Most analysts looking at the long-term future of the organic industry are cautiously optimistic, predicting annual growth of organic markets around 20 percent in the medium term. The market for certified organic food in 2000 was around US$16 billion, assuming the Japanese market is a conservative US$300 million (see Table 2).
The lower estimate of market growth rate for individual countries is different for each country and between 10 and 25 percent. Assuming the lowest growth estimates (10 percent for each country) are maintained for ten years, it would boost the global market to US$61 billion in nominal terms in 2010. This would represent a market share of 3.5 percent, assuming just 2 percent growth per annum in the total food market38. Likewise, the higher estimated growth rates (between 15 and 30 percent), if sustained in all organic markets, would see retail sales reach US$94 billion by 2010 with a market share of 5 percent (see Table 4).
Table 4: Estimates for organic food and beverages retail sales in 2010
5 706-8 900
9 313-13 786
4 046-6 192
3 034-4 644
1 719-2 631
27 510-42 351
32 364-49 534
61 372 - 94 220
* Growth rate estimates for European Union member states are derived from ITC, 2001. Where unspecified, growth rates are assumed to range from 10 to 15 percent per annum. The 2010 sales estimates are based on these assumed growth rates, applied to the lower bound of the 2000 sales estimates.
Some authors have speculated about growth rates as high as 30 percent per annum, and indeed these have been observed in some markets. A sustained 30 percent across-the-board growth would see organic sales scale US$210 billion in 2010, or 11 percent of the global market. This seems unlikely given the current state of the market.
If the high growth rates apply until 2005 and the lower estimates thereafter, the global sales in 2010 would amount to US$73 billion. The lower rate, from 2006, has a greater influence on the final estimate because the base is higher. These ten-year projections serve to illustrate the type of growth rates needed for the markets to attain certain levels or shares. However, continued market growth is not a forgone conclusion.
It is clear from the variation in the 2010 projections that the assumed growth rates make a lot of difference to sales ten years ahead. If organic sales have been unusually rapid in recent years because of food safety concerns from conventional foods, it could be that lower growth rates are more likely in the latter part of the decade39.
Scandals and food scares could also reduce demand for organic food in cases of:
The Indian definition
"Organic agriculture is a system of farm design and management that creates an ecosystem which can achieve sustainable productivity without the use of artificial external inputs such as chemical fertilizers and pesticides."
The Indian Government's strategy for organic agriculture is covered by the National Programme for Organic Production which aims to promote sustainable production, environmental conservation, reduction in the use and import of agrochemicals, the promotion of export and rural development. This strategy is promoted by the Ministry of Agriculture, the Ministry of Environment and the Ministry of Commerce.
Specific legislation has only been developed for the export of organic products. This is regulated by Public Notice No. 19 (RE-2001)/1997-2002, 11 June 2001 (duly amended by 25 (RE-2001)/1997-2002, 2 July 2001).
Support to organic agriculture
Inspection and certification
India has no locally based certification bodies, however, two international certification organizations have branches in India, namely IMO India, part of the Institute of Marketecology, Switzerland and Skal India, subordinate to Skal International, from the Netherlands. ECOCERT International is also active within India, but does not have a local branch. These market for export to the European Union under article 11 of EU Regulation 2092/91, but also certify to standards of non-European Union countries.
A National Accreditation Policy has recently been approved in India (May 2001) for the accreditation of certification bodies. The certification bodies already working within India are now being accredited. The Norms that apply follow the standards of the FAO/WHO Codex Alimentarius Commission guidelines for the production, labelling and marketing of organically produced foods. For the present the National Steering Committee for Organic Farming, set up under the Chairmanship of the Secretary of Commerce to the Government of India, together with members from the Ministry of Agriculture, is the competent authority which consents to such accreditation. However, the Ministry of Agriculture will be the nodal Ministry to develop the mechanism for organic standards in the course of time.
The organic market
In 2000-2001 there were approximately 41 000 ha of land certified as organic in India. At present, organic products sold on the domestic market receive a premium of about 20-30 percent over conventional products. Such organic food is usually sold directly from the farmer or through specialized shops and restaurants. As India has no national legislation for organic agriculture, there is no mandate stating that organic products labelled as such need to be certified, however, a national Indian Organic Logo will eventually be developed for export.
Many organic farmer are organized into farmers associations such as the Organic Tea Manufacturers Association, from Calcutta; the Delhi Trust for Development, based in New Delhi and Vidharbha Organic Farming Association, from Hingarh Ghat. Other farmers associations exist but still remain to become active.
India does not import any organic products, however the export market was estimated to be worth approximately US$700 000 in 2000-2001. The main market for exported products was the European Union and involved rice, pulses, sugarcane products, walnuts, fruit pulp, tea, coffee and spices.
Large tracks of land in India are already cultivated with very low use of agrochemicals, and traditional production systems adopted by farmers for many perennial crops have been, by and large, without any use of fertilizers and pesticides. Although yields in these areas are low and production is principally for subsistence, there exists great scope for organic agriculture. Work carried out in different universities and institutions suggests that the productivity in these areas could be improved further by adoption of organic techniques, for example, organic manure and biopesticides. Recently a package of organic practices for a number of crops has been standardized and is now at the implementation stage.
There is growing appreciation for organically grown food, especially as it provides additional value to production. However, there are a number of challenges that India and its organic community need to face:
Source: provided to FAO by the Ministry of Agriculture, India, December 2001
Factors that affect demand for organic products in the long run are income growth, relative prices, environmental consciousness and exogenous shocks (e.g. food scares).
In some developing countries, local markets for certified organic agriculture are emerging, especially through specialized shops in large cities. Although these markets are still very small and not assessed, they could develop quickly. Local organic markets tend to increase with income growth and heightened environmental consciousness.
Theoretical and empirical evidence suggests that demand for environmental goods is positively related to income levels once national incomes rise beyond US$8 000 per person per year40. This varies across countries and types of problems (for example, from clean water to biodiversity extinction), with local pollutants of air and water addressed first. An exception seems to be global pollutants, such as greenhouse gases, but pollutants involved in conventional agriculture are among those that tend to be reduced as the higher-income countries impose more stringent regulations41. To the extent that the demand for organic food is based on improving the physical and social environment, rising income levels should increase the market share of organic products.
The most rapid increases in income growth are occurring in areas where the organic market share is low or the product is uncertified. China is a large and rapidly expanding market, but organic sales are starting there from a low base and are often over-ridden by "green" foods (i.e. foods produced through practices that decrease the use of synthetic inputs).
Not all the evidence confirms the relationship between income and organic food demand. An attitudinal survey of 1 200 Australian consumers found that the number of people consuming organic food tended to increase with income, but not very significantly. Furthermore, the effect did not persist above average earnings42. This contradicts the notion that organic products are luxury goods. Attitudinal surveys have their weaknesses in that respondents may not behave as they say they would.
In Argentina, about 20 percent of the total value of national organic production was sold on local markets in 2000. The 2001, the economic crisis lowered the internal organic market to 7 percent. It is however interesting to note that this reduction of internal organic markets affected high value animal products (poultry, beef, milk)43 but not the internal market of vegetables and eggs and honey, which proportionally, increased.44
An attitudinal survey of 470 Kansas (USA) consumers found that income, relative prices and family size determined organic purchases45. The authors concluded that if certain marketing barriers could be surmounted, significant increases in sales of organic products would be possible as incomes increase and, more importantly, relative prices move in favour of organic products.
