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FOR PRIVATE CIRCULATION ONLY A BI-MONTHLY PUBLICATION

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Visit us at www.eximbankagro.comMARCH 2006

VOL V ISSUE II

c o n t e n t s

H Organic Food

Industry:

Trends and

Opportunities 1

H Organic Agriculture:

Certification and

Regulations 2

H Organic Food

Market in EU:

A Brief Profile 35

H Organic

Agriculture

in India:

Opportunities

and Challenges 58

H Organic Citrus

and Citrus Juices:

World Market

Review 910

H Cotton: Growing

the Organic Way 11

H Organic Meat:Key Emerging

Markets 11

H News Focus 12

Published in English, Hindi, Marathi, Assamese, Bengali, Gujarati, Kannada, Malayalam, Oriya, Punjabi, Tamil and Telugu

ORGANIC FOOD INDUSTRY: TRENDS AND OPPORTUNITIES

The organic food industry has been growing remarkablyfor the past several years. Against the 2-3% growth in theconventional food industry, the organic food industry hasbeen experiencing annual growth between 17% to 22%over the past several years. Global retail organic food

sales, valued at USD 25 billion in 2003, are currentlyworth USD 31 billion and growing at over 20% per annum.The same is estimated to increase to USD 102 billion by2020.

Organic agriculture is now practiced in approximately 110countries and its share of agricultural land and farmcontinues to grow.

Markets of Organic Food

The major markets for organic food products are in theUnited States, the European Union (Germany, France,Italy, Belgium and the United Kingdom), and Japan.

The annual market size of natural and organic products inthe US is estimated to be anywhere between USD 16.3 29.7 billion. In 2005, retail sales of organic food and

beverages were approximately USD 12.8 billion. Growthrate estimates up to 2010 range between 9% and 16% perannum. A part of the US demand is met from imports. In2002, the import of organic foods into the US was aboutUSD 1.5 billion.

The EU organic market grew rapidly through 1990s by arange 20% and 40% per annum, but currently the growthhas slowed down because the number of regular organicconsumers has stabilized. Retails sales grew from USD10.5 billion in 2002 to USD 12 billion in 2004, at agrowth rate of 5% per annum. Germany is the secondlargest market for organic food and drink in the EU, whichaccounts for almost 30% of total organic sales valued atUSD 3.7 billion in 2003, followed by the UK, whichachieved estimated retail sales of USD 1.6 billion. Italyand France organic markets, each valued at approximatelyUSD 1.5 billion. The French and UK markets have grownon an average of more than 40% annually since 2001.Among the more significant countries producing organicproducts in Asia are China, Ukraine, India, Indonesia andIsrael (mainly dried and fresh fruits and vegetables andnuts). Japan is the largest consumer of organic products inAsia. The market was estimated at USD 350-450 millionin 2003 and is growing at 20% per annum. The Japaneseorganic market is characterized as one with high demand,strong purchasing power, and low domestic supply oforganic products. On the supply side, the value of Chineseexports grew from less than USD 1 million in 1990s toabout USD 142 million in 2003. By 2003, more than1,000 Chinese companies and farms were certified organic.

Challenges and Opportunities

Markets in developed countries are evolving to demandhighly processed organic products as well as rawcommodities. Supply competition is inevitable.

Fig 1. Organic Food Category sales in the US, 2003

Prepared

Foods

13%

Fruits &

Vegetables

42%

Beverages

15%

Sauces /

Condiments

2%

Dairy

13%

Bread/Grains

9%

Snack Foods

5%

Meat

1%

Source: Organic Trade Association, 2004

As production is widespread, most of the raw commoditiesare now available in organic form. In Europe, markets areincreasing for ready-to-eat meals, frozen foods, baby food,snacks and beverages. Ingredients needed for organic foodprocessing include juices, fruit powders, dried fruit, meat,flavourings, essential oils, herbs and spices and nuts.In Japan, organic consumer goods, which are in growingdemand, include fresh produce, frozen foods, juice, bakedgoods, baby food, chicken, sauces and ready meals. NewZealand has emerged as a significant supplier of organicfoods lately.

