.6 percent of farmland today to 20 percent by 2010. Agricultural universities across Europe have opened organic farming departments, and farm ministries have built up organic extension services.
In contrast, growth in the United States-where the total market for organic produce is roughly the same as in Europe-has come despite a lack of conversion assistance and little government support in general. A study by the Santa Cruz, California-based Organic Farming Research Foundation (OFRF) found that less than one-tenth of 1 percent of U.S. Department of Agriculture (USDA) research projects in 1995 had any relevance for organic agriculture. And an aborted 1997 effort by the U.S. government to set federal organic standards would have weakened the industry by permitting genetically modified seeds, confined livestock operations, and other practices never before considered organic. Thomas Dobbs, an agricultural economist at South Dakota State University, says, "U.S. policy is best described as one that is gradually evolving to be less unfriendly to organic production."
Beyond the problem of government neglect, the U.S. organic market has been the target of deliberate attacks by the chemical farming industry, which have intensified as consumer interest in organic has grown. The latest of such efforts was a report by the ABC news program "20/20," that relied on fabricated data and statements from an "expert" funded by the pesticide industry to claim that organic foods actually carried a greater risk of foodborne illness. (The program was forced to issue a retraction.)
Still, there are signs of a more welcome government stance in the United States. In conjunction with a newly released-and much improved-national organic standard, USDA has announced a cost-share program that will cover 70 percent of the certification costs for small producers in 15 states.
Life Outside of the Niche
"It's not completely accurate to call organics a niche market anymore," says Katherine DiMatteo, director of the Organic Trade Association in the United States. "Organic items are no longer limited to health food stores, but shelf space is expanding in major supermarket chains." More exposure means more customers all around, and DiMatteo says that food manufacturers and retailers know that this isn't a fad and are building organic sections for the long haul.
In the spring of 2000, when Iceland, one of Britain's largest supermarket chains, declared that it was converting its entire food line to organics, at no extra cost to consumers, it set off a domino effect in the British food market. Consumers flocked to Iceland products, forcing other food sellers to bulk up their own organic offerings if they hoped to retain market share. Six months later, the United Kingdom's largest supermarket chain, Tesco, entered the fray by dramatically expanding its line of organic foods, while lowering its profit margin on organics to keep them competitive. Tesco shoppers will soon have over 700 organic items to choose from, including fresh produce, meat, frozen and prepared foods, dairy items, bakery goods, alcohol, baby food, and pet food-a sweeping turnaround from 1992, when the chain carried just five organic items.
Dominant players in the global food market, including Danon, Nestle, Mars, and Unilever, are all experimenting with organic products, and they wield massive advertising and distribution arsenals to aggressively promote them. McDonald's is now serving organic dairy products in Sweden; and Swiss Air has begun serving all-organic meals on flights originating in Switzerland. Even the environmental laggard Dole Foods, the world's largest producer of fresh fruit, vegetables, and cut flowers, now offers organic bananas in North America. In May of 1999, General Mills rolled out its Sunrise line, which it called "the first-ever certified organic cereal from a major manufacturer." Later that year, the multi-national firm acquired the Cascadian Farms brand, an internationally recognized organic producer that has recorded annual sales growth of more than 40 percent over the last few years. Several large apparel companies have begun to purchase organic cotton, including The Gap, Levi's, and Patagonia. Many companies are contracting directly with farmers to provide organic produce for their stores, and some supermarkets have gone a step further, actually paying certain growers to convert to organic.
Organic food is rapidly moving beyond its counter-culture niche and into the mainstream. In fact, in a growing number of countries, most organic food is now sold in supermarkets. Although markets for organics are growing all around, growth in sales at supermarkets is outpacing that of farmers' markets or health food stores. In the United Kingdom, for instance, the share of organic food sold in supermarkets has increased from 63 percent in 1998 to 70 percent today, while the share sold by farmers' markets, independent retailers, or health food stores has declined from 37 percent to 30 percent. In the United States, the share of organic foods sold at discount outlets, like Costco and WalMart, jumped from just one percent in 1998 to 13 percent in 1999, according to the Hartman Group, a Bellevue, Washington-based market research firm. Half of the organic food sales in the United States are now made through conventional supermarkets.
Just a Greener Green Revolution?
All of this growth raises an important question about the future: can organic farming, which has traditionally operated on a small scale, expand to meet global demand without taking the same toll on the environment and rural communities that conventional agriculture does?
The newly kindled interest of mainstream consumers is obviously a central reason why more land is being converted, but it also presents some problems for organic farming. On one hand, the interest of major supermarkets and food manufacturers will continue to boost total organic area, reduce bottlenecks in the supply chain, and lower prices, which will mean new customers and a greater market share for organics. On the other hand, demand is growing so quickly that supermarkets often choose to bypass local organic farms in favor of a few large-scale growers that can deliver large quantities of a standardized product year-round.
