gro-organic potential may 29 2015

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Q u e s t i o n s o r C o m m e n t s ? E m a i l : i n f o @ g r o - i n t e l l i g e n c e . c o m

V i s i t : w w w . g r o - i n t e l l i g e n c e . c o m

A f r i c a n F i e l d s t o W h o l e F o o d s : P o t e n t i a l o f O r g a n i c

T r a d e i n A f r i c aIntroduction Grocery stores and farmers markets in Western nations tell the story of a swift change in perceptions of food, as their customers are increasingly calling for natural and organic foods. These relatively new markets are becoming increasingly importantand increasingly lucrative.

Retailers are capitalizing on the growing demand for organic productsUS retailer Whole Foods, which is emblematic of the organic market, has quadrupled its outlets since 2000 and expanded internationally.

Demand for certified organic products is clearly growing, and farmers of such products

must rise to help meet demand. The highly global nature of food systems means that this demand growth does not only present an opportunity for Western farmersthose all around the world now have the chance to participate in and profit from a highly

lucrative market.

Background Global sales of organic products have increased five-fold since 1999, and are expected to continue their upward climb. This growth has been driven by the US and EU, who together constitute about 90 percent of organic product consumption. In the US alone, the worlds largest single organic market, growth in consumption of such products is outpacing that of conventional foods by a factor of three-to-one. In both 2012 and 2013, organic food sales in the country enjoyed annual growth rates in excess of 10 percent.

Farmers around the world have been scrambling to keep up with demand: survey figures collected by the Research Institute of Organic Agriculture (FiBL) suggest that the total area of farmland dedicated to organic production increased 50 percent between 2005 and 2013, and currently, about 43 million hectares of agricultural land are dedicated to organic production worldwide (this is roughly equivalent to the size of Iraq). Much of this expansion has taken place in countries where demand for organic products is high: in the US, for example, the amount of land dedicated to organic production increased 5-fold between 1995 and 2011.

Cultivation has also expanded in regions that do not themselves consume significant amounts of organic products, such as Africa. In the five-year period between 2005 and 2009, the area dedicated to organic cultivation grew from 920,000 hectares to nearly 1.4 million. While some of these organic products are sold within the continent, the vast majority is for export.

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Indeed, trade has been playing an ever-increasing role in the organic food sector. The US, for instance, has been feeding its growing appetite for organic products through international imports, which amounted to $1.3 billion in 2014up from $668 million in 2011.

And while trade in organic products is attractive for potential producers, it does pose some particular challenges for farmers in developing countries. Perhaps the most significant of these difficulties is rooted in differences of definitions and standards: organic can mean one thing in one region, and an entirely different thing in another.

While most regions define organic farming broadly as a practice in which only naturally derived inputs are used (manure as fertilizer, application of only naturally-derived pesticides, no use of genetically modified seeds, etc.), different markets may define and interpret the details differently. For example, the use of the pesticide Rotenone has been a particularly divisive issueit is a compound derived from plants, and organic producers have historically had no problem in justifying its use in farming. However, some studies have suggested that the compound may be harmful to fish, and also potentially harmful to human health. As such, countries like Argentina, Japan and Kenya have opposed its inclusion in organic farming, while the US, Brazil and Australia have supported its continued use in organic farming.

Such discrepancies are not unusual, and make it difficult for farmers to target their crops towards multiple markets at the same time. Furthermore, importing countries each have their own standards and certification processes that must be fulfilled in order for crops to be considered organic. Obtaining these certificates can be expensive and time-consuming, and all the more so if a farmer is hoping to get certificates that would allow him or her to export to several countries simultaneously. However, there has been some recent progress in normalizing these standards and regulations. In 2012, the US and EU signed an agreement ensuring that organic items from one place could be marketed as such across the Atlantic. And more important for producers in other regions, like Africa, the agreement also indicated that the two would work towards establishing an equivalency in their assessment criteria of organic production in third countries. This was a major step forward for organic farmers everywhere and suggests that costs and processes in the near future may become cheaper and easier, respectively, in coming years.

As a result of these stringent, costly, and sometimes variable certification and trade requirements, organic imports from Africa are very much limited: of the more than 30,000 operators (producers and distributors) that were certified organic by the USDA as of January 2015, only around 630, or approximately 2 percent, were in Africa. While Europe has a larger presence in African agricultural markets, including organic markets, the prevalence of European-certified agencies in many regions is also limited.

