So you like whole-grain bread, pesticide-free plums, and low-fat meat? Better ask for a raise.
A recent study by researchers at the University of California-Davis reported that U.S. shoppers who consistently choose healthy foods spend nearly 20 percent more on groceries. The study also said the higher price of these healthier choices can consume 35 to 40 percent of a low-income family's grocery budget. That's bad news for public health. It's also bad news for the organic-food market, since organics usually carry the highest price tag of all the healthy stuff out there.
Do organics make the list?
Eventually, analysts keep telling us, demand for organics will set the wheels in motion that will drive prices down. But eventually never seems to come. Even though organics sales are growing by about 20 percent a year -- almost 10 times the rate of increase in total U.S. food sales, according to the Nutrition Business Journal -- these cleaner, greener products still carry a hefty premium.
How many shoppers have to jump on the organic bandwagon before we actually see prices fall? How long will that take? And what's the government's role in all this? It depends who you ask.
Be Fruitful and Multiply
The organic market we know today began evolving in the 1960s and '70s, when rising environmental awareness led to a backlash against pesticides and increased demand for "green" products. Over the last 20 years, the market has flourished, gaining enough stature to merit the introduction of nationwide U.S. Department of Agriculture certification standards in 2002. (Those guidelines have been attacked by some for being too weak; some producers also cause confusion by claiming to be "natural" or "sustainable" without being certified.)
Today, roughly three-quarters of conventional grocery stores carry natural and/or organic food, according to a 2002 Food Marketing Institute study. Restaurants across the country, from the high end to the greasy spoon, are plunking organic ingredients onto their menus. Still, organics represent only about 2 percent of the food industry, both in the U.S. and worldwide. And less than 10 percent of U.S. consumers buy organic items regularly, according to survey data from Nutrition Business Journal and the Hartman Group, a research firm specializing in the natural-products market. The $10.8 billion industry may be booming, but it's not even close to overtaking conventional sales.
This is in part because of plain old economics. According to basic economic principles, in the short term, as demand grows, prices climb along with it; this small supply and growing demand is what's now getting us, say, $4 quarts of milk. But in the long term, if the market continues to expand, consumption of organics should reach a higher plane where the cost per unit of processing, marketing, and distributing products is much lower. In other words, organic producers will build economies of scale. That price break, in turn, "could bring many more consumers into the market," says Thomas Dobbs, a sustainable-agriculture economist at South Dakota State University. Trouble is, no one seems to know for sure when that will happen.
That's because there are still so many exceptions to the rules, says Steven Blank, an agricultural economist at UC-Davis. Most organic farms in the U.S., for instance, are still small, often family-run operations that don't necessarily fit the economy-of-scale model, because they don't usually have high distribution costs that could be cut as demand rises. Many rely on farmers' markets, community-supported agriculture, and other small-scale distribution channels. "We're too local and hands-on for high distribution to change our costs significantly," confirms Sarah Coddington, co-owner of Frog Hollow Farms in northern California.
And when the little guys grow delicate crops like peaches and plums that have to be handpicked, Blank says, they can't reach the same economies of scale as farmers who harvest mechanically -- their labor costs are too high. "If we have a bumper crop, everything costs more to do," says Coddington.
Fresh, exciting.
Frog Hollow's tree-ripened fruits have developed a nationwide reputation, and a single, succulent peach can run more than $3. But generally, "it" fruits from small farms are not the ones causing a strain on the bank account. Most organic fruits and vegetables -- the largest sector of the organics market -- are only 10 to 30 percent more expensive than their conventionally grown counterparts, and Dobbs says many people are willing to pay that kind of markup for better produce. Where economies of scale could really make a difference is in the world of frozen produce, processed foods, and animal products.
Those items typically cost 50 to more than 100 percent more than their conventional counterparts, according to a 2002 USDA study. In a survey conducted by Colorado-based Walnut Acres -- which bills itself as America's first organic-food company -- price was a major barrier for nearly 70 percent of shoppers who didn't usually buy organic items.
