Chapter 1

GENERAL CONCEPTS AND ISSUES IN ORGANIC AGRICULTURE

Definitions and concepts

The term "organic agriculture" refers to a process that uses methods respectful of the environment from the production stages through handling and processing. Organic production is not merely concerned with a product, but also with the whole system used to produce and deliver the product to the ultimate consumer.

Two main sources of general principles and requirements apply to organic agriculture at the international level. One is the Codex Alimentarius Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods¹: According to Codex, "Organic agriculture is a holistic production management system which promotes and enhances ecosystem health, including biological cycles and soil biological activity. Organic agriculture is based on minimising the use of external inputs, avoiding the use of synthetic fertilizers and pesticides. Organic agriculture practices cannot ensure that products are completely free of residues, due to general environmental pollution. However, methods are used to minimize pollution of air, soil and water. Organic food handlers, processors and retailers adhere to standards to maintain the integrity of organic agriculture products. The primary goal of organic agriculture is to optimize the health and productivity of interdependent communities of soil life, plants, animals and people."

THE PRIMARY GOAL OF ORGANIC AGRICULTURE IS TO OPTIMIZE THE HEALTH AND PRODUCTIVITY OF INTERDEPENDENT COMMUNITIES OF SOIL LIFE, PLANTS, ANIMALS AND PEOPLE.

The other is the International Federation of Organic Agriculture Movements (IFOAM)², a private-sector international body, with some 750 member organizations in over 100 countries. IFOAM defines and regularly reviews, in consultation with its members, the Basic Standards that shape the "organic" term. According to the IFOAM 2002 Basic Standards, "organic agriculture is a whole system approach based upon a set of processes resulting in a sustainable ecosystem, safe food, good nutrition, animal welfare and social justice. Organic production therefore is more than a system of production that includes or excludes certain inputs."

Box 1: Organic livestock Organic agriculture includes crop and livestock systems as well as fish farming systems. Organic livestock production emphasizes a proactive health management programme that addresses environmental factors to reduce stress and prevent disease. Most organic livestock standards require that animals have access to adequate space, fresh air, outdoors, daylight, shade, and shelter for inclement weather, suitable to the species and climatic conditions. Standards require a balanced nutritional programme using primarily organic feeds. Generally, in Argentina, Australia and North America, 100 percent organic feed is required. Under IFOAM, Asian, and current EU standards, only 80 percent of the feed, or less, must be organic (the percentage of organic feed is gradually being increased, according to the standards of the region). The sources and types of feed supplements and feed additives allowed are defined in the standards, with emphasis placed on naturally mined, botanical, and biological substances. Standards in Argentina, Australia and North America require that organic livestock be managed organically from the last third of gestation of the mother, or at least from birth. Asian and European standards currently allow animals to come from non-organic sources at different ages, depending on the species. Synthetic health care inputs are generally prohibited or restricted. Some certification bodies and national standards prohibit the use of antibiotics (animals or their products must be sold on the conventional market if antibiotics are used), while others specify a withholding period, usually double or triple the label requirement, before the animal or its products can be sold as organic. Vaccinations are generally allowed, with some restrictions. Growth promoters and hormones are generally prohibited. Some physical alterations, such as beak trimming, are prohibited by some certification bodies, while allowed by others, if the practice is done to improve or maintain the health and safety of the animal. Castration and dehorning are typically allowed. Animals are to be handled humanely during transport and slaughter. Records must be kept of: livestock sources; feed and feed supplements; medications/ parasiticides; health management; production; and sales.

In contrast to food labelled as "environmentally-friendly", "green" or "free-range", the label "organic" denotes compliance with specific production and processing methods. Most synthetic pesticides and fertilizers, and all synthetic preservatives, genetically modified organisms, sewage sludge and irradiation are prohibited in all existing organic agriculture standards. Adherence to organic agriculture standards, including consumer protection against fraudulent practices, is ensured through inspection and certification. Most industrialized countries have regulations governing food labelled as "organic". Other terms also used are, depending on the language, "biological" or "ecological".

Organic agriculture principles are consonant with principles of biodynamic agriculture and permaculture. Started by Rudolf Steiner in 1924, biodynamic agriculture embraces holistic and spiritual understanding of nature and the farm within it, where the farm is a self-contained evolving organism which keeps external inputs to a minimum: biodynamic preparations are used and requirements include, among others, harmony of cultivation with cosmic rhythms, fair trade and the promotion of associative economic relations between producers, processors, traders and consumers. Certification requirements of biodynamic agriculture (labelled under the Demeter International network in Africa, America, Australia and Europe) include many organic standards, which are recognized under the United Register of Organic Food Standards and governmental organic aid schemes.

In the late 1970s, the ecologist Bill Mollison developed the concept of "permaculture" as an interdisciplinary earth science. Permaculture is a landscape and social design system that works to conserve energy on-farm (e.g. fuel from crop, firewood, food calories) or to generate more energy than it consumes. Care for natural assemblies (including wilderness), rehabilitation of degraded land and local self-reliance are central to permaculture³. Permaculture does not have distinct certification but this management approach is embraced by organic agriculture.

"Organic agriculture" is not limited to certified organic farms and products but includes all productive agricultural systems that use natural processes, rather than external inputs, to enhance agricultural productivity. Organic farmers adopt practices to conserve resources, enhance biodiversity, and maintain the ecosystem for sustainable production. This practice is often but not always oriented towards the market for food labelled as organic. Those who seek to label and market their foods as organic will usually seek certification - almost certainly if they grow to export. However, many farmers practise organic techniques without seeking or receiving the premium price given to organic food in some markets. This includes many traditional farming systems found in developing countries.