It is instructive to examine a mature, well-functioning organic market. Denmark is one such example. The organic agriculture labelling system is well known and trusted. Most of the products are sold through supermarkets. Supply is relatively stable and the price premiums are moderate. A study of 2 000 Danish households shows the estimated responsiveness of consumers to changes in retail prices46. The estimates suggest consumers are very responsive to changes in organic prices, especially for livestock products. The analysis suggests that if organic prices fell by 20 percent, the organic market share would rise from 10 to 15 percent for dairy products (see Table 5). This implies that a 20 percent price reduction elicits a volume response of 50 percent.
Table 5: Estimated changes in Danish organic market shares from 20 percent reduction in prices
Existing share (1997-1998)%
Estimated market share %
Volume response %
Bread and cereals
Source: Wier and Smed, 2000.
While few markets share the characteristics of Denmark, the implications of these results for market shares are obvious. Lower relative costs to the final consumer will boost the market.
Changes in tastes and preferences are difficult to analyse or predict, but are probably the driving forces behind the present growth in demand for organic commodities. Increasing awareness of environmental and food safety issues are a major factor. Concern over animal welfare is a major force in some markets. In recent years concerns about genetically modified organisms have helped increase awareness in some countries, as have concerns about livestock diseases and antibiotic-resistant bacteria. If new technology proves to have health or environmental risks, the demand for organic products is bound to increase. On the other hand, if the current concerns abate, the recent growth in demand for organic products may slow down.
Several factors constrain the ability to increase supply of organic products in response to growing demand, at least in the short term. On the other hand, there are a series of factors that should lead to a lowering of costs of production, and may well be much more important than the negative ones.
It seems reasonable to expect that those who can most readily convert to organic agriculture are likely to do so first. Complete newcomers will take longer to come on stream. Organic management requires not only a different mix of inputs and outputs but also a new way of doing things. Knowledge on how to farm organically is not readily available, as in most countries few courses or advisors are available to teach those who are interested. To some extent, farmers have to learn on the job. Those who do not have this aptitude will find the transition more difficult and expensive.
Factors that affect demand for organic products in the long run are income growth, relative prices, environmental consciousness and xogenous shocks (e.g. food scares).
The increasing number of organic farmers and e-communication facilitates knowledge sharing and learning from one another's mistakes. As knowledge concerning organic practices becomes widespread, production efficiencies should improve. Increased acceptance of organic management methods may also lead to an increase in investments in organic agriculture research, escalating the productivity.
The conversion period is costly because of inevitable management errors, but also by additional investments, for example:
All these factors raise costs of production. Of course, these difficulties are not the same for all enterprises. It is relatively easy to convert dairy farming to organic production in Austria, Denmark, Finland and Switzerland, and this has led to a significant penetration of organic produce in the milk and dairy product market in these countries.
In addition to the knowledge and investment required during the conversion period, organic farmers have temporal requirements, especially in terms of the time it takes for soil to respond to new management, with possible consequences for lower yields in those years. Also, products grown during the conversion period often do not qualify for price premiums.
Certified organic agriculture is a relatively recent development within China. Only a handful of institutes and researchers have been engaged in activities related to organic agriculture and organic food production, and even then only on a small scale. One of these institutes is the Rural Ecosystem Division of Nanjing Institute and Environmental Sciences, a department of the State Environment Protection Agency (SEPA).
In 1994, in order to promote the development of organic foods and to protect the rural environment from pollution, SEPA established the Organic Food Development Centre (OFDC). OFDC then prepared a comprehensive set of organic farming production and food processing standards and management regulations for the organic food label. OFDC is now responsible for inspection, certification, labelling, research, education and training related to the development of organic food.
These standards cover crops, eggs and milk products, apiculture, mushrooms, sprout products and wild plant collection; processing of organic products; distribution and sales; storage and packaging; inspection and auditing; air, irrigation and water quality used in production; and permissible and prohibited materials for production and processing.
A formal national certification programme began 1995, with specified procedures for obtaining organic food certification. OFCD also established a close relationship with the Organic Crop Improvement Association of the United States, which set up a national branch under OFDC in 1995.
Markets for Chinese organic produce
The first product to be certified as organic was tea from the Zhejiang Province in the early 1990s, but methodologies, inspection and certification were introduced and inspectors were trained by foreign experts. However, by 1996 about 10 000 farmers and ten processors were engaged in organic food production and processing, and between 20 to 30 different products were certified. These included soybean, buckwheat, sesame, sunflower and pumpkin seeds, rice, walnuts, pine nuts, tea, apicultural products, medicinal herbs and milk, and a few processed products such as fruit juices, noodles and beverages.
Great potential for organic production exists in China, as the case of tea demonstrates. Initial studies in Jingxian County, Anhui Province, showed that 80 percent of tea plantations were already producing tea without the use of chemical fertilizers and pesticides, a good prerequisite for organic tea production. Pest problems are also easily controlled through manual and biological measures, and the tea collected before Qingming (one of the 24 Chinese agricultural seasons, usually during April) is usually pest free. The transition to certified organic production would therefore not be too difficult.
The Chinese domestic market for organic food still remains to be developed however, although some organic foods, such as honey, tea, milk powder and rice are sold in Nanjiang City. With rapid economic development being experienced by some within China and an increasing common public concern of food contamination, demand for organic products is likely to increase. It is estimated in the coming years that the sales volume of main organic foods might rise from 1 to 2 percent of the entire food sales in China. The domestic market potential for organic foods is therefore vast.
In 1996 about 1 800 tonnes of organic produce was exported to European countries, Japan and the United States, nine times the export volume of 1994. The number of organic food traders also increased from two in 1993 to five in 1996. China is a large agricultural producer and exports considerable quantities of agricultural by-products and produce to international markets. If 5 to 10 percent of these products are certified as organic, they will have great potential on the international market as well.
Problems and constraints
The organic sector within China is still in its infancy and therefore faces a number of problems and constraints. These include the need to:
raise awareness and improve education related to organic foods and the reduction in the use of chemical fertilizers and pesticides;
China covers a vast land area and has a long history of traditional agriculture. Farmers have accumulated rich experience and developed many suitable agricultural techniques including crop rotations, maintenance of agricultural diversity, soil fertility improvement and traditional pest control over thousands of years, which may be easily applied to organic practices. The potential for organic agriculture in China is therefore enormous.
Source: Li Zhengfang, 2002
Another constraint is the rising cost of inputs as demand increases. Although organic farmers prefer to rely on a closed system with minimal use of purchased inputs, this is not always possible. One concern is the availability of seed or plant material acceptable under organic management (such as GMO-free seeds, seed not coated with a fungicide or suitable open-pollinated varieties). Another is the availability of suitable livestock breeds. Insufficient quantities of organic nutrients could cause problems in organic cropping systems which are not integrated with livestock or which have a relatively intensified production. Sources of nutrients include animal manure, algae extracts, rock phosphate, nitrogen-fixing crops and composted household and food processing waste. New technologies may need to be developed to make maximum use of these, and other potential inputs. Some input costs may fall as demand for the input increases and boosts production.