Reference: IFOAM FAO FAS, USDA

Fig 2. Composition of the EU organic market, 2003

Source: FiBL, 2005

UK

15%

France

15%

Italy

13%

Sweden

4%

The Netherlands

4%

Denmark

3%

Switzerland

7%

Austria

3%

Belgium

3%

Finland

2%Spain

1% Others

2%

Germany

28%

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ORGANIC FOOD MARKET IN EU: A BRIEF PROFILE

European Union (EU) is one of the leading and rising markets of organicproducts in the world. The standards for organic food production andlabeling in the EU are laid down in Council Regulation (EEC) 2092/91.In EU, organic products encompass an enormous diversity of productgroups. However, the main product groups are:l Coffee, tea and cocoa l Grains, pulses and seedsl Vegetable oils and fats l Edible nutsl Spices and herbs l Dried fruitsl Fruit juices and concentrates l Sugar

l Honey

Market Size

EU is the largest market for organic products after the USA. Thedevelopments of EU organic markets differ considerably from one membercountry to another as they have entered various stages of product lifecycle.

Table 1. Countries clustered by stage of organic market developmentMature market Growth market Emerging market

countries countries countries

Austria Finland Czech Republic

Denmark Italy Greece

Germany The Netherlands Ireland

Switzerland Sweden Slovenia

United Kingdom France Spain

Belgium Norway

United Kingdom Portugal

Source: OMIaRD, 2004

Countries listed under mature markets are characterized by the leadingrole of supermarkets in sales of organic products. In growth markets,specialized organic food shops and direct sales are the main outlets and inemerging markets, the organic sector is a niche market, mainly servicedby organic farming pioneers and a small number of actors with no clearorganized structure.

In terms of sales, Germany remains the largest market in EU, amountingto 3.1 billion. Other EU markets with annual sales above 1 billion areFrance, Italy and the UK. The organic markets grew between 2 and 5%lately in Italy, Germany and France, while in UK it remained around40%.

Growth pattern of organic markets in EU reveals that the former leadingmarkets showing less growth as compared to the emerging markets.

Information on market size by product groups is scarce or non-existentas the markets are in different stages of development. However, data onsome key product markets provide some fair idea on the growing market

trends.

Coffee, tea and cocoa

Germany is Europes largest market for organic coffee followed by theNetherlands and the UK. Market share is highest in Denmark (3.4%),followed by the Netherlands (2.9%). Sweden and Germany have marketshares of 1.6 and 1.1% respectively.

The leading EU markets for organic tea are the UK and Germany, withconsumption of 1,000-1,500 tonnes and 600-800 tonnes respectively in2001. Although the UK being the largest tea market, consumption hasbeen decreasing. Consumption of tea in all other EU countries is restrictedto maximum 100 tonnes of green or black tea per year. The market fororganic cocoa is well developed with annual market growth until 2002being 10-15%.

Edible nuts and Dried fruits

The EU edible nut and dried fruit market is a rising market. Exactmarket size of organic nuts and dried fruits is not available. However,reports reveal wide range of organic nuts are on offer in the EU markets,leading ones are hazelnuts, peanuts and almonds. Others offered areBrazil nuts, cashew nuts and pistachios. Similarly, the most popular organicdried fruit mainly in demand in health food stores characterized by drying

Table 2. Overview European markets for organic food, salesin million, share in % of total food sales, 2002-03

Retail Average Share in Annualsales1 consumer total growth*

(2003) spending in food sales* (2002)

* (2003) (2002)

Total Europe 11,000

Germany 3,100 38 2.2 510

United Kingdom 1,607 27 2.0 1015

France 1,578 27 1.5 510

Italy 1,400 24 1.5 515

Switzerland 742 101

Sweden 420 47 2.0 1015The Netherlands 395 25 1.5 510

Denmark 339 51 2.7 05

Austria 323 40 2.5 510

Belgium 300 29 1.5 510

Finland 212 41

Spain 144 4

Greece 21 2

Hungary 18 2

Czech Republic 6 1

Other Europe**2 395

Source : FiBL (2005)