Traditional agriculture includes management practices that have evolved through centuries to create agricultural systems adapted to local environmental and cultural conditions. Owing to their nature, traditional systems do not use synthetic agricultural inputs. Many, but not all, traditional systems fully meet the production standards for organic agriculture.

"ORGANIC AGRICULTURE" IS NOT LIMITED TO CERTIFIED ORGANIC FARMS AND PRODUCTS BUT INCLUDES ALL PRODUCTIVE AGRICULTURAL SYSTEMS THAT USE NATURAL PROCESSES, RATHER THAN EXTERNAL INPUTS, TO ENHANCE AGRICULTURAL PRODUCTIVITY.

It is important to distinguish certified from non-certified organic agriculture for the purpose of this study. Agriculture that meets organic production standards, but is not subject to organic inspection, certification and labelling is referred to as "non-certified organic agriculture" as distinguished from "certified organic agriculture." While economic and institutional conditions differ, both rely on the same technology and principles. Although the results might be similar, non-certified organic agriculture may not always represent a deliberate choice between alternative production systems - lack of access to purchased inputs may constrain such choice. Whatever the motivation, an organic farm reflects an intentional management system in which a producer manages resources according to organic principles. Non-certified organic agriculture therefore includes traditional systems which do not use chemicals but which apply ecological approaches to enhance agricultural production.

By contrast, some agricultural systems simply do not use purchased inputs (such as mineral fertilizers or synthetic pesticides) because the farmer cannot afford them nor has access to them. These systems cannot be considered as organic according to internationally recognized standards. These systems usually have low, declining productivity. Negligent systems often result in environmental degradation (e.g. soil erosion) and can create public nuisances that threaten neighbouring farms as reservoirs for noxious weeds, pests and diseases.

Organic standards require operators to conserve, restore, and enhance natural processes; to work with nature to protect crops, rather than to submit to or subdue it. Producer's decision-making is therefore essential to the meaningful differentiation of organic agriculture from systems that do not use synthetic inputs by neglect. Production by neglect is not considered "organic" for the purpose of this study, even if the organic standards in some local jurisdictions have not made this distinction.

All agricultural management systems that apply ecological approaches but which make use of some synthetic inputs and/or genetically modified organisms (e.g. integrated pest management, zero tillage, conservation agriculture and low-external input sustainable agriculture) are obviously excluded from the organic category.

Development of organic agriculture

The organic agriculture sector is currently the fastest growing food sector. Growth rates in organic food sales have been in the range of 20-25 percent per year for over a decade. Growth rates of organic lands are impressive in Europe, Latin America and the United States. The total area of organic land tripled in Europe and the United States between 1995 and 2000. In the last 5 years, in Argentina, the organic land area increased 1 280 percent.⁴ However, these reported percentage increases must be viewed in the context of the low absolute levels. Globally, certified organic agriculture occupies less than 1 percent of lands and 1-2 percent of food sales. In some cases, the growth may reflect the entry of land long farmed organically into a certification programme rather than an actual switch in farming systems.

Prior to the late 1980s, the slow but constant development of organic agriculture was driven by grassroots organizations, farmers and traders. In the United States, the states of Oregon and California adopted organic legislation in 1974 and 1979, respectively. In all other parts of the world, it took a long time before the standards established by the organic agriculture community (e.g. the Soil Association in the United Kingdom in 1967 and IFOAM in 1980) were echoed by national and supranational legislation and control systems (e.g. France adopted legislation in 1985 and 1991 marked the adoption of the European Union Regulation no. 2092/91). The recognition of the role of organic agriculture in achieving environmental objectives, including sustainable use of land set aside⁵, led to the adoption of agri-environmental measures to encourage organic agriculture (e.g. the 1992 reform of the Common Agricultural Policy and accompanying EU Reg. no. 2078/92). On the supply side, and in the European Union, policy instruments stimulated small farmers to convert to organic farming by providing financial compensation for losses incurred during conversion.

Consumers concerned with food quality, as well as the protection of the environment, were the first to stimulate demand. New market opportunities have developed as part of a business strategy to address consumer concerns, particularly in the European Union and the United States. Major food companies see the processing, handling, stocking, and promoting of organic foods as part of a positive public image. Retailers of all sizes now aggressively promote and market organic food, with major food retailing chains now accounting for a major share of the retail markets for fresh as well as processed foods.

Consumers are increasingly sceptical on the safety of conventional foods and the soundness of industrial agriculture. The use of growth regulators (such as Alar in the United States) stimulated interest in organic food. The crisis over dioxin-contaminated food and livestock diseases (such as Bovine Spongiform Encephalopathy (BSE) and foot-and-mouth in Europe) further increased demand for organic food. Consumer surveys in almost every country show a segment that demands an alternative to genetically modified foods. Governments have responded to these concerns by setting targets for the expansion of organic production. Thus, the concern of consumers and governments with the quality and safety of food has become the major driving force in the development of organic agriculture in industrialised countries. While some may question the validity of consumer concerns, there is no doubt that these have contributed to the growth of the organic sector.

These concerns have also opened possible markets for developing country exporters, enabling them to enhance foreign exchange earnings and diversify their exports. Price premiums of between 10-50 percent over prices for non-organic products, as well as more secure markets for organic commodities, can help counter-balance the loss of preferential trade arrangements, falling food prices and withdrawal of government support to agricultural inputs and other services. Major northern markets offer good prospects for suppliers of organic products not domestically produced. These include coffee, tea, cocoa, spices, sugar cane, tropical fruits and beverages, as well as fresh produce in the off-season. Increasingly, governments in developing countries are creating conditions in support of organic exports.