Opportunities and obstacles in organicsOrganic products consistently sell at a much higher price point than their conventional counterparts. In the US, organic produce can have a 100 percent premium on non-organic produce. At a minimum, organic vegetables sold at a 10 percent price premium (onions), and such products have at times sold at more than 3 times the price of their conventional counterpart (potatoes) in 2013. UNCTAD research suggests that similar price premiums exist internationally, including for those products sold within Africa.


V i s i t : w w w . g r o - i n t e l l i g e n c e . c o mA f r i c a n F i e l d s t o W h o l e F o o d s : P o t e n t i a l o f O r g a n i c T r a d e i n A f r i c a

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Higher prices are not necessarily enough, however, to convince farmers to convert to organic production,

as there are many more factors important in the determination of profitability. And while some of these

factors are shared by organic and conventional farmers, many do differ. For example, while organic

production means that farmers do not spend as much on synthetic fertilizers and pesticides, farmers lack

of such inputs may leave their crops more vulnerable to pests and damage. Relatedly, organic products

may demand more labor, which of course is also a cost. Various studies have scrutinized the comparative

cost and profitability of organic versus conventional agricultural production, and their results have been

mixed.

An FAO review concluded, based off its case studies (which were in both developed and developing

countries), that the lower production costs and/or the higher price premiums of organic farming make

the practice oftentimes more profitable than conventional farming. The review also determined that

while yields for organic products were often lower than their conventional counterparts in developed

countries, the opposite was true in developing countries, and that organic produce was often more

resistant to external pressures such as drought.

Furthermore, the fact that farmers around the world are expanding their organic production

demonstrates that they themselves anticipate receiving, or are already receiving, positive returns on their

organic goods.

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Source: USDA



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An FAO review concluded, based off its case studies (which were in both developed and developing countries), that the lower production costs and/or the higher price premiums of organic farming make the practice oftentimes more profitable than conventional farming. The review also determined that while yields for organic products were often lower than their conventional counterparts in developed countries, the opposite was true in developing countries, and that organic produce was often more resistant to external pressures such as drought.

Furthermore, the fact that farmers around the world are expanding their organic production demonstrates that they themselves anticipate receiving, or are already receiving, positive returns on their organic goods.

According to many scholars, organic opportunity is particularly well suited to African farmers, given the availability of arable land and labor resources required for organic cultivation. Moreover, organic production requires that farmers eliminate or reduce their reliance on artificial fertilizers or pesticideswhich is ultimately a good thing for African farmers, who already struggle to afford and access such inputs. In fact, organic production is in many ways similar to traditional methods of subsistence cultivation already in the region, but has much greater profit potential. Indeed, survey evidence suggests that African organic farmers surveyed had higher incomes than their conventional producer counterparts.

Many of these African organic farmers are located in a handful of countriesthe country with the highest number of organic farmers in the continent is Uganda, followed by Tanzania, Ethiopia, Senegal, Madagascar, Kenya, Burkina Faso, Zambia, Togo and Mali. And in terms of the countries that dedicate the most land to organic production in the continent, Uganda also takes the top spot, followed by (in order) Tanzania, Ethiopia, Sudan, Tunisia, Egypt, DRC, South Africa, Madagascar, and Ghana.

As previously noted, the majority of the consumption of organic products takes place in the EU and the US. African consumption of certified organic produce is relatively small or non-existent, and most organic goods there are produced for export. As global demand for organic products is continuing to grow, African farmers will have little trouble finding markets for their certified goods, but there are, however, many challenges standing in the way of the African organic farmer.

As mentioned above, farmers must obtain certification in order to market their products as organic. However, obtaining and maintaining certifications is both time consuming and costlythe latter which is particularly troublesome for farmers in developing countries. As noted above, certification requirements may vary by importing market, meaning that farmers must understand and comply with all of the standards that make a product organic in each of the markets they hope to export to. Some of these requirements may prove difficult to comply with in Africafor example; EU standards require the use of organic seeds, which can be difficult to obtain in Africa.

Once a farmer has complied with the foreign standards, they must seek an agent certified by the import market to certify their product as organic. While both the EU and the US have authorized dozens of organizations to act as certifying agents abroad, these agents dont necessarily have a presence in every country, providing a challenge in nations that lack a local inspection authority recognized by the major importing markets. Ecocert SA, for example, is recognized by both the USDA and the EU to certify products as organic according to their respective standards. While Ecocert is a fairly large certifying body and one of the largest in Africa, it actually only has offices in five countries in the continent (Burkina Faso, Madagascar, Morocco, South Africa and Tunisia).