So to win these folks over, do organic producers have to start offering cheap cheese and budget bonbons? Dobbs makes a surprising estimate: if just one-third of American shoppers bought organic foods on a regular basis, most prices would come down to that 10 to 30 percent markup we're seeing on produce today.
Still seems expensive, but Dobbs says a third of U.S. consumers could afford to buy at today's prices if we chose to. The reason we can afford more than we think? We're already paying that much -- and more -- for supposedly cheap food.
More than Meats the Eye
Conventional crops are heavily subsidized by the federal government in the United States, making them artificially inexpensive. Couple those subsidies -- which have been in place since the New Deal -- with the cost of cleaning up pollution and treating health problems created by conventional farming, and we're paying a lot in taxes in order to pay a pittance at the grocery store.
"When we make the argument that low-income people can't afford organics, we're assuming that the prices of conventionals are the prices we should be paying," says a USDA economic researcher who asked to remain anonymous. "But those prices externalize a lot of costs, like pollution and higher energy inputs."
A study last year by Iowa State University economists showed that the annual external costs of U.S. agriculture -- accounting for impacts such as erosion, water pollution, and damage to wildlife -- fall between $5 billion and $16 billion. (For context, that's as much as twice the EPA's 2005 budget.) And Michael Duffy, a coauthor of the Iowa paper, says his team's estimate is conservative.
So will this drive frustrated consumers to the o-side? Hardly. If anything, the taxes consumers already pay to support conventional farming are a disincentive to paying "double" for organics. To encourage a shopping shift, as European agricultural researchers Stephan Dabbert, Anna Maria Haring, and Raffaele Zanoli write in Organic Farming, government has to throw farmers a bone.
"In Western Europe, most countries have decided that organic agriculture needs special support to bring production [and consumption] up to a significantly higher level," Dobbs notes. In countries including Denmark, Sweden, Germany, Austria, and Switzerland, and also at the European Union level, governments contribute to organic markets. In fact, many European policy makers treat organic farming as an instrument to help mitigate environmental problems, manage marginal lands, and address falling farmer incomes, according to Dabbert, et al.
Meanwhile, in the U.S., scant federal money is set aside strictly for organic farmers. The industry doesn't even have access to the type of pricing data and guarantees available to conventional farmers, says University of Georgia agricultural economist Luanne Lohr. "In order to induce producers to get into the [organics] market, they need to know what kind of prices and revenue they're looking at," she says. Without that information, "the producers are flying blind," at the mercy of large distributors who can set unfair prices. "A lot of people would be willing to go into organic, but they don't want to just throw away their investment [in their conventional farms] to get into a system in which they don't have price guarantees," says Lohr.
The success of the USDA's Natural Resources Conservation Service, which dispenses grants that help conventional farmers implement more sustainable practices, suggests subsidies are a key part of encouraging such changes. Deputy Chief Tom Christensen reports that so many farmers are interested in the $3.9 billion program that only one in four applicants is given funding.
Loaves and Wishes
Subsidies are a useful way to increase supplies, experts say, but they're only effective in conjunction with a well-run market. "Regulations that promote organic agriculture by encouraging supply are not ... sufficient to ensure the continuous growth of the organic sector," wrote Nadia Scialabba, a senior officer of environment and sustainable development for the U.N., in 2001.
Scialabba cited the case of Austria, which was the leading organic producer in the E.U. in the mid-1990s. About 10 percent of farmers in the country decided to go organic because of subsidies offered by the government, but this increase in supply was met with inadequate information, distribution, and marketing channels; as a result, many threw in the trowel. They had the money -- they just needed a market.
Some other policies that would effectively increase supply have been contentious. For instance, the USDA has been criticized for allowing dairy farmers to be certified while still in the process of converting conventional cows to organic status. (Such status depends on the grain fed to the cows.) Somewhat ironically, a ruling this January that reversed that provision could hurt the market, at least temporarily. Some of the companies making "organic" products under the weaker standards might jump ship due to the higher production costs under the stricter guidelines, says Lohr. This could slow progress "as the industry reorients itself" around the new rules, she says.
