Lack of organic farming land could stall growth of US$320 billion organic food market – Informa’s Agribusiness Intelligence

The future growth of the US$320 billion^[1] organic food market could be at risk if organic land area does not grow sufficiently to meet rising demand, according to insights from Informa's Agribusiness Intelligence. Statistics from independent sources confirm the global organic farmland area has grown by 8.4% per year since 2001 – but organic food consumption is exceeding the growth of land, increasing by 10.2% per year over the same period.

Organic farmland not being converted quick enough

The growth of the organic market has been fuelled by a rapid rise in the area of farmland which has been certified organic. However, while the global organic farmland area has grown by 8.4% per year since 2001 – organic food consumption over the same period has increased by 10.2% per year^[2]. As of 2016, a total of 57.8m ha had been approved for organic production, amounting to 1.2% of all the world's farmland. In the last two years, some 13.4m hectares of new organic farmland has been created, as demand for organic food and drink products grows. Some 2.7 million farmers worldwide were identified as 'organic farmers' in 2016 (up 13% year-on-year). There are now 15 countries around the world – from Sweden to Samoa – where more than 10% of the total farmland area is registered organic.

EU standardises international definition of "Organic"

According to FiBL and IFOAM Organics International, the second biggest market in the world for organic products is the EU with sales in 2016 estimated at €30.7bn. From 2021 onwards, the EU will insist that its own domestic rules should directly apply to imported organic goods, and that current 'equivalency' agreements, which the European Commission says allows upwards of 60 different standards to be considered equivalent to EU standards, will no longer be valid. This, the EU claims, will finally establish a level-playing field between EU producers and those from third countries which, it believes, is not currently present.

New legislation will also be ratified by legislators in the course of 2018 to control what can be deemed organic by EU farmers, but this will not enter into force until January 1st 2021. The aim of the new rules is to limit the exceptions to standard organic production rules which are currently available, which will put greater pressure on organic farmers.

US policy changes threaten organic Beef & Poultry

In the US market, unlike the EU, there is no subsidy system in place to reward organic farming and so the price premium which organic products attract is the only economic incentive. One area of current controversy surrounds acceptable management practices for organic livestock and poultry producers. The US government is withdrawing an Organic Livestock and Poultry Practices (OLPP) rule which set out to impose new provisions for regulating livestock handling, transport for slaughter, and poultry housing standards for organic products. Without this rule, organic livestock producers could see increased competition from producers with lower standards who could still call themselves organic. It remains to be seen the impact this will have on consumer perceptions of quality in this major global market.

Chris Horseman, Policy Consultant to Informa's Agribusiness Intelligence said: "A massive international market now exists for organic food and drink products, ranging from fresh fruit and vegetables through to ready meals and processed foods, but future growth is by no means assured. Sophisticated regulatory frameworks are in place to govern all aspects of the organic food chain, from approved farm management techniques to rules on the marketing and labelling of organic products. But demand for new organic farmland to serve this growth is ever increasing. This is especially pressing considering that the unit yields from organic agriculture are lower than those from conventional agriculture. In the longer-term, a growing world population may pose questions about the sustainability of organic farming, and whether there remains room in the market for a production system which renounces pesticides and artificial fertilizers and hence does not seek to maximise output and yield by using in the same way that conventional agriculture aims to."

References

¹ "Organic Foods and Beverages Market Analysis by Product". Published by Grand View Research, 2017.
² "The World of Organic Agriculture: Statistics and Emerging Trends 2018". Published by FIBL and IFOAM Organics International, 2018.