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Agricultural Marketing Resource Center

Organic Food Trends Profile

By Marsha Laux, content specialist, AgMRC, Iowa State University, mlaux@iastate.edu.

Updated November 2013 by Diane Huntrods, AgMRC, Iowa State University.
 

Organic agriculture, a worldwide growth industry, can be a profitable, sustainable business for agricultural producers interested in going through the certification process necessary to enter this market. Organics have continued to expand during the last few years, and industry experts are forecasting steady growth of 9 percent or higher (OTA 2012).

Growth in the organic sector has highlighted issues that need to be addressed: shortages of organic raw materials such as organic grain and organic sugar and competition from food marketed as “locally grown" or "natural." A shortage of affordable organic ingredients or products, such as corn and soybeans for livestock feed, left organic producers unable to meet market demand.  (ERS 2009)

The U.S. organic market is relatively new, with the USDA only adopting national standards for organics in October 2002. The USDA National Organic Program (NOP) regulates all organic agriculture in the United States.

Production
According to the 2008 Organic Production Survey (NASS 2010), the United States has 4.1 million acres used for organic production. Of that amount, 1.6 million acres were planted to organic crops and 1.8 million acres were organic pasture or rangeland. Figures for the previous year, reported in the Organic Agriculture: 2007 (NASS 2009), stated that the nation had 2.6 million acres used for organic production.

The number of certified organic farms, ranches and processing facilities in 2011 totaled 17,281, a 240 percent increase since 2002 (NOP 2012). While there were organic farms or ranches in all 50 states, nearly 20 percent, or more than 2,500 of the operations, were in California. Other states with large numbers of certified and exempt organic operations were Wisconsin (1,124), New York (842) and Washington (737).  (NASS 2011)

Transitioning to Organics
Organic agriculture has attracted conventional producers, who make the transition due mainly to the price premiums in the market. While transitioning to organics can be confusing, many resources are now available to help producers make the change. For a list of transitioning resources, see http://www.agmrc.org/agmrc/markets/Food/food+organic.htm.

The USDA maintains a list of accredited certifying agents (ACAs), with 49 U.S.-based ACAs as of January 2013. Individuals wishing to transition to organic should verify that the agency they select is an approved certifier. Certifiers should be contacted early and often for assistance in complying with their individual requirements and procedures. Markets should be identified, and only certified organic processors and handlers used for organic certification compliance.

According to the 2008 Organic Production Survey (NASS 2010), nearly 128,500 acres of cropland and nearly 66,000 acres of pasture are currently being transitioned to organic production. Those states transitioning the most cropland to organic production are (in order): Idaho, Montana and Nebraska. Those states transitioning the most pasture to organic production are (in order): Texas, Oklahoma and Montana.

Sales
In the United States, systematic collection of price data for organic products is limited. There have been a few studies of farm-level, wholesale and retail organic price data, and these have shown significant organic premiums for most fruits, vegetables, grains and milk (ERS 2005).

The total value of farm-level organic sales reached $3.2 billion in 2008, up from $1.7 billion in 2007. Organic crops accounted for $1.9 billion in sales and organic livestock, poultry and their products accounted for $1.2 billion. California led the nation in organic sales, with 36 percent, or $1.2 billion, of all U.S. sales. According to the 2008 Organic Production Survey (NASS 2010), other top states in terms of organic sales were Washington ($282.0 million), Pennsylvania ($212.7 million), Oregon ($155.6 million), Texas ($149.3 million) and Wisconsin ($132.8 million).

The 2008 Organic Production Survey (NASS 2010) also found that most U.S. organic producers sold their products locally, with 44 percent of sales taking place less than 100 miles from the farm. Nearly 75 percent of sales were either local or regional (that is, more than 100 miles but less than 500 miles). According to an ERS survey of organic handlers (2008), more than 50 percent of organic sales in 2004 were made either locally or regionally.

In terms of sales outlets, the majority, or 82.6 percent, of organic sales were to wholesalers, including processors and distributors. Just 10.6 percent of sales were to retail operations, including supermarkets and natural food stores, and only 6.8 percent of sales were direct to consumers via farm stands, farmers’ markets and community supported agriculture.

A study conducted by the Organic Trade Association (OTA) surveyed manufacturers, distributors and retailers about the organic industry. The survey indicated that U.S. sales of organic products, both food and and non-food, have grown from $1 billion in 1990 to $31.5 billion in 2011, increasing 9.5 percent in the last year. Organic food sales alone rose 9.4 percent, totaling $29.2 billion. Organic non-food sales rose 11 percent, totaling nearly $2.2 billion.