Once a certifying agent has been contracted, the costs of certification vary by farmer and can be steep, ranging from a few hundred to several thousand dollars for USDA certifications. In the case of the USDA, certification costs includes an application fee, annual renewal fee, assessment on annual production or sales, and inspection fees. EU certification also carries substantial and variable fees, ranging from around 400 to over 1,300 for select countries examined in 2008.

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Aside from challenges with obtaining the necessary particular difficulties facing organic productionaccording to UNCTADin the continent include a lack of policy support, little investment in organic agriculture education and a general proliferation of misinformation about organic production. Many organic products wilt and deteriorate faster than conventional ones, given that they can only use a limited number of chemicals in the cultivation and post-harvest process. This means that the products are under additional pressure to be transported from farms to export quicklywhich can presents a challenge in regions where market access is already relatively weak. The sale of organic products that do not rot as easily or quickly as fruits and vegetableslike coffee and sesame, for examplemay be more feasible in regions where transport networks are unreliable or weak.

The Ugandan exampleWithin Africa, Uganda was an early adopter of the organic mantra and successfully established itself as a significant producer and exporter of organic products.

Ugandan producers became involved in organic agriculture in the 1990s, in part through the support of the Swedish International Development Agency (SIDA). SIDA implemented the Export Promotion of Organic Products from Africa (EPOPA) program, which supported producers through the provision of technical assistance, the development of national organic standards, and offering marketing support. The program, which ran from 1997 to 2008, assisted thousands of smallholder Ugandan farmers who produced organic fruits, vanilla, coffee, cocoa and edible oils for export.

The 2001 establishment of the National Organic Agricultural Movement of Uganda (NOGAMU), which seeks to promote and develop organic production, also reflects the countrys growing commitment to the sub-sector.

NOGAMU consists of more than 500 individual and over 300 corporate members, while also representing 200,000 small-scale farmers. In 2002, NOGAMU initiated the creation of the Uganda Organic Standard, which details the requirements that must be fulfilled in order for a product to be certified as organic in the country, and is consistent with EU regulations. The standard was adopted in 2004, and that same year, UgoCert, a certification company that provides organic certifications, was also registered.

Uganda has also been active in organics at a regional level, coordinating with UNCTAD and UNEP on the development of the East Africa Organic Products Standard, adopted in 2007. And legislators began work on the Ugandan Agricultural Policy in 2009, which should offer support and guidance at the highest level for the countrys organic producers.

In many ways, Uganda is a natural stage for organic expansion. Its soils are famously fertile, and its weather ideal for the production of a diverse array of crops. Furthermore, its agricultural sector is dominated by smallholder farmersa fact which in and of itself tends to lend itself well to organic conversion. Also, these farmers use very little fertilizerUganda as a whole has one of the lowest rates of fertilizer use in the world (lower than the sub-Saharan African average).

These comparative advantages meant that Uganda, as of 2012, had around 190,000 organic producerssecond only to India. In 2013, these producers worked on over 200,000 hectares of organic land, about 2 percent of the countrys agricultural area. According to a 2005 UN study, Ugandan organic farmers received premiums ranging from 10 percent to 100 percent for their products, which include pineapple, coffee, cocoa, and sesame.

Given its relatively long history of organic production, Uganda has a modest, although growing, domestic market for organic products. As is the case with other parts of Africa, consumers there often do not perceive any added value to organic products, so may not buy thembut this trend is slowly changing amongst wealthier consumers. The majority of organic Ugandan and many of these products are organic versions of traditional cash crops, such as coffee. According to both UNEP and FiBL, Ugandas export earnings from organic products have significantly increased, from $4.6 million in 2002/03 to $44 million in 2013. Continued growth in organic consumption by both foreign and local markets is expected




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to provide Ugandan organic farmers plenty of reason to continue their production of organic products into the future, and to inspire other countries in the region of the lucrative benefits of organic production.

SummaryThe steady growth of the organic market has led to a proliferation of opportunities for farmers in developing regions. Higher prices, potentially higher profits, resource availability and a general compatibility with local cultivation systems makes the expansion of organic production a particularly interesting prospect in places like Africa. The movement towards the increased synchronization of organic standards should make the certification and sale of organic products much easier for African farmers.

All of these factors, as well as near certainty that global demand for organic products will continue to flourish, make the prospects for organic systems in Africa bright.


gro-organic potential may 29 2015

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