Conference on Supporting the Diversification of Exports
in the Latin America and Caribbean Region
through the Development of Organic Agriculture
Port-of-Spain, Trinidad & Tobago,
8-10 October 2001
PROSPECTS FOR ORGANIC AGRICULTURE
The organic agriculture sector is today the fastest growing food sector. Impetus to the rapidly growing organic agricultural sector is provided by withdrawal of government subsidies on agricultural inputs, introduction of policy instruments favourable to organic agriculture, controversial food and environmental safety debate on genetic modification and crisis provoked by dioxin-contaminated food, mad-cow and foot-and-mouth diseases.
On the supply side and in the European Union, policy instruments were instrumental to persuading small farmers to convert to organic farming by providing financial compensation for losses incurred during conversion. Regulations that promote organic agriculture by encouraging supply are not, however, sufficient to ensure the continuous growth of the organic sector. For example, in the mid-90s, Austria was the lead organic producer in the EU with about 10% of farmers using organic methods because of subsidies offered by the Government. However, scarce advisory systems and inadequate processing and marketing channels resulted, in year 2000, in the return of organic farmers to conventional methods (e.g. 25% of organic farmers in the Tyrol).
On the demand side, aggressive promotion and marketing strategies of retailers and supermarkets have created new market opportunities in northern countries. The role of the major food retailing chains in promoting the growth of the market for organic food is crucial. These chains now account for a major share of the retail markets for fresh as well as processed foods, so large-scale market access for organic foods depends on securing shelf-space in this type of outlet.
The development of organic agriculture will not be linear but responsive to technological innovations due to unforeseen factors that will challenge agricultural development as a whole.
Within Europe, the development of organic agriculture took 30 years to occupy 1% of agricultural lands and food markets. The recent food safety crisis, however, resulted in an unforeseen growth whereby governments such as the UK are now targeting 30 % of organic lands within 10 years!
In Argentina, the spectacular growth of organic lands from less than 500.000 ha in 1999 to 3 million hectares in 2000 occurred mainly on grassland, in response to organic meat demand (although this reflects reclassification and extension of certification rather than switches between farming systems). World meat demand is increasing and is expected to continue to increase. If safety concerns continue to multiply (BSE, salmonella, dioxin), many countries (such as Japan, the largest importer of meat) are expected to seek more organic meat.
Future evidence on the health and environmental safety (or lack of it) of most transgenics will be determining options for biotechnology or organic agriculture. For example, oilcrop production (especially soybeans and rape) is subject to major changes as oilcrops are the focus of biotechnology development. At present, major organic soybean producers (Argentina, Brazil, and Paraguay) are being heavily confronted with GM soy (and Bt corn) that have become mainstream in these countries. Consolidated knowledge on food safety of GM crops might either increase the potential of net exporting countries through improved production of GM foods or create new markets (and exporters) of organic commodities.
The current deregulation of agricultural policies leaves decisions on the most suitable type of agriculture and food production to market forces. The growing concern of society with the safety of food produced by conventional systems, as well as growing interest of multi-national food enterprises and retailers in organic products suggest that the growth of certified organic agriculture is likely to develop according to market rules.
However, moves towards the decoupling of agricultural support from production and the increasing emphasis on support to agriculture’s role in providing public goods will also provide an impetus towards adoption of environmentally-friendly farming systems, including organic agriculture. Agri-environmental policies and global environmental conventions (especially those promoting carbon sequestration and biodiversity) are likely to trigger an increase of demand and supply for organic agriculture products.
The future of organic agriculture will depend on the political will and economic forces that will dominate the agriculture sector as a whole. As world agriculture globalizes, few and large private companies will increasingly control world food supply chains.
Access to inspection and certification, as well as the necessity to develop new ways in processing organic food, are major challenges that are likely to be taken up by large and established food companies. More than for other foods, multi-national food companies are expected to certify the organic food supply, both in terms of contracting production and international trading. In particular, the growth of processed organic foods will be facilitated by the capacity of these companies to assemble ingredients from different parts of the world and to guide production to meet their specific needs.
The current tendency for organic convenience food in industrialized countries is expected to increase, especially for tropical beverages, baby food and frozen vegetables that will dominate imports. Some tropical organic raw materials (e.g. coffee, cocoa, cotton, tea) are likely to have a discreet market share as cash crops.
The equitable access to services and markets is related to the regulatory and capacity-building role of governments, and of UN institutions that assist them.
Agricultural and environmental policies, including those responding to food safety concerns, have a large role in facilitating or hindering the adoption of organic agriculture. Besides financial support to conversion and regulations to protect the claim of organic producers, public investments in research and training are fundamental. The main factor limiting organic agriculture development is its reliance on knowledge, a public good that is non-existent in most countries. Extension personnel rarely receive adequate training in organic methods and organic agricultural research is under-funded. Ultimately, the development of technical progress will determine the evolution of relative profitability of food systems.
The increasing demand for certified organic agriculture products entails a great capacity to respond to traders, retailers and consumers’ needs in terms of quantity, regularity and quality of supply. Suppliers must be able to demonstrate that their products comply with internationally agreed organic standards. The establishment of reliable certification and accreditation systems requires advanced legal and technical knowledge and organizational skills. Active support to inspection and certification is necessary to facilitate the participation of farmers, and especially small holders, to the benefits of the organic system.
Developing countries, that represent the main suppliers of tropical organic commodities to northern markets, may face trade barriers due to different country requirements. International equivalence of organic standards is of key importance to decrease government administration and to prevent redundant certification. The application of the principle of equivalence would bring mutual benefits to both exporting and importing countries because it would ensure flexibility to exporters and conformity with requirements of importers. Growth prospects of organic trade will be availed only if official measures are established for international equivalency of organic standards.
Focusing only on exports is likely to be counter-productive to organic agriculture development. Considering the modest technologies available today for organic agriculture and the relatively vulnerable organic post-harvest and marketing chain, certified organic food has its limits in contributing to world food supply. However, the potential contribution of organic agriculture to developing countries’ food security, especially for subsistence and local markets, can be substantial.
Organic practices use cheap and locally available resources. The productivity of agricultural systems can be improved in the absence of factors over which farmers have little control: mineral fertilizers, synthetic pesticides, improved seeds/breeds and access to credit. Organic agriculture techniques replace external inputs by ecological services and farmer's management skills. In resource-poor and market-marginalized areas, organic agriculture is an alternative in the search for an environmentally sound solution to the problem of food insecurity. Food supply strategies of most developing countries remain a dis-incentive to the development of organic agriculture. A policy change towards re-valorization of local production and practices, supported by investments in capacity-building, will be fundamental in the adoption of organic agriculture in resource-poor areas.