Consider the Upper Midwest Organic Marketing Project, an attempt between 1995 and 1997 to boost the land under organic production in five American states, as well as consumption of organic products in the Minneapolis-St.Paul metropolitan area. The project was a success, particularly in increasing organic offerings in mainstream supermarkets. But, according to economist Thomas Dobbs, who studied the project, a disconnect developed between regional supply and demand, with greater reliance on large and distant organic suppliers. "Preserving an organic farming and food system that differs substantially from the industrial system may necessitate a slow and deliberate approach," he concludes.
But, organic demand is scaling up right now, at a pace that local growers may not be able to keep up with. "We try to support local, organic growers as much as possible," says Sarah Kenney, marketing director for the Midatlantic region of Whole Foods Markets, the world's largest retailer of natural and organic foods. Produce bins at Whole Foods always carry country or state-of-origin labels, and, particularly during the summer, Whole Foods stores host "locally grown days," which steer customers towards local produce. Still, Kenney notes that "this is a commodity market and sometimes you run into problems of consistency and reliability and price at the local level." U.S.-based Whole Foods may obtain its organic produce from as far away as Chile or New Zealand.
The economics of the mass food system represent a rude awakening for the first generation of organic farmers, many of whom seem to have been made immune to consolidation by their grounding in local food systems and close connections with consumers. In agriculture, as with other industries, size brings substantial marketing and distribution advantages. "Such advantages," according to OFRF's Mark Lipson, "mean that the organic sector is very quickly recapitulating the tragedy of conventional agriculture," the process by which bigger players squeeze out the smaller farms and erode rural communities. Profits have been down in the past few years for Lipson's own family farm-a mixed-vegetable operation which he shares with another family-due to a recent surge of entrants into organic vegetable production and a subsequent drop in organic vegetable prices. Medium-sized growers are particularly vulnerable, since smaller growers can often sustain themselves on direct marketing or local outlets.
A flood of corporate incursions-enticed more by economic opportunity than matters of principle-also means that maintaining high standards is increasingly at odds with efforts to maintain the bottom line. In the United States, agriculture-industry pressure on the first round of national organic standards opened the way for the use of GMOs, sewage sludge, food irradiation, and feedlot-style livestock production. (Public outrage later changed this). Fred Kirschenmann, director of the Leopold Center for Sustainable Agriculture and former chair of the National Organic Standards Board Livestock Committee, recalls the time Horizon Organic tried to water down organic standards. Horizon, which sells nearly 70 percent of all organic milk sold in the United States, lobbied to allow for organic dairy farms that would have been essentially confinement operations, similar in many respects to conventional dairy operations where large numbers of animals are not allowed to graze. Gundula Meziani, policy manager at the British Soil Association, remembers recent deliberations in which the National Farmers Union in Britain suggested that organic standards be loosened to include less rigorous practices allowed in other nations, in the name of international competitiveness.
Despite these organic growing pains, it's clearly better to have large organic farms tied into the mainstream food chain than to have conventional farms spraying pesticides and force-feeding antibiotics to livestock. "Even the most industrial organic farm represents a huge improvement over the agricultural status quo," according to Meziani. She points to the fact that while conventional poultry farms in the United Kingdom may house hundreds of thousands of chickens in a single metal building, organic standards allow a maximum of 4,000 hens.
If organic agriculture is to continue its rapid pace of growth without undercutting the small-scale farmers that have nurtured the market thus far, those farmers will need continuing support from consumers who demonstrate a preference for local produce. "The organic movement must push for ecological principles throughout the food system, not just on the farm," says the Leopold Center's Kirschenmann, "or else it will become progressively harder to differentiate organic from the conventional food system."
Kirschenmann warns that if long distance markets and specialization become the norm, the basis of the organic farming system-and the related environmental advantages-will begin to unravel. The gradual depletion of soil nutrients will necessitate the use of lots of external (albeit natural) inputs, which will not only generate transportation related pollution and increase energy consumption, but will exacerbate disease and pest pressures and fail to build soil health.
Building a Better Food System
Consider two different sources of certified organic vegetables in the United States. The first is Natural Selections, which takes up more than 15,000 acres in the American West. The second is Liz Henderson's 15-acre farm (one-thousandth Natural Selection's size) in upstate New York, which includes a small herd of buffalo.
Natural Selections is not a farm, but actually a food marketing company that purchases vegetables from farms throughout California, Arizona, and Baja Mexico. Natural Selections specializes in both conventional and organic salad greens, vegetables, and fruit. Its organic products are marketed through the well-known Earthbound Farms label. Natural Selections controls its own washing, processing and packaging facilities in California and Arizona-a sort of vertical integration that has become the pattern in conventional agribusiness. Some of the farms that produce for Natural Selections are as big as 500 acres, and are highly mechanized and standardized operations; some employ migrant labor. Natural Selections also contracts with other suppliers of organic foods so that it can offer a full list of produce to international supermarket clients year round.