Non-certified organic agriculture is of particular importance for meeting local food requirements while providing protection and sustainable use of natural resources. Organic management makes it possible to save on production costs (especially important when cash is needed to purchase synthetic inputs) and to promote economic and/or food self-reliance. In market marginalized and resource-poor areas where farmers have no access to modern inputs and technologies, organic agriculture can also raise the productivity of traditional systems by optimizing the use of local resources⁶.

For example, hundreds of thousands of indigenous farmers have turned to the organic movement to reinstate along the Andes sophisticated agricultural practices developed by the Incas. Individual small family vegetable plots and groups/associations managing organic produce for domestic urban markets and small informal fairs are widespread. Cuba has adopted organic agriculture as part of its official agricultural policy, with substantial investments in research and extension, to compensate for shortages in external input and to substitute food imports.

Box 2: Pesticides residues in conventional, IPM-grown and organic foods, United States of America The effect of different agricultural production systems on dietary exposure to pesticides is a question of considerable interest to scientists, regulators and the public, yet few empirical analyses of residue data have addressed this question. Sufficient data on pesticide residues in organically grown foods, foods produced through Integrated Pest Management (IPM), those certified as containing No Detectable Residues (NDR), and foods with no market claim (assumed to be conventionally grown) now exist, allowing this question to be answered. Researchers analysed test data on pesticide residues in more than 94 000 organic and non-organic food samples of some 20 different crops tested over nearly a decade. Data were obtained from three independent US sources: tests undertaken by Consumers Union (CU) in 1997 on selected foods; surveys conducted by the Pesticide Data Program of the U.S. Department of Agriculture on residues in a wide array of foods available on the US market; and the California Department of Pesticide Regulation surveys of residues in foods sold in California. Research highlights: The USDA data showed that 73 percent of conventionally grown produce had at least one pesticide residue, while only 23 percent of organically grown samples of the same crops contained residues. A second test was carried out on the USDA data, excluding residues of long banned, environmentally persistent chlorinated organic insecticides, such as DDT, dieldrin and chlordane (i.e. residues due to environmental contamination, rather than differences in crop production methods). The fraction of positive organic samples dropped from 23 percent to 13 percent, but conventional samples only dropped from 73 percent to 71 percent. More than 90 percent of USDA's sample of conventionally grown apples, peaches, pears, strawberries and celery had residues. Conventionally grown crops were six times as likely to contain multiple pesticide residues. In California State testing, residues were found in nearly a third of conventionally grown foods, but in only 6.5 percent of organic samples. The researchers remarked that the California data were based on tests with less sensitive analytical methods than those used to generate the USDA data, and hence, did not include many low-level residues detected by the USDA's testing methods. California testing also revealed multiple pesticide residues nine times more often in conventional samples than in organic samples. CU's tests found residues in 79 percent of conventionally grown samples and in 27 percent of organically grown samples, with multiple residues six times as common in the former. Results for IPM/NDR samples were approximately midway between the organic and conventional samples. This analysis shows convincingly that organically grown foods have fewer and generally lower pesticide residues than conventionally grown foods. However, the analysis does show that organic foods are not pesticide free, due to many factors beyond the control of the organic farmer (e.g. pesticide spray drift from adjacent fields or soil or irrigation water contamination). While the risks to heath associated with dietary pesticide residues are still uncertain and subject to debate, risk is relative, and lower exposure undoubtedly translates into lower risk. Source: Baker et al, 2002

Box 3: Organic aquaculture Aquaculture (the farming of aquatic animals and plants) is expanding at an average rate of 9 percent per year since 1970. However, the quantities and diversity of certified organic produce being produced remain small (5000 mt of which 80 percent of salmon), partly due to the absence of universally accepted standards and accreditation criteria organic aquaculture. Over 91 percent of total conventional marine aquaculture production in 1999 farmed aquatic plant and mollusc species feeding low on the aquatic food chain. Given the possible introduction of appropriate water and nutrient management techniques, the prospects for the increased production, including organic production, of farmed organic aquatic plants and molluscs is considerable. Most reported certified organic aquaculture products produced in Europe use marine and brackish waters, a largely untapped resource, thus preserving fresh water supplies for human consumption and conventional agriculture. Aquaculture also covers organic aquatic plants for either direct human consumption or for use as feed inputs for animal husbandry, including for the organic pisciculture sector. Based on current estimates of certified organic aquaculture production and an anticipated compound annual growth rate of 30 percent from 2001 to 2010, it can be expected that certified organic aquaculture will increase considerably, while still remaining a tiny share of total aquaculture production.

Resource use efficiency in organic agriculture

AGRONOMIC PERFORMANCE

Comparisons of the performance of organic and conventional agriculture systems are meaningful only when made over an intergenerational period of time in order to assess the continued capacity of natural resources to sustain agriculture. High yields in non-organic systems are often exploitative systems that degrade land, water, biodiversity and ecological services on which food production depends.

Most comparisons of the efficiency of alternative production systems focus merely on the gross yield of marketable commodities. Farmers usually experience a decline in yields after discarding synthetic inputs and converting their operations to organic production. After the agro-ecosystem is restored and organic management systems are fully implemented, yields increase significantly.