Table 3. Expected growth rates, 2003-2007 in %

Germany UK Italy France Denmark

Overall 4.8 11 5.5 6.1 1.5

Convenience products 7.3 8.8 6.3 10.0 3.3

Meat products 3.1 12.3 7.2 10.0 1.7

Dairy products 6.7 8.8 4.1 6.5 1.0

Fruit & Vegetables 7.1 8.3 5.8 5.0 4.0

Cereals products 4.6 6.0 4.4 5.3 2.5

Urban regions 8.1 9.9 6.8 7.6 2.9

Rural regions 4.7 6.9 3.6 3.5 1.8

Source : OMIaRD, 2003

using natural processes are sultanas, dates, raisins, prunes and apricots.Others having smaller but promising markets include dried banana,mango, papaya and pineapple.

According to reports from ITC and FAO, other growing organic productmarkets in EU are of spices, herbs and essential oil, fruit juice andconcentrates, grains and pulses, vegetable oil, sugar and honey.

Consumption patterns and trends

Study on the consumption of organic food products in EU show, widedifferences in trends and development on the organic market among thedifferent EU countries. The organic market remains a niche market withcertain products wearing the badge of better than others. Increasinglychanging consumer perception towards health foods has driven theorganic food market in EU, which is reflected by strong growth in demandfor certain product categories such as baby food and dairy products.Fresh foods such as milk and milk products, vegetables, fruits, bread andmeat are the other key items to the market expansion for organic productsin the EU.

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Production

The total land under organic cultivation in EU is 6.3 million hectares.Organic plant production as a percentage of total plant production in

2001 is provided in Table 4.

Table 4. Organic plant production as a percentage of total plantproduction in 2001, sorted by percentage of organic production

in total production

Country Cereals Oilseeds Olives Potatoes Vege- Fruit Winetables (incl. nuts)

Austria 2.8 4.4 4.1 7.6 1.4 1.7

Italy 2.5 14.4 2.0 1.3 3.8 2.9

Finland 2.2 2.0 1.2 2.2 1.2

Denmark 1.5 0.3 1.4 19.0 2.8

Sweden 1.9 0.9 0.9 1.4 3.1

Germany 1.0 0.5 1.2 5.9 2.0 1.2

United Kingdom 0.4 0.0 0.6 2.0 1.6 0.0

Spain 0.7 1.3 2.1 0.1 0.1 0.4 0.5

Portugal 0.9 1.5 3.0 0.4 0.4 1.8 0.4

The Netherlands 1.1 0.0 0.3 1.4 0.6 0.0

Luxembourg 0.3 0.1 4.7 9.2 0.8 0.1

France 0.2 0.4 0.3 2.1 1.3 0.9

Belgium 0.3 0.0 0.2 0.7 0.8 2.5

Greece 0.1 0.0 0.4 0.0 0.2 1.3 2.4

Ireland 0.1 0.4 2.5 0.8

Slovenia 0.1 0.4 0.1 0.5 0.4 2.0 0.2

Czech Republic 0.2 0.0 0.2 0.2 0.2 0.0

EU-15 0.9 0.5 4.9 0.8 1.4 1.9 1.5EU average calculated only for countries for which production data is available

Source: OMIaRD (2004)

Imports

Organic trade is not recorded separately in the HS system and is notregistered by Customs. Data on organic trade are therefore scarce andare mostly estimates.

Germany is the largest importer in EU importing a wide assortment oforganic products, accounting for an estimated 38% of the value of rawmaterials for the German organic market. Fruits and vegetables bothfresh and processed are the largest import item, with 30% share inturnover of all imported organic foods. Imports of organic cereals &cereal products, eggs and poultry meet accounted for 10-20%. Other

leading organic import products include nuts, tea, coffee, cocoa, spices,culinary oils and fats, sweeteners and bakery products.

The UK is the next largest importer of organic products mainly ofprocessed organic food and fruit and vegetables followed by theNetherlands, which is a sizable importer of organic fresh fruits andvegetables, grains and cereals, dried fruits, nuts and seeds, coffee, tea,spices and herbs.