With more specific reference to livestock, production standards allow zero or only a small proportion (less than 20 percent) of feed and fodder to be non-organic. The gradual decrease in percentage of non-organic feed will increase the price of organic feed if supply does not respond timely to the increased demand. According to the Danish Ministry of Food, Agriculture and Fisheries (1999), supplies of organic broiler chicken were limited by insufficient availability of organic feed. Pig production faced similar constraints. However, other factors also play a role in the determination of the price. Increased feed prices will mean that some farmers will reduce livestock production, and some will increase feed production. Modeling of the Danish organic sector suggests that lowering the allowable proportion of non-organic feed on all the different types of farms from 20 percent to zero changes national net returns from DKr 3 566 million (approximately US$471 million) to DKr 3 350 million (approximately US$443 million) for the sector as a whole assuming 20 percent of all farms are using organic management techniques47. The pig sector is hardest hit, with national net returns DKr 2 447 million (approximately US$323 million) to DKr 2 293 million (approximately US$303 million). The relative effects would obviously be much greater with wider levels of adoption of organic methods - at least under present conditions of input and output prices, and the state of technology. These results cannot be generalized to other countries with a different industry structure than Denmark, or indeed to different years.
Organic agriculture represents a different paradigm from conventional agriculture48. Techniques and innovations applicable to one may not be readily transferable to the other. Increased research into organic methods is likely to significantly reduce the cost disadvantage that acts as a barrier to many farmers converting to organic agriculture.
The increased demand for organic nutrients and fodder will tend to increase costs in the short term as organic agriculture expands, depending on the particular country and industry. The availability of organic seeds and livestock breeds may also constrain growth in the short term. However, at the levels of adoption considered likely in the next ten years, supply constraints of this nature are unlikely to be binding in most markets. The various factors pushing costs down are likely to be of greater significance. The costs of supplying organic products to the consumer are likely to fall as economies of scale and research and development in production and marketing bring about greater efficiencies.
The costs of supplying organic products to the consumer are likely to fall as economies of scale and research and development in production and marketing bring about greater efficiencies.
In addition to underlying demand and supply factors, a further issue determining the future of the organic agriculture market relates to production, processing and handling standards as well as to compliance with the organic guarantee system (inspection, certification and accreditation). The problem of having to meet requirements set by different countries is addressed in Chapter 1 (see Institutional performance).
There is a trade-off between breadth and depth in the setting of standards. Clearly, as with any product, the more stringent the standards are, the more closely some consumers of the product will be provided with the exact characteristics they demand. More stringent production standards, however, limit the size of the organic supply, as fewer farmers will be in position to participate.
The European Commission is under permanent pressure from the food industry to make the organic standards more flexible: the risk is that the concept of organic agriculture may become diluted. The organic sector is in competition with other sustainable agriculture alternatives, all clamouring for the attention of the consumer, and may lose out to the alternatives if consumer expectations are unmet.
Standards involve compliance, ensuring that the organic standards are met. International organic markets (European Union, Japan, the United States) are now all subject to government rules and conditions of access. Developed countries face problems of multiple accreditation of certification bodies and administrative complications. Developing countries often require certification by a foreign certification body, which can be prohibitively expensive. Some countries manage to have their certification body accepted as equivalent to that of the importing country.
The harmonization and equivalency of organic production and certification standards can facilitate trade as they lend credibility to the product. It saves on costs and removes the disincentives currently preventing the participation of many producers in international organic trade, especially smallholders in developing countries.
The evolution of organic agriculture standards and the establishment of guarantee systems that cater for diversity of conditions and needs today are likely to influence the nature and size of the organic market and its position relative to competitors in the years ahead.
The role of most governments in organic agriculture has been regulating organic production and certification and supporting producers. In 1997, funds to support organic agriculture amounted to Euro 186 million, less than 0.5 percent of the total Euro 40.5 billion (US$40.5 billion) annual agricultural budget of the European Union49.
The evolution of organic agriculture standards and the establishment of guarantee systems that cater for diversity of conditions and needs today are likely to influence the nature and size of the organic market and its position relative to competitors in the years ahead.
Over the last 15 years, many small-scale farmers in Costa Rica have been making the transition to organic agriculture, largely through their own initiative. The main reasons for this change have been economic problems caused by the high cost of agro-chemicals and their loss of effectiveness, health aspects, concerns relating to the environment and biodiversity and a search for alternative markets for produce.
Today, Costa Rica has more than 9 400 hectares devoted to organic production, representing almost 2 percent of the total land area used for permanent crops and arable land. This involves more than 4 000 farmers organized into 135 producer organizations, cultivating a range of products such as bananas, plantains, pineapples, mangoes, oranges, sugar cane, mulberries, cacao and coffee. The majority of this produce is exported, mainly to the European Union and the United States.
Reasons for the success of the organic sector
- the State Phytosanitary Service responsible for registering and monitoring organic certification agencies;
- the National Organic Farming Commission established as an advisory body to MAG;
- the National Organic Farming Programme providing institutional support for organic production and coordination of efforts (both private and public) which promote and encourage organic agriculture.
In addition to these bodies the Foreign Trade Promotion Agency of Costa Rica (PROCOMER) has in recent years been developing a programme of support for organic farming, which provides information and training for producers with a view to promoting national organic products on international markets.
Although organic production still has many obstacles to overcome, the Government of Costa Rica has realised that there is much potential in the area of organic agriculture. It has pledged to continue providing all necessary support to organic producers and the development of organic farming in general, not only locally, but also for the promotion of export markets.
Source: WTO, 2001
The European Union Agenda 2000 policies increased support for the provision of environmental services without specifically assisting organic agriculture50. Perhaps most important of all, changes introduced in Agenda 2000 allow member states to switch direct support from large farms to agri-environmental measures, putting the onus on national governments to determine their environmental outcomes and their support for organic agriculture. However, organic agriculture has to compete with other agri-environmental schemes, as farmers can receive government funding by choosing to comply with alternative schemes such as integrated pest management. Nonetheless, there is evidence of greater funding and greater uptake of support to organic agriculture. For example, assistance for farmers converting to organic agriculture in the United Kingdom increased from £1 million (approximately US$1.5 million) in 1997 to £18 million in 2001 (approximately US$28 million)51.
A move towards organic agriculture would reduce European Union support payments but increase government outlays in the member states52. The reduction in European Union payments comes about because livestock are less heavily subsidised than cereals and organic producers tend to have more livestock in their system. A shift towards organic methods would most likely lead to a fall in production of cereals and reduce the need for intervention and storage costs and exports subsidies53.
A detailed study of the Danish agricultural sector, using data collected by the Danish Institute for Agricultural and Fisheries Economics, looks at the contribution of domestic support to gross returns under the arrangements that existed at the time54. In 1996, farm subsidies averaging DKr 149 000 per farm (US$17 890 at current exchange rates) exceeded net returns and contributed 9 percent to gross returns on conventional farms. The author notes that both taxpayers and farmers would have been better off in that year had they not been required to produce anything before collecting the subsidy. Organic farms on average received the conventional subsidy of DKr 124 000 (US$14 880) per farm plus an additional organic subsidy of DKr 53 000 (US$6 360) per farm. Subsidies contributed 11 percent to gross returns. However, organic price premiums contributed 26 percent, indicating that consumers were assisting taxpayers in the provision of environmental goods.
The European Union strategy on sustainable development tacitly recognizes the impact of the Common Agricultural Policy (CAP) on the environment (e.g. decline in biodiversity). The mid-term review of the CAP in 2002 will aim to reward quality rather than quantity of agriculture production by encouraging organic agriculture and shifting subsidies from market support to rural development.