If conversion to organic departs from low-input (often traditional) systems, then yields tend to be stable. A study from Kenya⁷ indicates that organic agriculture in the tropics shows a good performance. This finding was contrary to conventional wisdom that contended such a system would be constrained by insufficient organic material. Organic systems in medium potential areas significantly out-performed conventional methods in maize grain yields, net cash benefits, return on capital and return per family labour day. For example, organically grown maize experienced less damage from weevils during storage than its conventional counterpart. This and other similar findings show that organic systems can double or triple the productivity of traditional systems.

The productivity of organic agriculture systems varies through the different stages of management: (i) in-transition from conventional to organic management; (ii) in-conversion from traditional to organic management; (iii) organic management based on input substitution, and (iv) complete shift to a systems approach. The need to secure farm economic viability in the short-term results in few farms achieving a systems approach.

In most cases, transitioning farmers suffer decreased productivity, but even then there are cases where the conventional system is in such decline that there are significant positive yield responses to the addition of organic matter, particularly when there is a carryover of synthetic N fertilizer such as calcium nitrate. Also, there are cases where transitioning farmers still have some carryover with herbicides that suppresses weeds well into the second year of transition; for them the decline in yields related to weed pressure does not begin until the second or third year. This is most common in grain field crops such as wheat, rice and corn.

Yield losses are greatly exaggerated by conventional experiment stations. The actual experience of most transitioning farmers is that the yield losses are tolerable. The increased labour (particularly for weed control) seems to hurt US farmers more than lower yields. Yield losses are caused by a number of interrelated factors: soil organic matter and biological activity take time to get established; many conventional farms are on a pesticide `treadmill' that does not permit the establishment of beneficial organisms for pest, weed, and disease suppression; and fertility problems are common until restoration of full biological activity (e.g. growth of soil biota, improved nitrogen fixation, and establishment of natural pest predators).

The degree of yield loss varies, and depends on inherent biological attributes of the farm, farmer expertise, the extent to which synthetic inputs were used under previous management, and the state of natural resources⁸. Sometimes a few years may suffice or it may take many years to restore the ecosystem to the point where organic production is viable in economic terms. There are some soils that are so marginal and highly depleted that it would not be possible to farm without substantial government subsidies for certain commodities (e.g. cotton, wheat and corn on marginal lands in parts of the US high plains).

In the medium term, and as expertise increases, the value of organic agriculture becomes more evident because of yield improvements and increased fertility of the agricultural system. In the longer term, the performance of organic agriculture increases in parallel with improvements in ecosystem functions and management skills.

The performance of organic agriculture cannot be judged based on the comparison of a single-crop or a single year. Organic agriculture usually performs better if one considers total production of useful crops per area. The greatest constraints faced by transitioning farmers are the lack knowledge, information sources, and technical support. Greater government investment in appropriate research and extension services can help overcome these constraints.

Extreme weather fluctuations present a growing threat to agriculture. Organic systems appear to be more stable and resilient in response to climate disruption based on comparisons with their conventional counterparts under stress conditions such as severe drought and flooding. In 1993, conventional rice in Japan was nearly wiped out by an unusually cold summer while organic farmers yielded 60-80 percent of the annual average⁹. The better composition of water-stable aggregates in organic soils and reduced soil compaction result in the favourable performance of organic systems under both flood and drought conditions.

IN MARKET MARGINALIZED AND RESOURCE-POOR AREAS WHERE FARMERS HAVE NO ACCESS TO MODERN INPUTS AND TECHNOLOGIES, ORGANIC AGRICULTURE CAN RAISE THE PRODUCTIVITY OF TRADITIONAL SYSTEMS BY OPTIMIZING THE USE OF LOCAL RESOURCES.

Yield comparisons offer a limited, narrow, and often misleading picture of the different production systems. Profitability and long-term economic viability would be a better indicator to determine what techniques operators would choose. Organic production, processing and marketing depend on several interrelated factors. Profitability in organic agriculture depends on relative input and labour costs, actual production costs, conventional and organic market conditions and the price premiums received for organic commodities. In some countries, government payments for the adoption of organic techniques are available to offset certain costs and encourage practices that have long-term benefits to the environment. Accurate comparisons of economic performance must take account of performance over a complete rotation rather than a single year. Moreover, the multiple environmental benefits of organic farming, difficult to quantify in monetary terms, are essential ingredients in any comparison.

Economic performance

Only a few studies have assessed the long-term profitability of organic agriculture systems. While these studies vary in their methodologies and conclusions, they consistently show high revenues relative to conventional agriculture because of the premiums received. However, the costs relate to whole farm production (total production of a variety of species and not of single crop yields) over the whole rotation period: this includes both marketed products and non-food products (to feed animals and the soil). In particular, incomes achieved in one season may appear high because of price premiums but low in the subsequent rotation seasons if these crops have low or no market values. Looking at these seasons individually does not give an accurate picture of the financial viability of organic agriculture. Unfortunately, many comparative studies of organic and conventional or integrated production focus on a single crop and a single year.

The economic performance of organic agriculture in Europe shows a situation where organic farmers receive financial support and premium prices but where labour is expensive. An extensive analysis of European farm economics in terms of labour use, yields, prices, costs and support payments concluded that profits on organic farms are, on average, comparable to those on conventional farms¹⁰. In the United States, profits are also comparable, despite the fact that there are no direct subsidies for organic agriculture.

In developing countries where organic agriculture is not subsidised, synthetic inputs are expensive and labour is relatively cheap, market-oriented organic farmers can achieve higher returns thanks to reduced production costs and diversified production. For example, in the Philippines, price premiums are not a sufficient incentive to market rice as organic. Farmers have adopted organic practices nevertheless because the avoidance of external inputs saves on production costs while yields are more stable. In Madagascar, hundreds of farmers have increased their irrigated rice yields from two to as much as eight tonnes per hectare by using local seeds, composts and innovative soil, plant, water and nutrient management practices¹¹.

