Organic foods: Tremendous demand, short supplies

by Keith Nunes
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organic food sign
Organic food producers work to increase availability of raw materials.
 

KANSAS CITY, Mo. – Consumer demand for food and beverage products manufactured with certified organic ingredients continues to increase. Sales rose 11 percent in 2015 to $39.7 billion, and the trend is expected to continue as such demographics as Generation Z and baby boomers continue to influence food culture.

Perceptions of organic food differ between Generation Z and boomers, said Melissa Abbott, vice president of culinary insights for The Hartman Group, Bellevue, Washington, during a presentation at the Summer Fancy Food Show, held in late June in New York. More than half of the younger generation perceives organic as healthier, which compares to only 39 percent of the older segment.

“Gen Z views organic as a symbol of healthy food, while boomers see it as an absence of negatives,” Abbott said. “Gen Z sees organic as tasting better, too, but boomers don’t necessarily see the organic symbol as tasting better or even worth it in many instances.”

While consumer perception of organic is evolving, the themes surrounding the market for organic raw materials have not changed in recent years: There is tremendous demand, but not enough supply to meet the demand.

In 2015, for example, dairy and grains were two commodities where growth could have been more robust if greater supply had been available, according to the Organic Trade Association’s 2016 Organic Industry Survey, which was released this past April.

“There is an industry-wide understanding of the need to build a secure supply chain that can support demand,” the survey said. “This goes hand-in-hand with securing more organic acreage, developing programs to help farmers transition to organic and encouraging new farmers to farm organically. Some companies are dealing with these issues individually.

“Meanwhile, others are working together to address this concern. One exciting example is the US Organic Grain Collaborative, whose members include Annie’s, Stonyfield, Organic Valley, Clif Bar, Nature’s Path and Grain Millers, among others.”

Nate Lewis, Organic Trade Association
Nathaniel Lewis, senior crops and livestock specialist, Organic Trade Association

Nathaniel “Nate” Lewis, senior crops and livestock specialist with the Organic Trade Association, Washington, said organic ingredient supply tightness “has not really eased.”

Making the transition

One of the most costly aspects of organic production is the transition from conventional production to certified-organic, a process that takes up to three years. To ease the financial burden, groups such as the OTA are working to develop a transitional certification process.

“This is a project we have been working on for about a year,” Lewis said. “We think there is the potential for a transitional market premium between conventional and organic.”

The idea is to create a transitional status for producers, but there are challenges, most notably ensuring that any form of transitional status does not compete with producers and manufacturers that have achieved organic certification.

“We formed a task force within the OTA to assess the risks and potential of such a program and have put together what we think a program would look like,” Lewis said.

The trade association submitted its assessment to the US Dept. of Agriculture, and the agency is reviewing how such a program may interact with the National Organic Program.
While the OTA is working to formalize a transitional program within the NOP, there are other companies offering transitional certification.

For example, QAI, Inc., a certifier of organic food in North America and a part of NSF International, Ann Arbor, Michigan, has designed a program to recognize and incentivize farmers as they transition their land from conventional to organic growing methods.

The new protocol, QAI Certified Transitional, is a way for companies to recognize “organics in training.” Producers who want to transition to organic growing methods from conventional must do so over a three-year period. Through QAI Certified Transitional, consumers are able to see which products are in the process of converting to organic. Products featuring a QAI Certified Transitional mark must contain a minimum of 51 percent transitional content.

Lewis said that as demand for organic continues to outstrip supply, the industry will see more efforts aimed at bridging the gaps and overcoming the barriers to shifting from conventional production to organic.

“That is the limiting factor to the growth of the industry,” he said. “Manufacturers are looking for ingredients that are often not there.

“They (manufacturers) are aware they need to become more engaged in the incentivizing of producers in a more comprehensive manner.”

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