In May 2001 and March 2002, European ministers of agriculture met to discuss organic agriculture prospects55. A commitment was made to launch a process towards the development of a European Action Plan within the next two years containing a consensual strategy covering all aspects of organic food and farming in Europe. The Action Plan will ensure, among others, that organic agriculture is a key element of the Common Agricultural Policy reform and environmental programmes and that it will take into account other policy initiatives (e.g. CEE accession negotiations, WTO negotiations). The establishment of such an Action Plan on organic agriculture in Europe is likely to have a multiplier effect on other countries.
Several European governments have set objectives for conversion of agricultural lands to organic management, with a view to achieving environmental or other objectives. By 2005, the target for conversion to organic land for Denmark and Italy is 10 percent each and of 20 percent for Sweden. By 2010, the Netherlands and Norway target 10 percent each, Germany 20 percent, and the United Kingdom 30 percent. Countries in the European Union with the largest area of agricultural land (France and Spain) have very low rates of conversion at present but Spain has recently boosted its organic conversion. Attaining these ambitious targets depends on government funding and consumer support.
Targets and subsidies are not uniform across the European Union member states, reflecting differing objectives. Policies for conventional agriculture also affect organic agriculture. Chiefly, building a domestic consumer base is of fundamental importance for any country to foster organic conversion.
In the United States, there has been virtually no federal-funded support for organic agriculture. The Conservation Security Programme provides individual farmers who can meet specific environmental requirements with up to US$50 000 per year. Although organic farmers are well placed to meet these requirements, few of them are large enough to qualify for this amount. Using reasonable assumptions about average payments (between US$5 000 and US$15 000 per farm per year) and growth rates in the number of farms (of between 14 and 17 percent per year), discounted costs would most likely be between US$343 million and US$1 031 million. As less than 50 percent of United States organic farmers earn US$15 000 or more per year, these proposed payments represent a substantial subsidy56.
The 2002 US Farm Bill includes funds for organic certification cost sharing which cover 75 percent of an operation's inspection and certification fees, up to US$500 per farm per year. In some states, such as Minnesota, converting lands have started receiving organic transition support payments of US$20 per ha for crops and US$10 per ha for pastures.
Agricultural and environment policies are linked. Organic agriculture is viewed by some governments to have a specific role, with fewer negative environmental impacts and greater positive ecological services than conventional agriculture, notwithstanding that there is a range of conventional farming systems with varying degrees of environmental impact.
As seen above, government funding for organic production in most countries has evolved from agri-environmental schemes. Environmental objectives will continue to drive government support towards organic agriculture. For example, the Organic Federation of Australia has developed an ambitious five-year plan that aim to raise the organic sector from 1 to 4 percent of agricultural production by 2006. The Government, however, would consider the sector within the commodity-based environmental management systems currently under development.
Organic agriculture would receive a major boost if the environmental externalities associated with conventional agriculture were charged to those contributing to the problem. This has proved difficult in agriculture because the source of pollution is often dispersed and dependent upon a variety of factors and difficult to quantity. Nonetheless, moving to producer-pays principle would mean that the cost of cleaning up the pollution from agriculture would shift from taxpayers to agricultural producers. These costs are then likely to be passed on to consumers, with a favourable impact on the relative price of organic and conventional goods.
The contribution of organic agriculture to the implementation of international environmental agreements has not yet been sufficiently assessed. There are, however, reasons (see Chapter 2) to believe that organic agriculture could facilitate reaching environmental targets, such as:
the Convention on Biological Diversity targets for conservation and sustainable use of biodiversity;
Advances and innovations in organic agriculture have so far been done by organic farmers themselves. Formal research into organic agriculture appears to attract little funding, even relative to the size of the sector. For example, in the United States, organic agriculture represented about 1 percent of agriculture in the 1990s but organic research represented 0.1 percent of federal agricultural research funds57.
Formal research into organic agriculture appears to attract little funding, even relative to the size of the sector.
Most organic agriculture research in Australia, Europe and the United States is in the area of farm production. Further work needs to be done on marketing. There is little understanding of how consumers respond to changes in prices or other characteristics of the product. How soon would price premiums be eroded with the expansion of the organic market? What leads to a change in tastes or preferences? Why are markets growing at different rates? What is the best approach to promoting market development? How can markets be made to function better? Likewise, there seems to be little analysis of policy outside a major study undertaken for the European Commission58. The establishment of a systematic method of evaluating research expenditure and benefits for organic agriculture would be a useful step.
Encouragement of organic agriculture will require major shifts in public policy towards support for conversion to organic methods together with public investments in research and extension (itself implying a major change in well-entrenched attitudes of extension staff). Powerful vested interests would doubtless vehemently oppose such changes.
Currently, large investments are being made in biotechnology, which is the antithesis of organic agriculture: while genetic engineering isolate and reduce complex problems to single issues and search for a single-factor solution, organic agriculture deals with the whole farm and the intrinsic relationships between all living beings. Yet, organic agricultural research is presently severely under-funded.
For example, data available suggests that USDA spent, in 2001, US$5 million on organic agriculture research and US$210 million on biotechnology research64. This disparity in research allocation would be greater if one considers the amount of private research investments to biotechnology. A United States organic farm survey reports that less than 0.1 percent of total land in United States experimental stations is devoted to organic research.
Greater scientific knowledge about biotechnology, and public perceptions of the relative safety and benefits of genetically modified organisms (GMOs) compared to organic products will have an important impact on both systems.
Recently, several governments strengthened their support to organic agriculture research. In the United States of America, the 2002 Farm Bill provides US$15 million for specific organic research. In Europe, public research funds vary: The French Institute of National Agricultural Research has allocated, since 2000, US$5.5 million annually for its organic research programme; in the United Kingdom, a five-year research fund of US$7.9 million has been established in order to cater for domestic demand for organic food. In New Zealand, the Government allocates NZ$ 45 million (approximately US$21 million) annually to sustainable agricultural research of benefit to organic agriculture (e.g. biological control and reduced chemical input systems) and NZ$ 2.6 million (approximately US$1.2 million) specifically for organic agriculture research65.
Some developing country governments have also started investing in organic agriculture research. For example, the Indian Ministry of Agriculture encourages State governments to put aside 50 percent of land under Government farms for organic agriculture. The Ministry also suggests that model schemes on organic agriculture may be prepared and circulated among States for implementation. Each State is encouraged to create a suitable unit for the promotion of organic agriculture. The Madhya Pradesh Government has taken the lead by setting aside half its farmland for organic agriculture while also identifying a village in each block as an organic farming village66.
Government funding for organic production in most countries has evolved from agri-environmental schemes.
In industrialized countries, demand for certified organic products is expected to continue to increase, perhaps above the 20 percent growth rate registered in current years. However, the future growth of certified organic agriculture will depend more on supply constraints than on changes in demand. The tendency so far has been for demand to grow faster than supply, but this may moderate as more "followers" (as opposed to "innovators") enter the market.
Developing countries are just starting to benefit from organic market opportunities but under present conditions, large producers and operators are better placed to access international markets. The limited quantities of organic products and the demanding quality standards and rules governing organic production and processing might limit the extent to which developing countries can fill the demand for organic food in northern markets. Organic food trade might be discouraged by difficulties in complying with foreign standards as well as costly certification systems, especially if international equivalence is not established. Access to inspection and certification, and the need to develop new ways in processing organic food, are major challenges that large and established food companies are better placed to handle67.