Box 4: Simple method to vastly increase rice yields, Yunnan Province, China Under the direction of an international team of scientists, farmers in China's Yunnan Province implemented a simple change in their rice paddies. Instead of planting the large stands of a single type of rice as they typically have done, the farmers planted a mixture of two different rices. With this one change, growers were able to radically restrict the incidence of rice blast - the most important disease of the most important staple in the world. Within just two years, farmers were able to abandon the chemical fungicides previously widely used to fight the disease. Many researchers have long argued that planting a diversity of crops should lead to benefits like greater productivity and the suppression of disease, compared with single variety plantings. This study shows that such environmentally friendly methods can be highly effective, even more effective, in this case, than standard chemical practices. The scientific hypothesis behind the study, the latest in a growing number examining the effects of biodiversity, is simple. If one variety of a crop is susceptible to a disease, the more concentrated those susceptible types are, the more easily disease can spread. The disease should be less likely to spread, however, if susceptible plants are separated from one another by other kinds of plants that do not succumb to the disease and can act as a barrier. Rice blast fungus, which destroys millions of tonnes of rice and costs farmers several billion dollars of losses every year, moves from plant to plant as an airborne spore - a method of transport that could be easily blocked by a row of disease resistant plants. Scientists tested the hypothesis by asking farmers to plant their farms in experimental plots using two kinds of rice: a standard rice that does not usually succumb to rice blast disease and a much more valuable sticky rice known to be highly susceptible. Farmers also planted control plots of monocultures, allowing scientists to test the importance of the mixtures in the health and productivity on these farms. What scientists found was that farmers gained even more benefit from the mixtures than expected. Resistant plants did block the airborne spores in a field but as more and more farmers became involved in the study, these positive effects began to multiply across the region. Not only were disease spores not blowing in from the next row, they were no longer coming from the next farmer's fields or the next, rapidly damping the spread of the disease on a large scale. In addition, scientists found that the sticky rice plants, which poked up above the shorter, standard rice plants with which they were grown enjoyed sunnier, warmer and drier conditions than they would have in a stand of tall, sticky rice plants. These conditions appeared to discourage the growth of the fungal rice blast in the sticky rice plants. The fact that the rice blast is the most devastating diseases of rice, the staple crop of most people worldwide, alone makes the study important. Scientists interviewed said there was no reason, however, why mixtures could not decrease disease spread in other crops as well, though how powerful and useful a remedy it will be is likely to vary. As biodiversity is an essential tool for organic production, this study is of particular interest for organic farming especially as it does not involve the application of chemicals. Source: The New York Times, 2000

Organic products tend to command impressive premiums in developed countries at retail level: on average between 10-50 percent (and in some cases as high as 100-200 percent) above conventional prices for the same commodity. These premiums reflect several underlying factors on both the demand and supply side. Premiums reflect strong consumer demand, with some consumers willing to pay higher premiums than others do. Most consumers in developed countries will pay a premium for organic, but only to a point. As the premium increases, the number of consumers willing to pay it decreases, because the conventional commodity is always available as a substitute.

Premiums in excess of 50 percent usually have underlying supply constraints and bottlenecks. These are often temporary and unpredictable. Because fewer fungicides and post-harvest tools are available, fresh organic produce tends to be more seasonal and local. Long-term high premiums often reflect severe production problems related to chronic endemic pests and diseases that cannot be managed effectively by existing biological and cultural techniques. On the other hand, situations where organic production costs are as low as, or lower than, conventional production will frequently see little or no organic price premium received by farmers.

Premiums compensate farmers for skilled resource management; higher labour costs, unit costs, and handling expenses; and administrative, inspection, and certification fees. Premiums also reflect the price to avoid and mitigate negative environmental externalities incurred by conventional agriculture. These include costs of damage to natural capital (e.g. loss of arable land), human health (e.g. allergies, intoxication, birth defects, cancer) and reduction of water, air and soil pollution. Such indirect costs are not usually included in food prices, and this distorts the market (comparative prices for organic products appear high) while encouraging activities that are costly to society.

Many reasons contribute to the additional costs to market organic products: inspection and certification fees, segregated storage, fewer options to control post-harvest pests and diseases, properly cleaned and well-documented transportation, careful handling to avoid dilution and contamination, appropriate packaging, and economies of scale. Because organic producers comprise a smaller proportion of the agricultural industry, individual producers are widely dispersed. Greater collection and assembly costs further add to the costs of transportation. Pest and disease infestations can result in handlers facing an unpleasant choice between losing most and possibly all of a crop, or treating it with a prohibited substance to recover the losses, and selling the product as non-organic. Segregation increases costs of handling. Many retailers require their suppliers to provide individual packaging and special labelling for organic food not required for conventional food.