Other findings of OTA's Organic Industry Overview include:

  • As of 2011, 4.2 percent of all U.S. food sales were organic.
  • The organic food sector grew by $2.5 billion during 2011; close to 50 percent of that growth was contributed by fruit and vegetable sales.
  • Meat, poultry and fish sales experienced the fastest growth, increasing 13 percent from 2010.
  • Organic dairy captured nearly 6 percent of the total U.S. market for dairy products.
  • Over $2 billion worth of organic fiber, cosmetics and household products were sold in 2011.

U.S. sales of organic products have remained strong. The Mintel market research company found that frequent buyers of organics were remaining loyal but likely to purchase cheaper organic products. Infrequent buyers of organics, on the other hand, were likely to select fewer organic products.

The results of OTA's U.S. Families' Organic Attitudes & Beliefs Tracking Study ( 2011) concur. Overall, 78 percent of the nearly 1,300 families participating in the study reported they were purchasing organic products, up from 73 percent in 2009. Nearly 50 percent of the surveyed parents revealed that they bought organic products because they thought the products were "healthier for my children and me." According to the study, 72 percent of the parents were familiar with the USDA Organic seal, compared to 65 percent in 2009. The study also found that 30 percent of the families had only recently begun purchasing organic products.

Exports and Imports
In January 2011, the Commerce Department’s U.S. Census Bureau began creating agricultural product trade codes for exported and imported organic products. As of July 1, 2013, the number of trade codes for exported organic products totaled 26 and the number of trade codes for imported organic products totaled 35. Most of the trade codes for organic exports are for fresh fruits or vegetables, while most of the organic import codes are for coffee, olive oil, tea and wine.

In 2012, the U.S. Census Bureau released trade data for the organic agricultural product codes. An analysis of the data available for 2011 showed that the 23 commodities being tracked at that time accounted for more than $412 million in export sales, which was about evenly split between fruits and vegetables. Of the organic fruits analyzed, grapes, apples, and cherries had the highest export sales. Organic apples sales totaled $46.2 million and comprised 4 percent of all apple exports. Of the organic vegetables analyzed, lettuce, carrots and spinach had the highest export sales. Organic lettuce sales, for example, totaled nearly $85.2 million and comprised about 16 percent of all lettuce exports. More than half of the selected export sales of organics went to Canada. (OTA)

USDA's Foreign Ag Service maintains a list of the current 61 organic trade codes.

Trade
The United States now has organic trade agreements with three other countries--Canada, the European Union (EU) and Japan--to facilitate the global exchange of organic products. The agreements reduce the cost and remove barriers for U.S. organic farmers wanting to export their goods to those nations.

In June 2009, the joint Canada (Canadian Food Inspection Agency) and United States (USDA) regulated organic system, the world’s first reciprocal agreement between two countries, was signed. That country is the largest estimated export market for U.S. organic products. For more information, see the USDA's International Trade Policies: Canada.

As of June 2012, the framework for an organic reciprocal agreement between the United States and the EU was approved, streamlining trade between the two largest organic producers in the world. The potential market for U.S. organic products in the EU market is estimated at almost $50 million. For more information, see International Trade Policies: European Union.

Beginning in January 2014, organic products certified in Japan or the United States may be sold as organic in either country. U.S. organic farmers and processors will now have access to the growing Japanese organic market. For more information, see the International Trade Policies: Japan.

Similar organic trade partnerships are currently being discussed with South Korea and Switzerland (FAS 2013).

International Sales
Canada’s organic market grew to $3.7 billion in 2012, with national sales of certified organic food and non-alcoholic beverages reaching $3 billion. Organic foods, including fresh products, accounted for 1.7 percent of total food sales nationwide. As in the United States, fruit and vegetables dominate organic sales, capturing 40 percent of total sales. About 30 percent of Canadian organic sales in 2012 were for imported U.S. organic products, the largest by far of any importing country. The province of British Columbia has the most developed organic markets, followed by the provinces of Alberta and Ontario. Nearly 60 percent of all Canadians buy organic products every week.  (COTA 2013)

Organics in the United Kingdom (UK) experienced decreases in the amount of organic managed land and organic product sales during 2011, according to the Organic Market Report (2012) published by the Soil Association. The report shows sales of organic products declined 3.7 percent in 2011. However, increases were seen in sales of organic lamb (up 16%), organic cosmetics (up 8.7%) and organic baby food (up 6.6%). The report also noted that 83 percent of UK households still buy organic products, with dairy products and fresh fruits and vegetables being the most popular organic products.