Exports

In many EU countries organic food production is primarily aimed tocater to domestic demand and to a much lesser extent destined forexports. The main export markets for EU organic products are USA and

Japan.

Germany was the largest organic potato exporter in quantity accountingfor 13.3% of total potato exports. Among the EU countries, France hasone of the highest export percentages exporting half of its organic oilseedsmainly to Germany and Scandinavian countries. It also exported overhalf of its organic wine. The Netherlands is one of the leading EU exportersof organic food products serving as a significant entry point for organicproducts mainly re-exported into the European hinterland.

Table 5. Imports of selected organic food products by EU-25in million, 2004

Product Total EU imports,2004 in million

Coffee 3,971,248

Tea 716,043

Cocoa 2,096,293

Rice 1,161,404

Pulses of which: 1,275,979

Kindly beans 222,047

Black & green grams 14,089

Seeds of which : 815,748

Sunflower seeds 699,234

Sesame seeds 116,514

Vegetable oils & fats of which: 5,629,166Soybean oil 519,008

Palm oil 1,864,277

Coconut oil 845,657

Edible nuts of which: 4,556,320

Peanuts 623,152

Cashew nuts 265,473

Pistachios 428,345

Spices & herbs 905,030

Dried fruit 878,127

Fruit Juice/concentrate 4,180,362

Honey443,846Sugar 1,199,845

Source : Eurostat 2005

Table 6. Imports of selected organic food products by selectedEU countries in tonnes (wine in hectolitre), 2001

Country Cereals Oilseeds Potatoes Vege- Fruit Milk Winetables (incl. nuts) (products)

Germany 120,000 20,000 10,000 40,000 80,000 20,000 110,000

Denmark 12,000 1,000 1,100 9,700 0

France 48,000 2,500 30,000 40,000 27,000

Italy 200,000 1,000 15,000 18,000 25,000

Netherlands 100,000 10,000 1,000 23,000 68,100 7,500 19,600

Sweden 3,000 143 1,142 3,857 0 1,093

UK 40,000 15,083 29,351 73,300 4,900 3,000

Sum EU-15 551,292 39,693 168,655 323,237 104,783

Other EU* 28,292 8,967 29,062 30,280 20,383

* Excluding new EU countriesSource : OMIaRD (2004)

Prices

Generally, almost all organic products command higher price thanconventional products, mainly due to more labour intensive productionand expensive materials. Premiums between organic and conventionalproducts in EU markets generally range between 15 and 25% dependingon the type and quality of product and the current market situation.

However, price varies considerably among the EU countries. Swedenhas among the lowest premiums attached to organic products andGermany the highest.

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Table 7. Exports of organic food products by selectedEU countries, 2001 in tonnes

Country Cereals Oilseeds Potatoes Vege- Fruit Milk Winetables (incl. nuts) (products)

Germany 50,000 1,000 15,000 10,000 8,000 25,000 12,000

Denmark 1,000 0 2,000 1,700 20 14,000 0

France 10,000 0 0 10,000 15,000 2,000 375,000

Italy 120,000 0 5,000 31,000 150,000 5,000 500,000

Netherlands 70,000 7,000 1,000 46,750 58,000 27,500 0

Sweden 4,000 0 128 43 15 0 0

UK 0 0 0 0 1 0 0

Other EU* 63,444 n.a. 8,630 33,430 60,694 55,000 n.a.

Sum EU-15 318,444 n.a. 31,758 132,923 291,730 128,500 n.a.

Source : OMIaRD (2004)

Table 8. Organic and conventional prices in Germany at theretail level 2004 in

Organic Conventional Mark-Up

table grapes 2,74 1,77 55%

apples 2,68 1,76 52%

banana 2,49 1,30 92%

cabbage-lettuce 1,41 0,67 110%

iceberg-lettuce 1,57 0,88 78%

gherkin 1,51 0,65 132%

tomato 3,67 1,69 117%

tomatoes on the vine 4,17 2,03 105%

capsicum 7,34 4,56 61%

white cabbage 1,53 0,73 110%

cauliflower 1,98 1,26 57%

carrot 1,46 0,78 87%

onion 1,69 0,97 74%

leek 2,47 1,34 84%

potatoes 1,37 0,63 117%

Source: EISFOM, 2004

Trade Structure

For organic trade health food and natural food stores and direct marketing

are more specific. Distribution of imported organic foods through aspecialized importer and/or a processor/packer is the most common formof distribution. Using indirect marketing, producers and exporters supplytheir organic products to importers in EU. Direct sales from foreignexporters to the central purchasing units of retail chain stores are stillrare.