Box 5: Ecological tourism as a tool for conversion to organic agriculture, Poland The European Centre for Ecological Agriculture and Tourism-Poland (ECEAT-Poland) is using ecotourism as a tool to help small farmers make the sometimes difficult transition from conventional agriculture to organic agriculture. In this way farmers benefit financially while environmentally sound practices are spread, and the natural landscape, biodiversity and local culture and traditions are protected and shared with visitors. In Poland, most small farmers already use relatively little chemical pesticides and fertilizers, so transition to organic agriculture is not, in fact, so difficult. It mainly requires education of the farmers in the organic approach and in some practical techniques of organic agriculture. For farmers who wish to convert to organic production, ecological tourism provides additional income during and after the transition process, helping to motivate farmers to make the transition to organic farming. Ecological tourism also educates tourists about organic agriculture and organic foods, and provides an extra market for the farmer's products, in addition to the income from providing tourist accommodation. Project approach: Small farmers interested in converting to organic agriculture and ecotourism are identified. Farms are visited and farmers are advised on the advantages of participating in the project. Formal training sessions are held for small groups of interested farmers, providing practical information on organic agriculture, ecotourism, the growing market for organic products, general ecological awareness, and the necessity for cooperation among farmers in order to achieve successful transition to organic farming. Once a farm meets Ecoland standards (an internationally recognized certification body) for at least half of its products, it may participate in the ecotourism programme. Descriptions of participating farms, their surroundings and local tourist attractions are prepared and published annually in an ecological tourism brochure both in Polish as well as other languages in cooperation with the ECEAT network (based in the Netherlands). A promotional campaign emphasizing the social, ecological and economic goals of the project is conducted using press conferences, radio and television interviews, newspaper and magazine advertisements and articles. Visitors register as ECEAT farm guests, and a financial record of ECEAT tourists is kept by the farmers. Farmers donate 10 percent of their ECEAT tourist earnings to ECEAT-Poland to help pay for the publication and distribution of the brochure. From an initial 400 tourist from Western Europe in 1993, there were over 3 000 in 1998 and 75 percent of the farms remained within the project. ECEAT-Poland publications and videos give more information on ecological tourism, ecological awareness and ecological cooperation to the farmers in the project, as well as to the public. The project has grown quickly and become well established in Poland. It is being increasingly recognized by ecological organizations, the public, local governments and private industry as a practical means to help convert to organic agriculture. Conversion to organic agriculture through ecotourism is proving to be an environmentally and economically sound solution for farmers and society, particularly in, though not limited to, ecologically protected areas such as those near national parks and landscape parks. The ECEAT programme, which started in Poland, has now been replicated, with local variations, in 23 other countries of Europe, assisted by the network base in Amsterdam. Source: Lopata, 2002

To date, consumers in industrialized countries have been willing to pay a premium for organic food because they perceive environmental, health, or other benefits from that choice. While surveys show that consumer demand is unmet, organic farmers also report insufficient demand for their products. Balanced expansion of supply and demand and reduction in organic production costs (achieved through targeted research) will be one factor in maintaining the organic price premium. At present, the general tendency for demand to out-grow supply suggests that the premium is not under immediate threat for most product categories. Organic production is expected to continue to offer premium prices and a profitable alternative to conventional production systems for many farmers.

High prices and limited outlets have historically curtailed demand for organic agriculture. Lower prices would expand the organic market without discouraging producers, provided that the premium still compensates the costs of transition and provides a living wage to the producer. Most of the premium is captured by retailers, wholesalers, distributors and processors. Retailers can reduce prices while maintaining the profitability of organic farmers. A price premium to producers of 10-20 percent, perhaps even 50 percent, would have almost no impact on consumers. This, however, is not likely to be accepted by retailers and where feasible, direct marketing channels are being developed. At present, the marketing strategy of many major food retail chains is to expand the supply of a few low-cost organic products produced by a relatively small number of producers. This strategy benefits a few large organic farms, which rely on input substitution and global market over small and medium-sized local farmers.

Greater investments in research and extension offer long-term solutions to organic production and handling constraints. The redirection of only a small portion of public expenditures towards biological and cultural methods could increase yields, lower handling, distribution, and marketing costs, and deliver lower prices for organic food to consumers. As the organic market grows and matures, economies of scale should narrow margins for conventional products.

In many developing countries, there are no domestic institutions that can assist farmers to produce, handle, and market organic food. Extension services deter the adoption of organic agriculture because agents are trained to advise farmers to use what the experiment station has determined to be the most efficient inputs. Most often, organic methods are considered obsolete throwbacks to a less efficient time.

Land tenure is another determining factor, given the long-term commitment needed for organic methods to be effective. Tenant farmers are unlikely to invest the necessary labour and sustain the costly conversion period without a guarantee of continued access to the land. Organic farmers may take years to reap a return on their investment and tenants and sharecroppers seldom have the luxury to wait that long.

The trade of organic commodities needs to be viewed with reference to international commodity markets. Prices received by farmers for conventional products have stagnated or decreased in real terms over the past thirty years, with farmers sometimes collecting revenues below production costs. Relative decline in prices since the late 1990s affects almost all agricultural commodities. Low coffee prices¹² have forced millions of small farmers into crippling debt that ultimately results in them forfeiting their land.

Low world prices also mean low export earnings: developing countries' export earnings from beverage crops fell by 18 percent between 1999-2000. Current low price levels of agricultural commodities are likely to remain so in the short-term¹³. Costs of conventional farming inputs have increased substantially, usually requiring hard currency to import.

Organic agriculture offers an opportunity to improve income because of: consumers' willingness to pay price premiums for organic produce and lower production costs due to reduced use or absence of imported inputs. Even when the price premium on organic products is low, stable and profitable long-term prices offer more security to farmers than volatile conventional commodity markets.

Social performance

The conversion of a farm to organic practices influences all facets of the operation, including labour demand, social structures, and decision-making processes. Organic agriculture enterprises often require more labour input than conventional farming in order to replace external energy and capital inputs such as fertilizers and herbicides. However, the extent depends on the intensity of the operation and level of farm capitalization. The ley system applied to organic cereal and dairy production in Australia, for example, results in similar demands on resources for organic and conventional farmers.