Future growth of certified organic agriculture will depend more on supply constraints than on changes in demand.
A recent study59 identified the four main origins of adventitious presence of genetically engineered (GE) crops at farm level. These are: seed impurities; cross-pollination; volunteers (over-wintering of plants and plants growing from spread seeds); and harvesting/storage practices (mixing of crops after harvest). The level of adventitious presence of GE crops depends on the crop and farm type. Organic agriculture has a zero tolerance of genetically modified organisms (GMOs) and contamination would result in the loss of market value and hence, the viability of organic agriculture. Chiefly, the freedom of choice of organic farmers and consumers are threatened by unregulated GMO release.
GE contamination of organic agricuture
The contamination of organic fields by GE crops has been estimated to result in an economic loss (i.e. lost sales or lower prices) of over US$90 million a year in North America.60 In Canada, the introduction (in the 1990s) of genetic engineered canola crops (i.e. oilseed rape) contaminated all canola crops across the prairies of Saskatchewan. Organic farmers have stopped growing canola because of concern of GE contamination. Organic products cannot contain GMOs and organic Saskatchewan producers are now deprived of both a valuable tool in their rotations and of a high paying crop with a growing market. In 1998, confined field trials of GE wheat began in order to introduce it as a commercial crop in 2004. Although wheat is a self-pollinated crop, there is danger of spread of pollen from the GE wheat: genetic contamination of organic wheat would devastate the organic sector in Saskatchewan. In January 2002, a class suit was filed against Monsanto and Aventis by two organic farmers on behalf of all certified grain farmers of Saskatchewan, calling for: compensation for damage caused to certified organic farmers resulting from the introduction of GE-canola into the rural environment; an injunction to prevent the introduction of GE-wheat61. The outcome of this first legal case will be of major importance to future policies regarding biotechnology impact on organic agriculture.
In New Zealand, the Ministry of Agriculture has provided a grant for the development of an organic industry strategic plan: one of the five most important issues being addressed is maintaining New Zealand GE-free. A 2001 Ministry of Environment study on the potential impacts of controlled and uncontrolled release of GMOs in the New Zealand environment reports that the country "clean green" image provides considerable value to organic exports. The Government issued a moratorium on the release of GMOs in the environment until October 2003. However, New Zealand is likely to assess the potential gains from the controlled use of GM technology to conventional agriculture versus the potential losses to organic agriculture from losing a GE-free status 62.
A pragmatic approach to restore freedom to operate for organic and transgenic agriculture farmers may be the establishment, by central or local authorities, of districts or enclaves where only one type of farming system is allowed. In China, the planning authorities of Yunnan Province decided to transform the entire local food system into "green" food production, with the declared intention to export GMO-free products to the European market. In 2001 in Chile, a draft plan of the Agriculture Ministry Regional Office and the National Environmental Commission proposes to convert the entire agricultural industry in Region XI of the country to organic agriculture. The aim is to make the area's agricultural, cattle and fisheries sectors chemical and GM-free within the next two years, in order to offer the Region a potential advantage from its isolation63.
The right to choose
Spatial isolation of GM fields, region-wide border management, establishment of GMO-free zones to protect organic fields and strict segregation during post-harvest handling are options that would restore producers and consumers' freedom to choose among specific farming systems and foods.
Multi-national food companies are expected to be major players in organic food supply, both in terms of contracting production and international trading. In particular, the growth of processed organic foods will be facilitated by these companies' capacities to assemble ingredients from different parts of the world and to guide production to meet their specific needs. At the same time there are numerous opportunities for developing country producers and exporters to enter markets for value-added organic products using simple available technology (e.g. small-scale solar drying of tropical fruits).
As world agriculture globalizes, few and large private companies will increasingly control world food supply chains. A handful of multi-nationals not only has the potential to limit farmers' choice on the type of food they produce but can also influence consumers' preferences through massive opinion-forming campaigns.
Two contrasting forces will influence the growth of organic agriculture. On the production side, multinational agrochemical companies, now also providers of patented engineered seeds and breeds, are unlikely to accept the loss of a large share of the inputs market; large investments are already made in campaigns to deter producers and consumers of organic foods.
On the demand side, mega food distribution companies will attempt to guide and mould the organic market to their mass marketing requirements as they have done in the conventional sector. Large retailers have started establishing their own organic standards, based on minimal input substitution requirements, in order to fit the industrial production and distribution model.
However, different factors influence different types of consumers. Large food distributors are realizing that nor all consumers can be expected to spouse the "fast food" culture, neither can all consumers be expected to enter the organic food culture. Within the organic consumer category, there are those who demand organic convenience food (e.g. microwave TV dinner boxes). Most of the demand for organic food, however, is based on minimally processed foods, the rejection of mass-market trends and on increasing fragmentation of markets.
The growth of industrial corporate organic foods is increasingly triggering responses of the organic agriculture community, mainly to maintain the integrity of organic agriculture and the viability of small organic farmers. Local markets, farmers markets, home delivery and community-supported schemes are emerging as alternative marketing strategies for organic agriculture.
The re-discovery and valorization of regional food production and local culinary cultures, coupled with energy concerns, might limit future organic food trade essentially to unprocessed tropical products. In fact, high-energy consumption entailed in international food transport and the likely introduction of "food miles" standards (related to the distance between production areas and markets) for certified organic food might result in the establishment of narrow food chains that will strengthen domestic organic markets.
The most-traded organic products today are cereals, fruit and wine, as well as tropical and out-of-season fruits and vegetables. In the coming years, developing countries are likely to gain a relatively substantial market share for organic coffee, tea, cocoa, herbs and spices, dried fruit and nuts. Organic baby food, beverages and frozen vegetables will likely dominate imports.
The Brazilian definition
"The organic production system refers to an agricultural or industrial production processes that use technologies that optimize the use of natural and socio-economical resources, respecting cultural integrity, aiming for autosustainability in time and space, maximization of social benefits, minimization of the dependence on non-renewable energy, and making no use of pesticides or other toxic synthetic products, genetically modified organisms, or ionizing radiation in any step of the production process, storing, or consumption, as well as, intermediate steps, privileging environmental and human health, and assuring transparency in all stages of production and transformation processes."
At present the Brazilian legislation for organic agriculture consists of a Normative Instruction from the Ministry of Agriculture (IN07/1999, 19th May 1999) that covers crop production, animal husbandry, food processing and handling and labelling. Specific legislation on organic agriculture is still to be voted on by the Brazilian Congress, a project covering (No. 659/99) this is underway. The legislation already in place states that all farms selling or labelling products as organic should be certified as such.
Support to organic agriculture
The Brazilian Government aims to generate rural development through its strategy for organic agriculture. The Ministry of Agriculture (Embrapa68), local and regional governments (e.g. PESAGRO and EPAGRI69) and specialized agencies such as NGOs (AS-PTA) and farmers associations (e.g. ABIO and AAGE71) are all responsible for the promotion of organic agriculture activities. Financial support for organic agriculture ventures is provided by the national and local government, but only through official banks. Some of these banks provide credit for just the conversion period, e.g. Banco Axial which provides between US$500 000 to US$2 million over 10 years. Others provide credit once the conversion period is over and in the form of anticipated credit for probable harvests, e.g. Banco do Brasil has a financial support line for already certified farmers. Financial help is also available for small scale investors through, e.g. Widar, a people-centred financing agent that provides smaller sums of money (between US$1 000 and US$2 500) during the conversion period. This financial support is usually provided to help the development of infrastructure and general maintenance, but also for activities such as the purchase of seeds.