Such dilutions and confusion can cause consumers to lose trust in the organic label and stop buying, according to a 2002 report presented by German researchers to the U.N. Environment Program. Lohr predicts that the rules will continue to be challenged in years to come, "because if there's demand for organic, people want to make it easy for farmers to become certified."
One thing is clear: though organics have been around for a half-century, unknowns still rule. Long-range studies are few and far between, says UC-Davis' Blank. And most economists don't wager a guess on when pricing will change. For now, in the absence of federal support, they put their money on consumer education driving the market.
"It's a matter of the public really knowing what they get when they buy organic," Blank says. The necessary increase in demand, he adds, is likely to happen only if shoppers develop a pro-organic philosophy before they ever set foot in the store.
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Comments
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TrashTsar Posted 6:25 am
25 Aug 2005
Our family switched to buying most everything organic a few years ago. Our local vendor of organics is Whole Foods, a switch from the local Safeway and its somewhat less expensive warehouse affiliate. I assumed that our grocery expense would go up as a result (but that's OK, right?--we are talking about our health and the health of the workers involved in the process).
After a year, curious about how much MORE we were spending, I ran a Quicken report that compared the cost of the first year of shopping at Whole Foods to the previous, "inorganic" year of grocery shopping. There were no changes in our household size (three), etc. To my amazement, our overall spending on groceries went DOWN!
"Why," you ask? The only explanation that I can think of is that by shopping less often at Safeway, we made fewer purchases of impulse items and junk food, like those yummy Lay's potato chips and Hagen Daz ice cream bars. But the difference was real, about a 10% decrease as I recall, amounting to several hundred dollars per year (it's been a while since I ran those numbers).
My point is that you may have to look deeper than pin-point price comparisons to find the true savings in adopting healthier eating habits.
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greenstork Posted 6:26 am
25 Aug 2005
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Forrest Posted 6:29 am
25 Aug 2005
So in short, I don't think it is desireable for food to be cheaper. I think food is really really cheap. Instead of designing federal subsidies to make food cheaper (and thereby drive farmers out of business, as we've been doing in this country for 100 years), why not increase the food stamps program, which helps provide food for low income people, and use a more direct approach to feeding the poor.
Also, everyone likes subsidies - so are subsidies for organic food a good idea? I'd rather see an end to the many subsidies for large-scale, conventional farming (economies of scale? one of the biggest ones is the ability to pay for big scale Washington lobbyists to procure subsidies). The savings could go to increase food-stamps. This would level the playing field between organic and non-organic production, and increase our ability to feed the poor, without any additional cost to the government.
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RevMcG Posted 6:37 am
25 Aug 2005
Who knows -- there might be a Wal-mart effect when the small farmers are finally all gone, as the new farm monopolies raise the prices they kept low to drive the little guys off of the land they had worked for generations.
Organics are not any more expensive than food ever was before -- working people are making less, and are then being sold a substandard, poisonous product that is by no means the same food our great-grandparents grew, and our grandparents were raised on.
Honestly, if organic produce gets any cheaper, I will become very nervous about the future of farming in this country. Food being too expensive for working people to buy is an indication of the need for a stronger labor movement in the U.S., not a call for lower prices.
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greenstork Posted 6:46 am
25 Aug 2005
If we completely eliminated huge factory farm subsidies, that would no doubt lead to a collapse in the U.S. agricultural industry because instead of buying U.S. crops, most consumers would simply buy more food from overseas -- perhaps food grown on felled rainforests or by using questionable production methods -- posing an additional environmental threat to say nothing of what it might do to the U.S. economy, and the effect that would have on the poor.
Am I off base here? In theory, I'd like to say no subsidies too but I have my doubts because of what I think the fallout could be.
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Bart Anderson Posted 10:59 am
25 Aug 2005
The question on my mind is, what happens as petroleum prices go up. What happens as they go way, WAY up?