In contrast, Henderson and her two business partners work the Peacework Organic Farm, and employ one to two local hired hands during harvest time. All of their produce serves surrounding areas through a community supported agriculture (CSA) scheme, in which members pay for a season's worth of produce up-front or in installments. The CSA fee operates on a sliding scale, with scholarship money available for people who can't afford to pay at all, so Peacework's produce is not just "yuppie food," as Henderson puts it. All participants work in some way to help out the CSA, either on or off the farm, which Henderson calls a "large scale home garden for 240 families." Peacework uses no fertilizers (not even those inputs allowed under organic standards), while some of Natural Selection's farms often truck in large quantities of composted manure or other approved inputs.
"Most small-scale producers would say that organic by nature works better at the small scale, allowing greater attention to the subtle signs of soil health or pest imbalance," says Lori Ann Thrupp, a U.S. Environmental Protection Agency ecologist who has studied several small and large organic wine, vegetable, and fruit farms in the United States. "Arguably, organic standards can be met at a wide range of scales." In contrast to the micromanagement of ecological processes that small scale allows, Thrupp explains, a larger operation might divide its farm into blocks of biodiversity that are rotated from season to season, or have different farmers who are expert in a certain crop use the land from year to year.
Ultimately, two complementary markets for organic products may develop: the industrial organic stream, which services major supermarkets and food manufacturers, and the local and regional organic stream, which maintains a strong connection to consumers. In light of the different types of organic production, Bernward Geier, director of the International Federation of Organic Agriculture Movements (IFOAM), favors keeping organic standards growing to incorporate more issues of sustainability. Local food systems, food security, farmworker rights, resource use efficiency-these might be called the "beyond organic" issues. Henderson's farm represents a form of organic that embodies many of the ecological, social, ethical, and even spiritual characteristics not currently or explicitly regulated by organic standards. "Organic is necessary, but not sufficient, for a sustainable food system," is how Lipson of OFRF sums it up.
"You can't write standards for how you treat your neighbor down the road or for a commitment to community or concern for maintaining the health of the soil," says John Ikerd of the University of Missouri. Nonetheless, Ikerd believes that the founders of the organic farming movement clearly had these intangibles in mind. He cites Sir Albert Howard's 1943 book, An Agricultural Testament in which Howard hoped that organic farming might help us learn "to subordinate the profit motive to the sacred duty of handing over unimpaired to the next generation the heritage of a fertile soil." Such distinctions, Ikerd is confident, mean a lot to a growing group of consumers for whom "organic is as much a philosophy of life as a physical characteristic of the foods _they eat."
The Soil Association's Meziani also sees room for improvement: "Only a small portion of today's organic farms embody the ideal of ecologically functioning systems." Meziani points to highly sophisticated versions of organic farming, such as biodynamic farming, in which extensive composting, carefully tuned planting times, and modulation of soil biota often result in near disease-free crops and livestock. "Further honing of organic systems will come with practice and research," says Meziani, "and standards should reflect such learning."
The likelihood of such improvement will depend on the flexibility of organic standards, but also on who controls them. Organic standards that function as a floor-a bare-bones minimum for compliance-are important to reduce opportunities for abuse, particularly when people are buying food off a store shelf instead of direct from the farmer. But standards that also serve as a ceiling will cripple the incentive to improve, as well as the means by which small and medium sized growers can differentiate themselves from the mass organic chain. The newly released organic standards in the United States, for instance, do not allow farmers and private certifiers to certify to a higher standard, a clause that will likely spur legal battles in coming years. Moreover, it is essential that the governance of the standards remain with people who are devoted to the philosophy, and who are not just looking to cut costs.
The bull market in organic products may represent the first step in an evolution for farmers, consumers, and the food system in general. Farmers who make the decision to grow organic may begin to rethink energy use on their farm or how they can improve the efficiency of their water use. Food sellers, from farmers markets to neighborhood co-ops to supermarket chains, might display additional information about the food they carry or even develop buying standards of their own. For consumers who decide to buy organic, it may only be a small additional step to begin to shop in season or favor local farmers-steps that also guarantee the best price for organic foods.
Consumers are the central players in this agricultural evolution. The current proliferation of organic farming hints at just how much power they wield-at how ordinary people can demand a different choice in the market place and drive monumental change in the economic sphere. The proliferation of organic farming also points to the spreading desire of people to know the story behind their food. Where was it grown? Who owned the land? What crops were rotated with it? Was the land doused with chemicals? Was livestock injected with hormones? What sort of labor was used on the farm? Did the farmer get a fair price? Interest in such details is getting more intense, and is a big part of what will further drive the transformation of our food system.
Brian Halweil is a research associate at the Worldwatch Institute.