Growth and Opportunity in the Organic Product Sectors

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Learning Objectives

After completing this course, you will: Define Organic Farming Explain the significance of organic product

certification Describe the size of the US organic market Recognize the organic market segmentation in the US Explain the key emerging trends

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Topics

1 Defining Organics

2 Organic Product Certification

3 Sizing the Organic Market

4 Market Segmentation in the U.S.

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5 Key Emerging Trends

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What Is Organic Farming

Organic farming is a system of agriculture that uses natural and biodegradable inputs while specifically avoiding the use of synthetic fertilizers or genetically modified organisms (GMOs) as seed stock or pesticides.

Did you know?For a quarter century now, GMOs are present in almost all processed foods in the U.S. but the Food and Drug Administration (FDA) does not require labeling (“voluntary”) even though GMOs are banned in many countries.

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Conventional Farming and Organic Farming

The Organic Farming Research Foundation draws a distinction between conventional farming and organic farming as such: “Organic farming refers to agricultural production systems that do not use genetically modified (GM) seed, synthetic pesticides or fertilizers. Fundamental characteristics of organic systems include design and implementation of an organic system plan describing the practices used in producing crops and livestock products; detailed recordkeeping systems tracking all products from the field to point of sale; and maintenance of buffer zones to prevent inadvertent contamination by synthetic farm chemicals from adjacent conventional fields.”

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Organic Farming Method

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Organic farmers use biological methods and management practices such as diversified crop rotations that improve soil quality. Organic farming increases soil organic matter, which enhances the soil's ability to absorb and store carbon, cycle nutrients, and absorb water. Increased soil organic matter contributes to greater resilience under stresses such as drought and flooding. A key element in understanding the cycle of healthy crop production is to focus on the soil health. Farmers who embrace the cycle of healthy production understand that the process of protecting your watershed is critical to maintaining the ability of the land to produce. Crop rotation, composting and soil enrichment are all achievable though proven methods explained here.Amish farmers in the U.S. have embraced approaches that support and enhance the immune systems of plants, based on insights highlighted in The Atlantic here from self-taught farmer named John Kempf.

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Topics

1 Defining Organics

2 Organic Product Certification

3 Sizing the Organic Market

4 Market Segmentation in the U.S.

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5 Key Emerging Trends

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Organic Product Certification

Certified organic products refers to agricultural products that have been grown and processed according to uniform standards that have been verified by the United States Department of Agriculture (USDA) in its rulemaking. The National Organic Program (NOP) develops the rules and regulations for the production, handling, labeling, and enforcement of all USDA organic products. NOP is the key to getting your organic products to the market with the correct, accepted certifications.

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What does NOP do?

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• Maintain the list of certified organic operations and help new farmers learn how to get certified

• Develop regulations and guidance on organic standards• Manage the National List of Allowed and Prohibited Substances• Accredit certifying agents to certify organic producers & handlers• Establish international organic import and export policies• Investigate and take action on regulatory violation complaints• Facilitate the work of the National Organic Standards Board, a Federal Advisory

Committee• Oversee the Organic Certification Cost Share programs to support certified

organic operators• Provide training to certifying agents, USDA staff, & other stakeholders

What Does NOP Do?

X

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Topics

1 Defining Organics

2 Organic Product Certification

3 Sizing the Organic Market

4 Market Segmentation in the U.S.

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5 Key Emerging Trends

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The U.S. Organics Market

The USDA sizes the U.S. organics market at over $6B in 2015 but the market growth has accelerated this year due to a shift in food consumption patterns away from GMOs, high sugar content and highly processed foods. The economic multiplier effect has been cited at 20 to 1x for each dollar of research expended.

The USDA details that organics in the US are highly skewed to the west and southwest where a highly seasonal population of “guest workers” enters to complete harvests. This may well change with the incoming Trump Administration as the H1-B visa program undergoes a thorough review.

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The U.S. Organics Market

The Organic Trade Organization sizes the market at $43.3B and this estimate actually captures a number of segments the USDA ignores. Scientific American offers an interesting insight, environmental scientists at McGill University in Montreal and the University of Minnesota performed an analysis of 66 studies comparing conventional and organic methods across 34 different crop species. "We found that, overall, organic yields are considerably lower than conventional yields," explains McGill's Verena Seufert, lead author of the study published in Nature on April 26. "But, this yield difference varies across different conditions. When farmers apply best management practices, organic systems, for example, perform relatively better."

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Topics

1 Defining Organics

2 Organic Product Certification

3 Sizing the Organic Market

4 Market Segmentation in the U.S.

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5 Key Emerging Trends

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Global Market Segmentation

Globally, the market segmentation suggests that organics are well established. Grains, nuts, cattle and poultry are all core elements of the global consumables but new niches are emerging. Specialty organics are surging.

Not surprisingly, organic products first established a market position among products directly applied to consumers in the cosmetics industry. The global organic personal care market is expected to reach $25billion by 2025, according to Grand View Research. The growing demand for organic and natural hair care, skin care, and cosmetic products results from a demand for higher quality products with no additives and better ingredients – these products demonstrate that the non-GMO offerings yield higher pricing.