The Australian Organic Market Report 2012, funded by the Biological Farmers of Australia, reported that organic sales are increasingly becoming mainstream, with three out of four organic products being purchased at supermarkets. The report also found that 65 percent of Australians purchased organic products in the last year, boosting the retail value of organic sales to nearly $1.3 billion AU. Fruit and vegetables remained the most comonly purchased item, but the meat sector experienced the largest increase in sales. Beef sales jumped by 111 percent to $72.7 million AU, and lamb sales were up by 64 percent to $18.6 million AU. Dairy product sales were also ;up by 63 percent to $29.2 million AU.

Global demand for organic products continued to grow, with sales reaching $59.1 billion US in 2010, according to The World of Organic Agriculture (2012). The United States was the largest domestic market for organic food ($26.7 billion US), followed by Germany ($8.4 billion US) and France ($4.7 billion US).

The World of Organic Agriculture (2012) also provides an overview of organic agriculture around the globe. During 2010, around 1.6 million producers, down from 1.8 producers the previous year, from 160 different countries farmed 37 million hectares of agricultural land, a slight decrease in area from 2009. Organic farmland increased in Europe; the largest increases were seen in France, Poland and Spain. On the other hand, organic farmland decreased in Asia, mainly due to large declines in organic farmland in China and India.

The total number of organic certification organizations was reported as 549, up from 489 in 2009. (Note: The USDA only recognizes 85 of these organizations.) Most certification organizations are in the United States, Japan and South Korea.

Policy
The 2008 Farm Act includes many new provisions to help U.S. producers meet the challenges of organic agriculture and facilitate consumer access to organic food. For example, the Organic Transition Support provision in the Environmental Quality Incentives Program (EQIP) provides financial support to farmers to convert to organic production. Other provisions in the Farm Act boost the funding for organic research, particularly for the development of new, improved seed varieties as well as for the conservation and environmental outcomes of organic practices, and support the expansion of data collection on organic production and marketing. (ERS 2009)

Through its two organic certification cost share programs, NOP reimbursed organic farmers and handlers over $6 million during 2011, a 20 percent increase from 2010.

Trends
In late 2012, the USDA NOP announced a strengthened residue testing program to help increase consumer confidence in the $32 billion organic industry worldwide. This program will provide additional verification that organic farmers are following the rules and not using prohibited substances. Beginning January 1, 2013, USDA organic certifying agents will test products from at least five percent of the organic farms and businesses that they certify each year.

In 2010 the United States surpassed the European Union as the largest market for organic products in the world. According to the Organic Monitor (2010), mergers and acquisitions led to consolidation, with large companies emerging at every level of the supply chain. Many new entrants and small companies in the organic industry had to focus on niche segments/sectors.


Sources
2008 Organic Production Survey, National Ag Statistics Service (NASS), USDA, 2010.

Accredited Certifying Agents (ACAs), Agricultural Marketing Service (AMS), USDA.

Australian Organic Market Report, Biological Farmers of Australia, 2012 - This report attempts to define the size and extent of the organic industry in Australia.

Canada’s Organic Market: 2013 National Highlights, Canada Organic Trade Association (COTA) - The value of the Canadian organic food market has tripled since 2006, and a diverse consumer base is driving the sector.

Consumer-driven U.S. organic market surpasses $31 billion in 2011, Organic Trade Association (OTA), 2012.

Emerging Issues in the U.S. Organic Industry, Economic Research Service (ERS), USDA, 2009.

Growth Patterns in the U.S. Organic Industry, Amber Waves, ERS, USDA, October 2013.

Marketing U.S. Organic Foods: Recent Trends From Farms to Consumers, ERS, USDA, 2009 - U.S. organic-industry growth is evident in an expanding number of retailers selling a wider variety of foods, the development of private-label product lines by many supermarkets and the widespread introduction of new products.

National Organic Program, AMS, USDA.

The North American Market for Organic Food and Drink, Organic Monitor, 2010.

Organic Agriculture: 2007 (United States), 2007 Census of Agriculture, NASS, USDA, 2009.

Organic Market Report, Soil Association, United Kingdom (UK), 2012 - This report is the definitive guide to organic trade in the UK.

Organic Production, ERS, USDA.

Organic Trade Association.

Seventy–eight percent of U.S. families say they purchase organic foods, OTA, 2011.

The U.S. Organic Handling Sector in 2004: Baseline Findings of the Nationwide Survey of Organic Manufacturers, Processors, and Distributors, ERS, USDA, 2008.

The World of Organic Agriculture, Research Institute of Organic Agriculture (FiBL) and the International Federation of Organic Agriculture Movements (IFOAM), 2012 - Organic agriculture was practiced in 160 countries in 2010, and 37 million hectares of agricultural land were managed organically. The countries with the largest area of organic agricultural land that year were Australia, Argentina and the United States.
 

 

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