Transportation -> skyrockets
Pesticides and fertilizers -> much more expernsive
Farm machinery and food processing plants -> upwards
The price differential between organic food and chemical food should go down, and overall food prices could go very high.
Local food becomes more affordable, more necessary. As a number of people have been pointing out, "local food" is the sexy new concept, supplanting "organic".
There have been some dynamite articles published recently on local food:
Attack of the $3 Tomato
(How Portland's snooty tastes are saving Oregon farms, luring kids back to the land and even-gasp!-teaching Republicans and Democrats to get along.)
http://www.wweek.com/story.php?story=6633.
Living on the Hundred-Mile Diet
http://energybulletin.net/8138.html
(original articles in The Tyee, e.g.
http://www.thetyee.ca/Life/2005/08/12/TravelledFood/)
Grist editors, sign some of those writers up!
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Xav Posted 5:51 pm
25 Aug 2005
I would insist a little more, and may invite GRIST to explore, 2 points:
1- subsidies to chemical mechanical agriculture::
as listed by Bart Anderson in his comment:
if energy prices go up
«Transportation -> skyrockets
Pesticides and fertilizers -> much more expernsive
Farm machinery and food processing plants -> upwards»
Subsidies to farmers go indirectly to the oil and chemical industries. to cover their costs in fuels and poisons.
It would be interesting to see in which proportion!!!!
Canthey be considered as subsidies to the oil industries?
2- quality of products (and externalities)
When you buy organic versus chemical food,
it is like SILK versus PLASTIC
can you really compare the prices?
it is true for quality, externalities. health value
A fruit or vegetable is made of solid matter and water
Due to agricultural techniques, chemically grown products tend to contain more water (this is one of the tricks that make crops (larger) heavier.
So you pay less per kilos, but not necessarelly less per kilos of solid matter (the nutrients, vitamines, trace elements etc)
the choice of species: to allow mechanical and chemical farming, and also transportation, newer sorts of plants are used, they also tend to catch more water.
A study done by a farmer where I buy vegetables and grains, shown that the difference can be of 40% for potatoes.
If you pay your organic, old fashion sort, potatoes 20 %more, the quantity of nutrients you actually buy, is still less expensive since you buy less water!
(I don't know if I am clear)
3- and a last comment:
unfortunately, an organicaly grown product, does not make it ecological
that is why local organic farming for local marked is the ecological solution.
There must be developped new solutions for distributions into cities (like urban gardens/farms) Big cities are unsustainable anyway.
About meat, you might read:
http://www.worldwatch.org/pubs/mag/2004/174
sincerelly and solar green
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Tom Kelly Posted 3:39 am
26 Aug 2005
We purchase most of our food from a small, local market that carries only organic fruit and vegetables. It has one other store which is slightly larger in the next town that also sells organic meat and poultry. It is almost always the case that the produce, when purchased in season from either of these two small stores, is $1-$2 cheaper per pound than similar organic items in Safeway, Andronico's, or Albertson's. Is it possible that these larger chains, which one assumes buy in larger quantities thus achieivng lower unit costs, are simply taking advantage of the willingness of the consumer to pay more for organic produce because we have been conditioned to believe that organic is more expensive? Are we being conned?
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amazingdrx Posted 10:23 pm
26 Aug 2005
This makes for healthier, better tasting, more nutritious vegetables. It also makes weeds grow very well.
In chemical farming the crops are designed to be resistant to poisons applied to kill everything (insects and other plants)except the crops themselves. The soil is dead, nothing but a semi-sterile chemical hydroponic media supplied with nutrients by oil based and mined fertilizers.
These poisons persist in the food, atrazine for example renders the sperm of males living in corn country unable to swim. The chemical companies rresponse to this? They are no doubt developing a male birth control pill based on atrazine.
Organic farming relies on human labor to physically separate weeds and bugs from the crops, eschewing the use of poisons and crops designed to resist those poisons. Food is produced from a natural, oraganic living system.
