Why America’s Love Affair With Organic
Justin Rohrlich March 22,
2010 8:10 AM|
economics don’t work for manufacturers or consumers.
few years ago, the word “organic” was thought to be
synonymous with the word “profit” for big corporations
like Walmart (WMT), General
Mills (GIS), Kellogg (K),
and Heinz (HNZ) that wanted to capture
a slice of the then-$31-billion market.
supermarket sales of organic packaged foods and non-alcoholic
beverages grew 29.1% in 2007, that growth slowed to
24.5% in 2008, to 11.7% in 2009, and to just 1.9% in
2010. At that point, the value of the organics market
had dropped to $4.4 billion, according to Nielsen data.
companies, the economics of organic don’t add up.
(PEP) so-called “good-for-you-products” like Tropicana,
Aquafina, and Naked Juice make up less than a quarter
of the beverage maker’s total sales.
segment, which makes up less than 2% of the beef market,
is "always going to be a niche," Forrest Roberts,
CEO of the National Cattlemen's Beef Association told
problem…is every grocery store sells such a very small
amount of [natural products]," says Joe Sanderson,
CEO of poultry producer Sanderson Farms
don’t add up for consumers, either.
an analyst at Wells Fargo, points out that people “don’t
need to go up to true organic to get most of the perceived
benefit in their food dollar," meaning they feel
just as good about buying slightly more expensive hormone-free
“natural” milk, which they still see as healthier than
traditional milk without paying as high a premium.
president of Hackett Financial Advisors, Inc., a money-management
firm with a focus on agricultural commodities, says
that as long as unemployment is high, he can’t imagine
the organic sector will thrive.
have to spend a tremendous amount of money to become
-- and maintain -- their organic certification,” he
says. “A lot of people aren’t willing to pay those higher
costs when they also have a credit card to pay down.”
obstacle to price parity is the issue of government
subsidies. Conventional crops are heavily subsidized,
artificially pushing down prices.
issue is yield-per-acre.
Wilson, CEO of fertilizer manufacturer CF Industries
Holdings (CF) said at the Reuters Food and
Agriculture Summit in Chicago last week, “If we aim
to feed the world through organic agriculture, we would
have millions of starving people because those kinds
of farming techniques don't provide the yields necessary
to create the abundance we have today.”
This is a
view shared by Nobel laureate Norman Borlaug, who's
said organic agriculture yields could never match those
of conventional yields.
research from the Rodale Institute’s Farming Systems
Trial, conducted with the USDA’s Agricultural Research
Service, paints a different picture -- if only conventional
farmers could afford the luxury of time, which most
for one, who runs High Maple Farms in Warwick, Maryland,
tells Minyanville he would simply lose too much money
while waiting for his tillable soil to become certified
organic--a process that involves using no chemical fertilizers
or pesticides for three full years.
Once a farmer's
soil is certifiably organic, things start to improve.
During the first few years, conventional corn yield
was superior to organic yield. Then, once the soil built
up its natural biological activity, organic yield matched
conventional yield. After that, over the next eleven
years, organic yield surpassed conventional yield, averaging
119 bushels per acre compared with 110 bushels per acre—which
included severe drought years and a record wet summer.
Sawyer says he'd love to be able to sell his corn at
the premium that organic commands, which is almost double
the per-bushel price. It's getting to that point that
is not feasible.
In the end,
the entire organic issue continues to become less of
chairman and CEO of the organic yogurt maker Stonyfield
Farm says, “It would be great to get all of our food
within a 10-mile radius of our house. But once you're
in organic, you have to source globally,” as there simply
aren’t enough organic cows, enough organic feed, enough
organic sugar, or enough organic fruit in the United
States to meet demand for Stonyfield’s products.
struggling farmers can always do what Michael John Fenter
did recently. In order to make ends meet, Fenter, an
organic farmer in Tacoma, Washington, robbed three banks
in two states, making off with $86,000 before getting
He will be
sentenced on June 14 -- just in time for the organic
heirloom tomato harvest.