EU Market Access Requirements

EU product legislation on consumer health and safety issues andenvironment are compulsory such as HACCP and sanitary andphytosanitory issues. EU sets requirements for organic production ofagricultural products in Regulation (EEC) 2092/91 and its amendmentsand defines export procedures in Regulation (EC) 1788/2001. Theregulations specifies the principles for organic production at farm leveland the rules that must be followed for the processing, import and labelingof products to be marketed as organic in the EU.

Reference: CBI, The Netherlands

ORGANIC AGRICULTURE IN INDIA:

OPPORTUNITIES AND CHALLENGES

Organic cultivation is particularly suitable for a country like India witha huge population of small farmers who still use traditional methods offarming with few agricultural inputs. It is estimated that 65% of thecountrys cropped area is organic by default, as the small farmers have nochoice but to farm without chemical fertilizers and pesticides as theycannot afford. This default status coupled with Indias inherent advantagessuch as its varied agro-climatic regions, local self-sustaining agri-systems,sizeable number of progressive farmers and ready availability of inexpensivemanpower translate into the potential to cultivate a vast basket of productsorganically.

ProductionEstimating area under organic agriculture in India is a difficult task asthere is no central agency that collects and compiles this information.However, according to National Program for Organic Production

(NPOP), APEDA, the total area under certified organic cultivation inIndia is around 2508826 ha, which includes wild herbs collection fromforest area of Madhya Pradesh (MP) and Uttar Pradesh (UP) of2432500 ha. The current production of organic crops is around 14,000tons (Garibay S V and Jyoti K, 2003). Out of this production, tea andrice contributes around 24% each, and fruits and vegetables combinemakes 17%.

Table 1. Major products produced in India by organic farming

Type of Product Products

Commodity Tea, Coffee, Rice, Wheat

Spices Cardamom, Black pepper, white pepper, Ginger,Turmeric, Vanilla, Tamarind, Clove, Cinnamon,Nutmeg, Mace, Chili

Pulses Red gram, Black gram

Fruits Mango, Banana, Pineapple, Passion fruit,Sugarcane, Orange, Cashew nut, Walnut

Vegetables Okra, Brinjal, Garlic, Onion, Tomato, Potato

Oil seeds Mustard, Sesame, Castor, Sunflower

Others Cotton, Herbal extracts

Source: Org-Marg, 2002 (Field Survey & Publication Organic and Biodynamicfarming, Govt. of India, Planning Commission)

Export Market

Organic agricultural export market is one of the major drivers of organicagriculture in India. India exports 31 organic products. It is estimatedthat more than 85% of total organic production, excluding wild herbsfrom UP and MP is exported. India is best known as an exporter of

organic tea and also has great export potential for many other products.Other organic products for which India has a niche market are spices andfruits. There is also good response for organic rice, vegetable, coffee,cashew, oil seed, wheat and pulses. Among the fruit crops bananas,mangos and oranges are the most preferred organic products.

Indias organic export products include, tea, honey, cashew, cotton,processed fruits, coffee, Basmati rice, sesame, spices, walnuts, pulses andwheat. Key organic items of export importance are fruits and vegetables,sesame, Basmati rice, fruit pulp, fruit juices, spices, cashew, tea, coffee,cotton and wheat. India has production advantages in most of theseproducts.

Domestic Demand

The domestic market is nascent but has huge growth potential. Presentlythe domestic market for organic products are estimated at 1,200 tonnes

and there are around 2-3 million potential customers for organicagricultural produce and is growing.