Organic agriculture is also receiving attention through the provision of funding for research. Both Embrapa and the National Council for Scientific and Technological Development received calls in 2001 for organic agriculture projects. Some municipalities also provide separate street markets for organic produce. Paraná State has obtained a loan form the World Bank for the training of 100 professionals in the field of organic agriculture.
Most programmes promoting organic agriculture have been carried out by NGOs and farmers associations, it is only recently that Government agencies have become involved. Now in some states (Paraná and Rio de Janeiro) official extension agencies are promoting organic agriculture; in Rio de Janeiro State, Embrapa has a programme promoting agro-ecology in home gardens involving more than 5 000 people.
Inspection and certification
The Ministry of Agriculture is responsible for accrediting certification bodies working within Brazil according to the norm IN 06/2002 (10 January 2002). However no certification body holds official accreditation at present.
Bodies exist within Brazil for the certification of organic products for the domestic market. The norms and standards of these certification bodies are readily accepted and recognized by producers, consumers and retailers. However, there are certain associations of organic producers who have opted for a system of self-certification for their organic products.
Many certification bodies functioning within Brazil are recognized by the international community, some of these in fact are international bodies with a Brazilian branch e.g. OIA-Brazil72, ECOCERT-Brazil73, Skal-Brazil74 and FVO-Brazil75. These different inspection and certification bodies have access to different markets. ECOCERT and OIA certify products for export to the European Union as provided under Article 11 of EU Regulation 2092/91, whereas FVO-Brazil certifies according to standards acceptable to the United States. There is one local certification body, AAO76 which works in association with the international certifying body, OIA. Each certification body affords the products it certifies its own label and the wholesaler, Horta and Arte, has an organic brand certified by AAO.
In 1999, the domestic market for organic agricultural products in Brazil was estimated at about US$150 million. Organic fruit and vegetables sold domestically typically receive prices 20-40 percent higher than conventionally produced products and organic cereals command prices 50 percent higher. Organic products sold locally are found in supermarkets, specialized shops and restaurants, through street markets and special deliveries and there are a number of wholesalers dedicated only to organic products. Aeroplanes in Brazil are also beginning to serve organic food.
Some farmers within Brazil follow organic agriculture principles, but are not subject to inspection and certification. This is the case with some family farmers and agroforestry systems and with some individuals and groups that carry out extractive activities, however such production is not usually market orientated but more for subsistence.
The total value of organic products imported to Brazil is unknown, but imported products consist of seeds and olive oil from Italy, vinegar from Paraguay and rice from Argentina. The export market for Brazilian organic products, however, was estimated to be worth US$100 million a year for 1999 and 2000. Exports included orange juice, sugar, soybean, coffee and fruits to the European Union, fruits and urucum to the United States and coffee to Japan.
Training and awareness
Organic agriculture is beginning to enter into the academic world in Brazil. Three universities are now offering Masters and PhD courses with specializations in organic agriculture and five agriculture research institutes are offering capacity building. Technical assistance is also given by associations of organic producers, two NGOs (CEPAGRI77 and AS-PTA) and some inspection and consultancy organizations. Other activities helping to raise awareness about organic agriculture include publications, information campaigns in supermarkets and information broadcasts on radio and television.
In 2001 certified organic land in Brazil covered about 269 718 ha, an increase of over 160 percent on the year 2000. The number of farmers certified as producing organically also more than doubled during this time, rising from 4500 in 2000 to 7 063 in 2001. However, the small but growing organic agriculture sector still has a number of challenges to be faced. Firstly there is an urgent need to accredit certification bodies working within Brazil to the national standards and norms. There is also an urgent need to create a unifying label for organic products to facilitate their identification by consumers. Continued awareness raising campaigns and research into organic management for tropical soils and suitable varieties together with farmer training are also priorities.
Source: provided to FAO by Embrapa Agrobiology of the Brazilian Ministry of Agriculture, April 2002
Oilseed trade (especially temperate oilseeds such as soybeans and rape) is subject to major changes as oilseeds are the focus of biotechnology. Future evidence on the food and environmental safety, and of consumer acceptance, of genetically modified oilcrops might either increase the potential of net exporting countries through improved conventional production or create new markets (and exporters) of organic oilcrops. 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. In Canada, organic producers can no longer market their rape as "organic" because of GM-rape contaminated organic fields (see Box 8 above).
Currently, trade in organic meat and livestock products (e.g. dairy) is low, partly because European Union-wide standards were adopted only in 2000 and because USDA lifted its prohibition of labelling and marketing organic meat only in February 1999. Given the high-value of livestock products as well as concerns with industrial meat safety, there is significant scope for organic beef and sheep meat exports.
World meat demand is increasing and is forecast to continue to increase with economic growth; many countries (such as Japan, the largest importer of meat, followed by the EU) are expected to seek more organic meat as a result of food safety concerns. Australia and New Zealand, who are the largest exporters of meat, have a comparative advantage for massive conversion to organic meat production.
It is expensive for intensive livestock producers to convert to organic production, but converting extensive, pasture-based systems could become economically more attractive if price premiums could be captured for organic meat and livestock products. In fact, the spectacular expansion of organic land in Argentina from less than 0.5 million ha in 1999 to 3 million hectares in 2000 occurred mainly on grassland, in response to demand for organic meat, although this reflects reclassification and extension of certification rather than real switches between farming systems. Organic livestock could improve both the productivity and profitability of existing pastures and put into sustainable use unexploited natural grasslands (for example, in China).
Organic livestock could improve both the productivity and profitability of existing pastures and put into sustainable use unexploited natural grasslands.
Current agriculture policy revisions, as in the European Union, in favour of organic agriculture might result in smaller cereal surpluses. Should Australia and North America (which together with Western Europe are the largest cereal exporters) follow this trend, a deficit of organic feed availability on world markets might occur. This might induce changes in animal feeding practices (from intensive livestock feedlots to integrated crop-animal systems) in developing countries, which depend on imported cereals (and oilmeals) for feed.
An eventual decrease in the availability of imported feed will undoubtedly bring a period of difficult adjustment to developing countries. A positive adaptation will be the establishment of narrower food production-consumption chains through efficient use of local resources and more developed domestic markets for organic commodities.
Favourable policy commitments and related support programmes (i.e. production support, research funding, field trials and knowledge and marketing development) lead to assume that Western Europe, on average, could have a tenth of its total agricultural lands under organic management by 2010. If these policies and the organic growth trend were sustained, up to a quarter of the European Union agricultural lands would be organically managed by 2030. Lack of data and rapid changes do not allow predictions of the extent of organic land management elsewhere.
Land use changes will not be linear but will respond to technological innovations and to unforeseen events. An example is the development of organic agriculture in Europe: it took 30 years for organic agriculture to occupy 1 percent of agricultural land and have a visible place in food markets. Then, the food safety crisis resulted in a spectacular (and unforeseeable) increase, with countries such as the United Kingdom aiming at 30 percent of land being farmed organically within 10 years. This indicates that growth trends of organic agriculture are subject to major deviations.