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Global Market Segmentation

Similarly, "Global Organic Food Market Forecast & Opportunities, 2020" from Tech Sci Research forecasts that the global organic food market is projected to register a CAGR of over 16% during 2015 - 2020. “Growth in the market can be attributed to growing health concerns among consumers and increasing awareness with regard to health benefits of organic food,” they conclude. Emerging players in the market are numerous and most are new participants.

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Who are the early key players in the global market ?

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Transparency Market Research highlights early key players in the global market for organic food as: Spartan Stores Inc., Hain Celestial Group Inc., United Natural Foods Inc., AMCON Distributing Co., Amy’s Kitchen, Whole Foods Market Inc., Clif Bar & Company, The Kroger Co., Dole Food, Frito-Lay, Newman’s Own, Inc., Dean Foods, and Organic Valley.

Who are the Early Key Players?

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Market Demand Not Yet Met

The Agricultural Marketing Resource Center has highlighted a problem with organics in terms of shortages and consumer confusion due to labeling which does not reflect that a product is certified organic. AgMRC confirms that, “rapid growth in the organic sector has highlighted issues that need to be addressed: shortages of organic raw materials such as organic grain and organic sugar and competition from food marketed as "locally grown" or "natural." A shortage of affordable organic ingredients or products, such as corn and soybeans for livestock feed, left organic producers unable to meet market demand.”

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Topics

1 Defining Organics

2 Organic Product Certification

3 Sizing the Organic Market

4 Market Segmentation in the U.S.

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5 Key Emerging Trends

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Trend in Organics

An interesting trend in organics is also that even Wikipedia describes organic farming as “an alternative agricultural system” as if thousands of years of cultivation should be dismissed as unconventional. So the narrative presented shows that there is a serious backlash to poisoning our ecosystem:

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Agriculture was practiced for thousands of years without the use of artificial chemicals. Artificial fertilizers were first created during the mid-19th century. These early fertilizers were cheap, powerful, and easy to transport in bulk. Similar advances occurred in chemical pesticides in the 1940s, leading to the decade being referred to as the 'pesticide era'.[14] These new agricultural techniques, while beneficial in the short term, had serious longer term side effects such as soil compaction, erosion, and declines in overall soil fertility, along with health concerns about toxic chemicals entering the food supply in the late 1800s and early 1900s, soil biology scientists began to seek ways to remedy these side effects while still maintaining higher production.

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US Leading the Trend

Without a doubt, a certain percentage of the population is willing to pay a premium for certified organic products. Some credible researchers believe the organic market is bigger than reported. Research and Markets sized the organic food & beverage market to be worth $84 billion two years ago with a projection of $212 billion by 2020 based on an estimated CAGR of 16.7% in the next 5 years. The U.S., Germany, the U.K. and Italy are leading the trend towards organics globally but the drive is widening.

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Regulation is going to be an increasingly important element in the organics field as some of the established process food companies view organics as a threat to their business growth. Data from the U.S. National Agricultural Statistics Service shows an huge 31% surge in organic crop and livestock production in recent data.

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Compelling Trends Emerging

Organic agricultural methods are internationally regulated and legally enforced by many nations, based in large part on the standards set by the International Federation of Organic Agriculture Movements (IFOAM), an international umbrella organization for organic farming organizations established in 1972. Not surprisingly, the Swiss offer a very comprehensive report entitled “The World of Organic Farming” which lays out beautifully over 340 pages that organics are the wave of the future. Indeed, there are compelling trends emerging as laid out in Trendwatching here. And part of the organics movement will shift to specialty foods, as shown here, as new categories emerge for consumers with new products that they had not seen before are now offered.Back Next

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Knowledge Checks

Organic farming is a system of agriculture that uses natural and biodegradable inputs while specifically avoiding the use of __________.

Back Select the correct option.

⃝Wsynthetic fertilizers ⃝Wgenetically modified organisms (GMOs) as seed

stock ⃝Wpesticides ⃝Wall of the above

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Knowledge Checks

Organic farming is a system of agriculture that uses natural and biodegradable inputs while specifically avoiding the use of __________.

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synthetic fertilizers genetically modified organisms (GMOs) as seed

stock pesticides

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Knowledge Checks

The National Organic Program (NOP) develops the rules and regulations for the production, handling, labeling, and enforcement of all USDA organic products.

Back Select the correct option.

⃝WTrue⃝WFalse

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Knowledge Checks

The National Organic Program (NOP) develops the rules and regulations for the production, handling, labeling, and enforcement of all USDA organic products.

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True

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Knowledge Checks

The Organic Trade Organization sizes the US organic market at ______________.

Back Select the correct option.

⃝W$81B⃝W$43.3B⃝W$25B⃝W$6B

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Knowledge Checks

The Organic Trade Organization sizes the US organic market at ______________.

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$43.3B

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