Crop diversification on organic farms, and related different planting and harvesting schedules, distributes labour demand through the season. This stabilises employment, reduces turnover, alleviates many problems related to migrant labour, and helps to spread the overhead payroll costs per employee. Diversity in agricultural production and value added products increase income-generating opportunities and spreads the risks of failure over a wider range of crops and products.

ORGANIC PRODUCTION IS EXPECTED TO CONTINUE TO OFFER PREMIUM PRICES AND A PROFITABLE ALTERNATIVE TO CONVENTIONAL PRODUCTION SYSTEMS FOR MANY FARMERS.

Labour demand is at the same time a constraint to organic conversion and an opportunity to expand employment in rural communities. Northern countries with high wages and a declining rural population have the greatest difficulties in finding an adequate labour supply. This constraint is however overcome by employing labour force migrating from developing countries and in-transition economy countries.

The introduction of organic agriculture may shift gender distribution of labour insofar as men may prefer to be involved with mechanised agriculture. In developing countries, women depend on access to common property because they seldom own land. Given that credit frequently requires land as collateral, landless people in general, and women in particular, find themselves unable to obtain credit through most lending institutions. It might therefore be assumed that organic agriculture facilitates women's participation as it does not rely on purchased inputs and thus reduces the need for credit. However, since organic agriculture requires several years to improve the soil, insecure long-term access to the land is a major disincentive for both women and men for launching into such a long-term enterprise.

To be competitive, organic operators need to experiment with new techniques, and must manage labour, land, and capital quite differently from conventional operators. The different options presented to farmers result in a variety of choices in techniques. Some succeed, some fail, and the difference is often based on experiments undertaken by the farmers, whether collaboratively with, or independent of, the public research institutions. On-farm research generates new knowledge that is shared with other farmers. Such learning processes lead to greater innovation together with increased likelihood of these technologies to persist.

BY BUILDING ON LOCAL KNOWLEDGE, ORGANIC AGRICULTURE REVITALIZE TRADITIONAL CUSTOMS AND LOCAL SELF-RELIANCE.

By building on local knowledge, organic agriculture approaches revitalize traditional customs and local self-reliance. Employment opportunities and higher returns on labour encourage people to remain in agriculture, reinvigorating rural communities. Strengthened social cohesion and partnerships within the organic community make for better connections with external institutions. Organized groups, such as producer cooperatives, have better access to markets and can negotiate their needs as equal partners in the food supply chain.

Together with the production system, the social environment of those engaged in organic agriculture generally improves: in fact, many organic systems incorporate fair trade principles which improve working conditions. The IFOAM Basic Standards includes a chapter on Social Justice Standards. These refer to and are based upon the conventions of the International Labour Organisation on labour welfare and to the human rights charters of the United Nations. The 2002 version of the IFOAM Basic Standards proposes to ensure access for workers, farm families and indigenous people to bargain collectively for fair wages, safe and healthy working conditions, and social services.

A growing number of certified organic agriculture commodities produced by small-scale farmers organized in democratic cooperatives meet fair trade requirements: farmers are paid adequately to cover costs of production and a social premium to improve the quality of life. Although the organic movement shares a consensus that social requirements are necessary, specific standards are controversial. Standard-setting bodies are sensitive to national sovereignty and the cultural context governing social and economic relations. Such standards might create trade barriers to some developing countries organic exports, but this pressure may trigger social and economic reform in many countries.

Institutional performance

Because "organic" is a production process claim, consumers must rely on certification programmes that verify claims. The standards that specify the organic production process appear quite precise, especially compared with claims made for other competing products. Consumers decide to purchase organic food in part because that choice reflects their values. For example, many consumers demand that organic food meet strict animal welfare standards. Others expect organic to mean fresh, local and minimally processed. The whole organic community requires that genetically modified organisms not be used to produce or process organic food or fibre. Social and economic issues, including producers receiving a fair price, are increasingly receiving attention.

Most industrialized countries have regulations that govern organic agriculture, including Australia and the European Union countries (1992), Switzerland (1999), Japan and the United States (2000). Some developing countries have also established policies and regulations on organic agriculture. In February 2002, 56 countries were reported to be at some stage of regulating the organic sector. Differences with regards to the scope of regulations and variation in their implementation raise a number of concerns, namely:

• import discrimination whereby compliance is required with standards not always suitable to agro-ecological conditions of export countries;
• multiple accreditation of certification bodies in order to access the three main organic agriculture markets (Europe, Japan and the United States);
• difficulties to traders, due to different rules interpretation by certification bodies;
• enormous workload (and delays) for authorities to negotiate bilateral equivalency;
• limitation of bilateral agreements with regards to products with ingredients sourced from around the globe.¹⁴

The Codex Alimentarius Guidelines for the Production, Processing, Labelling and Marketing of Organically Produced Foods constitute a recognized basis to harmonize organic standards and national regulations. The Codex Committee on Food Import and Export Inspection and Certification Systems is developing Draft Guidelines on the Judgement of Equivalence of Technical Regulations Associated with Foods Inspection and Certification Systems which intend to develop an infrastructure for the review of technical requirements other than sanitary measures associated with inspection and certification systems. These Guidelines suggest a process and general principles to determine the equivalence of all food systems and are particularly relevant to organic agriculture.