Keeping in mind factors that might radically change the future direction of agriculture as a whole, the demand for certified organic products in industrialized countries and the urge to meet organic supply requirements by developing countries is expected to induce major land-use changes worldwide. This would consequently bring changes to the food supply and distribution models in both developed and developing countries.
The demand for certified organic products in industrialized countries and the urge to meet organic supply requirements by developing countries is expected to induce major land-use changes worldwide.
For example, societal demands on the quality of land and water and the expansion of organic land management will entail changes in spatial policies in order to avoid contaminant drifts from neighbouring areas farmed conventionally in order to protect organic farms or their collocation in suitable and protected regions (see Box 10 above). Adoption of organic livestock production could reverse the on-going trend of intensive animal production systems that create considerable pollution problems as well as off-site degradation where feed and fodder are produced.
More specifically, organic agriculture could be a major force towards:
Considering the inevitable conversion of agricultural land to urban uses (especially in peri-urban areas of large cities), the necessity to protect the environment and halt biodiversity extinction, and the importance of increasing food production without losing arable land or clearing new land, organic agriculture becomes an attractive option. In most European countries, organic agriculture is perceived as a powerful means to recover and give new value and importance to the traditional characteristics of rural areas. Bio-ecological agritourism is being promoted as an activity that not only produces specific food and fibres (gastronomic traditions and craftsmanship) but also offers typical landscape, environmental services and rural hospitality. There are also avenues for income generation and food production to be explored by developing countries that have a great environmental capital.
The Czech definition
"Organic farming means a special kind of farm management that takes care of the environment and its individual parts by establishing the limitations and prohibitions for use of matters and procedures that have an adverse effect on the environment, pollute, contaminate the environment or increase the risks of contamination of the food chain and that increasingly takes care of the external manifestations and behaviour and welfare of reared farm animals in accordance with the requirements of the appropriate legal regulation."
Organic agriculture in the Czech Republic is the responsibility of the Ministry of Agriculture. Its overall policy on organic agriculture aims to encourage environmental conservation, a reduction in the import and use of agrochemicals and general rural development. Only farms certified as organic can sell products labelled as such. The legislation protecting this and the organic sector is the Organic Farming Act No. 242/2000 Coll. and the Governmental Decree No. 53/2001 Coll. These entered into force on 1 January 2001 and on 12 February 2001 respectively. This legislation covers crop production, animal husbandry, food processing, handling and labelling.
Additional backing from the Government comes in the form of direct economic support. This is provided both during the two-year conversion period and for the whole time after that the farm is certified as organic. This support is principally to compensate for losses made in production, but also functions as general promotion for organic production. In the year 2000, this constituted direct payments of US$50/ha/year for arable land, US$25/ha/year for meadows and pastures and UD$87.5/ha/year for permanent cultures (e.g. orchards and vineyards), and vegetables produced on arable land. The total cost to the Czech Republic in this year was approximately US$2 227 000, a 46 percent increase on 1998 where direct payments amounted to approximately US$1 202 275. The national Government also provides financial support for research and extension services, farmer training, biomeat marketing and for the promotion of organic agriculture.
Inspection and certification
Certification bodies wishing to operate within the Czech Republic can apply for accreditation to the Department of Structural Policy and Rural Development of the Ministry of Agriculture in accordance with Article 29 of the Organic Farming Act. On the basis of the results of a selection procedure, the Ministry forms a contract with the "authorized person" allowing them to carry out inspections and other professional activities related to organic agriculture.
The Czech Republic has only one certifying body, KEZ o.p.s., which is recognized both nationally and internationally. KEZ is authorized under Article 29 of the Organic Farming Act and certifies products for domestic consumption and export to the European Union and non-European Union countries. KEZ works in association with international certification bodies, although there are no international certification bodies working independently within the Czech Republic. The Czech Republic has applied for inclusion in the Annex to Article 11 of Regulation (EEC) No. 2092/91, which, if accepted would demonstrate that the standards adhered to by Czech organic farmers are deemed equivalent to those of the European Union. The Czech Republic has its own standards for determining equivalency of imported and domestically produced organic products. Countries and their certifying inspection bodies whose certification is considered equal to that of the Organic farming Act are entered into a list, Annex No. 15 to the Decree No. 53/2001 Coll.
The domestic market
National regulation imposes a system of inspection and certification for all products labelled as organic. Although no estimates of domestic consumption of organic products exist, price premiums commanded by organic produce are approximately 25 percent for cereals, 30 percent for fruits and vegetables and 40 percent for livestock products. Organic produce is sold via supermarkets, specialized shops, direct farm sales and sometimes to specialized restaurants and as home deliveries. A few specialist wholesalers for organic products also exist.
All organic products certified by KEZ receive the official state label, but the Ahold supermarket chain has a special brand for organic products: Selsky` DvuÞr, as does PRO-BIO, one of the two farmers associations that exist in the Czech Republic.
Awareness raising campaigns to promote organic agriculture have been running nationally since 1990. Publications and other materials were brought out in 1990 and information campaigns have been going on in schools and since 1993, sales exhibitions have also been taking place. In 1999 television and radio programmes were released and the year 2000 information campaigns in supermarkets were initiated.
Statistics provided by the Ministry of Agriculture show that organic agriculture in the Czech Republic is growing both in terms of the number of farms and the area of land certified, but organic agriculture still remains small within the agriculture sector: in 2000, 2.5 percent of agricultural lands were certified organic (99 757 ha), and 15 percent (65 942 ha) were in conversion. However, there was an almost 40 percent increase in the area of land certified as organic between 1999 and 2000 and a one-third increase in the actual number of organic farms. The certified organic land can be further broken down into 9.3 percent as arable land, 90.3 percent as permanent pastures, 0.3 percent under permanent cultures (e.g. orchards) and 0.1 percent other. The number of registered organic producers, processors and importers also showed a 16 percent increase during the same period.
Organic crop production centres mainly on cereal crops (11 099 tonnes in 2000) and fruit and vegetable production (8 864 tonnes in 2000). Pulses and other speciality crops such as wine grapes are grown on a much smaller scale (1508 tonnes). While crop species have seen an increase in production between 1999 and 2000, organic animal production in general has decreased, except for bovine species which have shown an approximately 20 percent growth in production; 5 289 heads in 1999 and 6 675 heads in 2000.
The Czech Republic also produces organic milk and eggs, and has facilities for the processing of organic produce. For example, there are five organic wine cellars, which in the year 2000 produced 6 400 hl of wine; there are ten plants devoted to the processing of organic dairy products; four organic flour mills and one organic fruit juice plant. Some processing plants that ordinarily produce conventional products do occasionally dedicate their operations to organic products, e.g. five bakeries, two flour mills and two processing plants for dairy products.
The estimated value of the domestic market for organic products is at present unavailable, as are the values of international trade, both imports and exports. However the main trade partners are as follows:
cereals, tea, spices, herbs, maize, onion and peas
Belgium, France and Japan
noodles, oils, honey, soya drinks, sauces, rice, pulses
Germany and Slovenia
cereals, maize, onion and pea
noodles, oils, honey, soya drinks, sauces, rice, pulses, tea, sugar and quinoa
UK and the Netherlands
cereals, tea, spices and herbs
UK and Italy
tea, sugar and quinoa
flour, herbs and spices
noodles, oils, honey, soya drinks, sauces, rice, pulses, tea, sugar, quinoa and cheese
flour, herbs, spices and cereals
Source: provided to FAO by the Ministry of Agriculture, Czech Republic, April 2002.
