The scope and direction of organic agriculture is not easy to define these days.

On one hand, some pundits are dismissive of organic foods and have said the movement has “jumped the shark” (passed its peak, so to speak). Others believe the recession has dealt organic food growth a momentary set back, while many true believers may think glowingly of expanding organic consciousness for years to come.

 Into this backdrop, the U.S. Department of Agriculture’s Economic Research Service has provided a tidy report on the state of the organic food industry. Find the report here:

Here are a couple of graphs from the summary of the 33 page report:

Retailing of organic products has evolved since 1997, when natural foods stores were the main outlet. By 2008, nearly half of all organic foods were purchased in conventional supermarkets, club stores, and big-box stores. Although produce remained the top-selling organic category, sales of dairy products, beverages, packaged and prepared foods, and breads and grains grew to 63 percent of total organic sales in 2008, up from 54 percent in 1997.

On the wholesale level, by 2007, the share of organic handlers’ sales to conventional retailers and club stores increased, while the share of sales to wholesalers and other distributors declined. Organic handlers are firms that buy organic products from farmers and other suppliers, process or repack the goods, and then sell the value-added resulting products to retailers, institutions, and other handlers, or directly to consumers or restaurants. Because of the competition for organic ingredients, handlers in recent years have relied on contracts versus spot-market sales to procure needed inputs.

While organic farmland acreage increased from 1997 to 2005, growth was not swift enough to prevent periodic shortages of some organic products. Certified organic farmland designated for raising grains and soybeans grew slowly, placing pressure on sectors such as dairy and meat sectors that depend on these inputs. The 2002 USDA National Organic Standards regulation in most cases requires farmland to be dedicated to organic farming for 3 years before that farm’s products can be labeled as organic. This creates a lag between increases in retail demand and supply from farms.

Here is what the report says about fresh produce:

Historically, fresh produce has been the most popular organic category and continues to be; growth in retail sales of fresh produce averaged 15 percent a year between 1997 and 2007. Fresh fruits and vegetables move from the farm to the consumer through certified organic handlers, who distribute, ship, broker, or wholesale transactions between the firms along the supply chain.

As produce moves along the supply chain, these firms follow strict procedures to maintain product quality and organic integrity. These include maintaining fresh produce at proper temperatures, and keeping organic and conventional produce separate during shipping. Consumers purchase fresh organic produce in conventional supermarkets, natural products supermarkets, and club stores.

Fresh organic produce is also available directly to consumers through venues such as farmers markets and community-supported agriculture arrangements. In 2005, the top organic vegetables in cropland were lettuce (12 percent of all vegetable acreage), tomatoes (7 percent), and carrots (6 percent). The top fruits were grapes (23 percent of all fruit acreage), tree nuts (16 percent), apples (13 percent), and citrus (10 percent).

On the organic consumer::

Organic foods are typically more expensive than conventional foods, costing at least 10 to 30 percent more (Lohr, 2001). Surveys indicate mixed results about consumer response to higher priced organic food. Seventy-three percent of consumers believe organic food is too expensive (Whole Foods Market, 2005), confirming earlier studies indicating that price was a barrier to purchasing organic food (The Packer, 2000, 2002; Walnut Acres, 2002).

Higher prices appear to be less of a barrier for some organic products, such as fresh produce or baby food (Barry, 2004). However, anecdotal evidence suggests that, in the second half of 2008, consumers began substituting cheaper conventional products and private label organic products for branded organic products in response to weakening macroeconomic conditions (Martin and Severson, 2008; Naughton, 2008; Progressive Grocer, 2008).

TK:  It seems organic supply is becoming better matched with the pull of consumer demand  as we speak, as conversion to organic acreage increases and organic demand slacks because of the economy.  Depending on the sector, there will be challenges to profitably move expanding volumes of organic produce.  In the end, it will depend on consumer willingness to pay more for organic produce – and the self-commentary we each have about organic purchases (“You fool! Why did you pay that much?”  Or “I did something good for the world just now”). Stay tuned for the next chapter and in the meantime, don’t miss this helpful USDA report.