In the absence of official measures to address equivalence, the organic community has organized an international programme to accredit certification bodies. The IFOAM Accreditation Programme, established in 1992, developed international procedures to evaluate organic certification programmes and assess compliance of organizations that claim to adhere to organic standards. Certification programmes involved with organic agriculture apply to the International Organic Accreditation Service (IOAS), an NGO established in 1997, in order to be accredited. IOAS evaluates their standards against the IFOAM Basic Standards and examines the competence of their programme against established criteria through field visits and audits. To date, IOAS has accredited about 20 certification bodies, operating in both developed and developing countries. This privately organized service has the potential to facilitate international trade in organic products, but this promise will be fully realised only when it is recognized by governments which have developed rules for organic agriculture.

Developing countries are important suppliers of organic commodities. They, however, need to establish that they conform to the standards and rules of the importing developed countries. Suppliers to multiple markets may need to carry several such certifications: standards accepted in Sweden may not be recognized in the United States or Japan, and vice-versa. In countries where recognized domestic facilities are lacking, suppliers often must hire foreign inspection and certification bodies; in many instances, this is prohibitively expensive. Given that a certain part of certification is a fixed cost, certification costs take a higher percentage of earnings of smaller units. Smallholders in developing countries have little chance to export certified organic products without active government support for inspection and certification. Alternative control systems for small holders are however developing in order to ensure quality assurance without depending totally on foreign inspectors and certification bodies.

Many developing countries require external technical assistance to build the capacity for technical, organizational, and legal skills needed to establish reliable certification and accreditation programmes. Some certification bodies become accredited by the importing country. This requires educated, trained personnel and administrative structures. International equivalence of various national organic standards will reduce the administrative overhead, improve public-sector relations with private certifiers and traders, and eliminate redundant certification. This bureaucracy and its attendant cost particularly burdens poor farmers in developing countries. Internationally recognized accreditation and equivalence will benefit exporting and importing countries alike because it ensures conformity with requirements of importers while recognizing the competence and compliance of the exporters.

Box 7: Smallholder group certification Smallholder grower groups vary considerably in size, ranging from less than 100 to thousands of growers. Most of these groups find it impossible to pay for an annual inspection visit by an external certification body to all their members, as required by the European Union, the United States and Japanese regulations, as well as the IFOAM Criteria for Organic Certification. As a result, the necessary annual inspections combined with the practicalities of the actual inspection have led to the development of a workable system of group certification. The system is built on the presence of an internal support structure within these producer groups known as an Internal Control System (ISC). However, different certifiers have developed their own approach and methods to smallholder group certification and ICSs. These are often designed specifically for certain groups or a particular region, but what is applicable in Peru might not be suitable for Thailand, or what works for smallholder groups of 100 farmers might be unmanageable for groups of thousands. In addition, competent authorities have different sets of requirements. Following an IFOAM supported workshop in February 2001, a generally accepted definition of an ICS was generated: "An Internal Control System is a documented quality assurance system that allows an external certification body to delegate the annual inspection of individual group members to local inspectors within the certified operator". The main task for the certification body therefore becomes to ensure the correct functioning of the ICS. An ICS is composed of an internally agreed management structure, qualified and trained internal inspectors and an informed approval committee. There are an estimated 350 organic growers groups, comprising some 150 000 smallholders in developing countries exporting their organic products to markets in the North and to date there are 25 certification bodies working worldwide with these smallholder groups. In fact, estimates indicate that 70 percent of the organic produce imported into Europe is produced by these smallholders. It is important that the on-going discussions on the reliability of ICSs do not lose sight of the fact that these quality systems take many years to develop. In most cases it has been a step-by-step development process between smallholder organizations and certification bodies. Clearly, smallholder groups with several years experience with an ICS will be better organized than a group in their first year. Alternatively, some smallholder groups have opted for a form of self certification outside of the present certification methods, as is the case of Agreco, a farmers' organization in Santa Catarina State in south Brazil. As with ICSs these are still under development and the fact that an increasing number of smallholder organizations have now converted their production to organic standards illustrates the success of the organic movement. Certification, internally and externally organised, provides them an even better opportunity on the global market. Source: Wilhelm and Fürst, 2002. Schoenmakers, 2002

Ensuring compliance must be legitimate and enforced with sufficient sanctions in both developed and developing countries alike. There is evidence that fraud exists in many developing countries. Recent experiences in Germany (with Nitrofen contamination) and in the United States (with poultry in the Southeast) show that developed countries are not free of negligence and fraud. This hurts the honest legitimate organic farmer in the exporting country as well as the consumer in the importing country. Trusted and enforced organic guarantee systems are key to successful trading of organic agriculture products. The establishment of an internationally agreed accreditation mechanism is crucial for determining equivalence of imported organic products.

TRUSTED AND ENFORCED ORGANIC GUARANTEE SYSTEMS ARE KEY TO SUCCESSFUL TRADING OF ORGANIC AGRICULTURE PRODUCTS.

¹ FAO/WHO, 2001. These Guidelines relate to crops, livestock, bees and processed food products.

² IFOAM, 2002.

³ Mollison, 1990.

⁴ SENASA, cited in Montenegro, 2002.

⁵ Lampkin and Padel, 1994.

⁶ Pretty and Hine, 2000.

⁷ ITC/KIOF, 1998.

⁸ FAO, 1999.

⁹ Lotter, 2001.

¹⁰ Offermann and Nieberg 1999.

¹¹ Basilio 2000.

¹² During 1970-2002, ICO composite prices declined from 51 cents per kg to 46 cents per kg in nominal terms, and from 201 cents per kg to 44 cents per kg in constant 1990 terms (FAO 2002a).

¹³ FAO, 2002a.