But that human labor makes organic food inherently more expensive.
The way to reduce labor costs asociated with organic farming? Machines. Smart machines taught to do the repetitive labor of planting, weeding, mulching, watering, fertilizing, harvesting...by human gardeners.
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rickeym Posted 5:20 am
27 Aug 2005
Thus a major role of subsidies has been to reward the argibusiness concerns, while ignoring the small farmers, and keeping food prices artificially low so as to drive the small farmer under.
And it's working. Thousands of small farmers each year give it up. Not a few of them commit suicide, a fact that's been fairly well hidden. In so-called developing countries, similar schemes are driving farmers off the land. The suicide rate in India, for instance, is epidemic.
We cannot merely clamor for cheaper organics. We need to support our local organic farmers, paying them a fair price for their efforts.
Agribusiness is starting to take over the organics business, ironically driving the small farmers who brought us the organic revival out of business. This is not a good thing, as it will mean huge monocrops and long shipping distances -- just like with conventional crops. And it does nothing to build community.
Food is cheap enough, probably too cheap, given how many farmers can't even break even at today's selling prices. (And yes, I'm oversimplifying for the sake of brevity; many small farmers are in debt owing to mechanization, over-reliance on fertilizers, etc. -- but that story is ... a whole other, if related, story!)
As for the inability of poor people to afford organics: To change that, we need to work on the social justice and job creation side of things to see to it that no one is ever too poor again.
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Bart Anderson Posted 6:30 am
27 Aug 2005
It depends. You say "inherently" because the US has been accustomed to cheap fossil fuels and relatively high wages.
Consider a world of expensive energy and low wages -- the Third World, the pre-19th C world, the probable world of the future.
In such a world, local organic produce grown on a small scale has a cost advantage.
If you would expand your definition of "machinery" to include energy-efficient technology of all types, then I would agree with you. Problem is, we're wedded to the idea of fuel-powered machinery and overlook the other possibilities.
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amazingdrx Posted 1:53 am
28 Aug 2005
The thing about inexpensive labor from the underdeveloped nations of spaceship earth is that it is being exploited to produce the same old genetically engineered, big agri biz, chem oil toxic,tasteless food.
Because of the long shipment from these countries to the big consumer markets the produce is designed to be picked green and hardly ever really ripens, mainly it rots.
The main advantage of robotic assistance to growers is that real heirloom crtops with great taste and nutrition can be grown to peak and harvested and transported quickly, all without the labor costs asociated with selective weeding, watering, feeding, and harvesting.
Crop rotation in strips and natural pest repellant plants can substitute for chemical toxins. Hand weeding and mulching, necessary without the use of chemical toxins, can be done quickly and productively with renewable electric powered machines that crawl between the rows.
And organic fertilizer made from waste can substitute for oil based and mined fertilizer.
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jdhlax Posted 5:04 pm
29 Aug 2005
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Bartek Posted 9:27 am
31 Aug 2005
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amazingdrx Posted 11:48 pm
31 Aug 2005
Good point!
Recycled organic fertilizer may beat the cost of oil based fertilizer and even human labor may beat the cost of running tractors and farm machinery running on oil and oil based chemical toxic elimination of weeds and insects.
But human labor assisted by solar and wind powered electric machinery and solar cogeneration produced organic fertilizer from the waste stream will beat that by orders of magnitude, feeding the people of spaceship earth in harmony with nature.
Renwable energy based green technology and organic farming are not mutually exclusive.
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mjgraham Posted 3:17 am
12 Sep 2005
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timonier Posted 1:02 pm
20 Sep 2005
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erathje Posted 3:43 pm
26 Nov 2006
If anyone's still reading this, I'm searching for public participation in a website/blog I'm finishing up for school. It's called AfterTASTE and is about the decline of food. Organic and local food is central to it, as is "jumping on the bandwagon" and policy changes.
Thank you for an informative article. I'm blogging about it right now!
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