Organic food boosters optimistic despite supply shortfalls

WASHINGTON, March 2, 2016 - Organic dairy processors were unable to keep up with increasing demand at times last year because of shortfalls in production, due in part to the lack of organic feed for milking cows, according to panelists at the first-ever session on organic agriculture at the USDA’s annual Agricultural Outlook Forum.

But despite the challenges, all four organic enthusiasts on the panel were bullish on the future of their niche. Although organic acreage is still less than 1 percent of total U.S. farm acreage, said Laura Batcha, CEO of the Organic Trade Association, demand for organic food will keep growing. “I think we all know that consumers are demanding changes in their food. This is not going away. This is part of what organic is participating in,” she said.

“A week doesn’t go by without a food company announcing or deepening” its offerings of organic products.

“It appears that we just didn’t meet the demand for organic dairy at times last year,” said Catherine Greene, the Economic Research Service senior agricultural economist who has tracked the organic market for more than 25 years and is the unchallenged USDA authority in the field. One factor in the shortfall was a chronic shortage of feed grains the last couple of years, she said.

Michael Ferry, president of Denver-based Horizon Organic, the largest U.S. organic fluid milk supplier, said organic milk production growth was limited by “strong competition for organic grain, including demand from organic eggs and meat.” He also said farmers face “obstacles to transition” from conventional to organic production – a transition period of three-plus-years and the need for nearby land to meet pasture and outdoor access requirements.

But dairy farmers who make the transition can sell milk for a price often double that of other milk, he said, with conventional prices today in the $15-17 range (per 100 pounds of milk) and a guaranteed contract price for organic milk “in the mid- to high $30s.” Although “yields likely on average are a little lower and hauling costs are a little higher… on average, organic dairy farmers are doing better than conventional dairy farmers,” Ferry said.

Fruits and vegetables are the leading category with 40 percent of the total $35-40 billion in organic food sales annually, followed by milk at 15 percent, Greene said. Organic sales growth is

expected to continue as access increases, she said. Certified organic fruit and vegetable acreage climbed 39 percent between 2011 and 2014, according to USDA producer survey data, but certified organic field crop acreage increased by only 9 percent in the same period, she said.

To help meet demand for organic feed for dairy and poultry producers, she said, imports increased between 2011 and 2014 for corn and soybeans. The United States imports about $500 million annually in organic feed and food, including coffee, bananas, olive oil and wine. She said the U.S. exports a comparable amount (by value) of organic products, overwhelmingly in produce.

John Reganold, regents professor of soil science and agroecology at Washington State, described a study that he and entomologist Michael Crowder published last year, concluding that “in spite of lower yields, organic agriculture was significantly more profitable than conventional agriculture and has room to expand globally.” He also asserted that “with its environmental benefits, organic agriculture can contribute a larger share in sustainably feeding the world.”

Their analysis of studies covering 55 crops, principally in Europe and North America, showed organic agriculture “was significantly more profitable” with returns 22 percent to 35 percent greater than conventional production, Reganold said. Total production costs of organic crops are not much different but labor costs are “significantly higher” for organic growers, he said. The organic advantage, he asserted, lies more in environmental and social contributions – although he said there are “few studies that account for negative or positive externalities.”

Organic agriculture can “play a significant role in feeding the human population” in the future, along with “other innovative farming systems such as conservation agriculture, integrated mixed farming and alternative livestock systems” that have attributes in common with organic farming, such as crop rotation and maintenance of rural communities. “The mounting environmental, economic and social impacts of conventional agriculture call for a transformation of agriculture to more innovative systems,” Reganold said.

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