Table 6: Major forces influencing organic agriculture's growth
Entry of large food industry and retailers (e.g. Unilever, Tesco, Sainsbury) into the organic agriculture sector.
Pressure of the agrochemical industry on farmers and policy-makers decisions and competition from other "green" products (such as "chemical free" or "free range").
Environmental, health and food safety concerns of industrial agriculture that increase demand for organic food (e.g. hormones, antibiotics, dioxins, Alar, BSE, GMOs, endocrine-disrupter pesticides, antibiotic-resistant pathogens, irradiation).
Agricultural epidemics that divert resources from organic agriculture (e.g. foot-and-mouth disease, other emergencies) or inevitably contaminate organic systems (e.g. by GMOs).
Decreasing food prices for conventional commodities and erosion of preferential trade agreements in world trade that favour diversification into organic agriculture.
Economic efficiency will depend on extent of support to agricultural production, real production costs and food prices.
Further harmonization and mutual recognition of organic agriculture standards and enforcement of the organic guarantee system.
Fragmentation of standards that may raise costs to exporters serving several markets. Dilution of standards that may lead to consumer cynicism and abandonment. Unpunished fraud that will result in loss of confidence in the organic claim.
Agricultural policies and/or food security strategies that include action plans specific to organic agriculture with development targets, training and advisory services to farmers and market development.
Food supply policies that decrease public expenditures in agricultural knowledge building and that allow only for price competition at world commodity levels.
Agri-environmental measures increased regulation of synthetic agricultural inputs and implementation of global environmental agreements (i.e. Conventions on Biological Diversity, Climate Change and Combating Desertification).
Potential trade barriers to organic foods and unfavourable WTO measures to integrate environmental considerations into agricultural policies.
Public and private investments in organic agriculture research (e.g. substitutes to synthetic inputs to production and processing) and organic knowledge development.
Agricultural research and extension programmes that promote intensive use of external inputs. Potential scientific innovation with assurance of safety and quality such as new biotechnology products.
The certified organic food market comprises a small (US$16 billion) but growing share (1-2 percent) of the total food market. In Europe in particular, this growth has been enhanced, on the supply side, by production subsidies to organic farmers and, on the demand side, by adverse perceptions concerning the safety of conventional food spurred by crises of confidence. However, growth in the organic market has also been strong in markets where these factors have been less evident, such as Australia, Japan and the United States, and some developing countries.
It is likely that the global market for certified organic products would continue to grow at 10-20 percent per year for the foreseeable future. By 2010 the market may well have grown to US$61-94 billion in countries with certified organic markets, or between 3.5 and 5 percent of the global food market. This is in the currently certified markets; expansion will be greater if non-certified organic markets were included (see Chapter 4).
The deregulation of agricultural policies would leave decisions on the most suitable type of agriculture and food production to market forces. The growth of certified organic agriculture will be governed in the future according to market forces, specifically: the growing concern of society with the safety of food produced by conventional systems; the growing interest of multinational enterprises in organic products; decoupling of agricultural support from production; and the increasing emphasis on agriculture's role in providing public goods.
The implications for governments wishing to develop the organic sector include the development of the appropriate policy framework that ensures transparency and the appropriate quality of organic agriculture products. This is particularly important for exporting countries. Another important step is research and development to assist farmers capturing benefits of productivity enhancement and improving efficiency in transport, handling, storage, processing and retailing, including market development and promotion.
Over the medium-term, all forms of sustainable agriculture, including integrated production and organic agriculture, are expected to converge with regards to their contribution to environmental quality, food safety and fair trade. The distinction, however, will remain with biotech agriculture, namely genetically engineered food and fibres. The degree of success and acceptance of biotech agriculture will have a major influence on agricultural policies and the viability of organic agriculture.
Major forces influencing organic agriculture growth, including market dynamics, policies and technology development, are presented in Table 6.
By 2010 the market may well have grown to US$61-94 billion in countries with certified organic markets, or between 3.5 and 5 percent of the global food market.
Both market forces and agriculture and environmental policies will increase the demand and supply for certified organic agriculture products. Increased conversion to organic agriculture will bring appreciable changes in land use and food supply chains. Organic agriculture has the potential to narrow the producer-consumer gap and enhance local food markets. Organic agriculture will result in decreased food surpluses in industrial countries and improved productivity in developing countries.
While organic food prices will decrease if the supply-demand balance changes, they are expected to remain above conventional food prices. In the medium term, the evolution of trade of certified products will depend on the establishment of equivalency of organic agriculture standards. Focusing only on exports is likely to be counter-productive to organic agriculture development and more attention should be paid to the potential of local/domestic organic markets.
Whether certified or not, the requirements set by organic agriculture will result in innovations that could have broad spin-offs. The urge for adhering to high ecological and social standards will produce, in some places, agricultural systems far ahead of the present organic enterprises. Organic agriculture has created a market-based incentive for ecological management. The demand for environmental and societal services will continue to increase and organic agriculture is providing a strong response in this direction.
The requirements set by organic agriculture will result in innovations that could have broad spin-offs.
38 This estimate of market share assumes a total market of US$1 500 billion.
39 Pirzio-Biroli, 2001.
40 Nimon and Smith, 2001.
41 There has been little success as yet in reducing greenhouses gases carbon and methane. A counter example is ozone depleting substances, for which effective measures have been taken.
42 Lockie et al., 2001.
43 Sales of products of animal origins dropped from 52 percent in 2000 to 14 percent in 2001 of total organic sales.
44 Montenegro, 2002.
45 Burress, Harris and Osland, 2000.
46 Wier and Smed, 2000.
47 Wynen, 1998.
48 For an extensive treatment of this concept, see Wynen, 1996.
49 Leetma, 2001.
50 Pirzio-Biroli, 2001.
51 Morley, 2001.
52 Zanolli and Gambelli, 1999.
53 Intervention payments are production-related subsidies, while storage costs and export subsidies relate to exportable surpluses.
54 Wynen, 1998.
55 Dabbert, 2001.
56 Lohr, 2001.
57 Lipson, 1997.
58 Lampkin et al., 1999.
59 Joint Research Centre, European Commission, Institute for Prospective Studies, 2002.
60 Soil Association, 2002
60 Loiselle, 2002.
61 Rösler, 1997.
62 US/FAS, 2002.
63 CONAMA, 2001.
64 Calculated on the basis of the USDA statute, which requires to set aside 1 percent of biotechnology spending for biotech risk assessment research.
65 US/FAS, 2002.
66 India Organic, 2002.
67 Kristensen and Nielsen, 1997.
68 Embrapa: The Brazilian Agriculture Research Corporation.
69 PESAGRO: The Agriculture Research Corporation of the State of Rio de Janeiro. EPAGRI: The Agriculture Research and Rural Extension Corporation of the State of Santa Caterina.
70 AS-PTA: Consultation and Project Services for Alternative Agriculture.
71 ABIO: Association of Organic farmers of the State of Rio de Janeiro. AAGE: Association of Ecological Agriculture.
72 OIA: International Agriculture Organization, based in Argentina.
73 ECOCERT from France.
74 Skal from the Netherlands.
75 FVO: Farm Verified Organic from the USA.
76 AAO: Organic Agriculture Association.
77 CEPAGRI: Centre of Consultation and Backing to Rural Workers.