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Rice

24%

Fruits &

Vegetables 17%

Tea

24%

Others

2%

Wheat

10%

Cotton

8%

Spices

5%

Coffee

4%

Pulses

3%

Cashew

3%

Fig. 1. Percentage share of organic products in India Table 3. Products for which Indian production has acomparative advantage

Product Season States

Tea Throughout the year Assam, West Bengal,Uttaranchal

Spices Throughout the year Kerala, Tamil Nadu,Karnataka

Coffee Throughout the year Kerala, Tamil Nadu,Karnataka

Rice Kharif & Rabi Punjab, Haryana,Assam, Maharashtra,Tamil Nadu

Wheat Kharif & Rabi Punjab, Haryana,Uttar Pradesh

Vegetables Throughout the year All India

Fruits Throughout the year All IndiaCotton Kharif Maharashtra, Gujarat,

Madhya Pradesh

Source: Org-Marg, 2002

Source: APEDA, 2003

Fig 2. Indias products and production areas

Source: APEDA, 2005

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Constraints and Challenges

Though there is rising interest for organic agriculture in India it is notgrowing at a pace to enhance its market attractiveness so as to motivate

larger section of farming community to opt for organic agriculture. Theflowchart below provides some of the key factors limiting organicagriculture in India in a nutshell.

Among the constraints listed above, current high levels of transactioncosts for getting farms certified as organic is a major deterrent forenhancing organic production in the country. The certification process isvery lengthy and complex and the cost of certification (refer Table below)is also unaffordable for small farmer.

Why-Why Diagram for limited penetration Organic Agriculture in India

Limited

Penetration

of

Organic

Agriculture

in

India

Low levels of MarketInformation aboutorganic produces

No designated agency atCentral, State & Local

levels which reaches farmerswith information

No Quality MonitoringControl Systems in place

Existence of spurious &low quality brandsin market

Low Quality of bio-inputs

Conventional Agri-inputsconsidered more effective

than Bio-inputs Non-availabilityof bio-inputs

Disincentive for tradersgiven the low penetration

of bio-inputs market

Limited Shelf life ofbio-inputsRelatively long time period

needed for bio inputsto be effective

Limited R & D efforts

& investments onBio inputsSubsistence farmingby large number of

small & marginal farmers

Time lag & high costsof conversion ofconventional toorganic farming

High Costs involvedcertification &

limited no. of certifyingagencies

Subsidies to conventionalinputs disincentivizing

bio-inputs

Limited financial outlaysfor bio-inputs

by government

No strategic attention for

greening agriculture &No coordinated effortat Centre & State level

Limited positivegovernment interventions

& high negativesubsidies

Price premiums reachmore for Intermediaries

than products

No & limited Storagefacilities

Under developedinfrastructure &

marketing channelsfor green outputs

No easy qualityassurance mechanisms

Lack of adequatetransportation facilities

Small farm holdings

Low levels of networkingamong farmers and other

stakeholders

Formal associations oftraders, farmers & othersare not paying adequate

attention

Mostly geographicallydispersed organic farmers;

Small numbers withdiverse organic products

Source: FAO

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Table 4. Cost of inspection and certification

Category Details Fees (Rs)

Small farmers and Travel and inspection 12,000/daycooperatives Report preparation 5,000 flat fee

Certification 5,000/certificate

Estate manufactures Travel and inspection 19,200/dayand exporters Report preparation 5,000 flat fee

Certification 5,000/certificate

Large and medium Travel and inspection 16,800/daysized processors Report preparation 5,000 flat fee

Certification 5,000/certificate

Source: Org-Marg, 2002

Key Developments and OpportunitiesOrganic farming has been identified as a major spearhead in the TenthFive Year Plan (2002-2007) and is expected to be one of the focus areasto boost agricultural growth in the Eleventh Five-Year Plan (2007-12) of

the Indian government. In a recent development Indian organic certifyingbodies will be soon receiving European Commission (EC) equivalencestatus exempting Indian organic products from further certification byEuropean agencies, which likely to bring down the cost of organic exportsand will also result in savings of 500-1,000 per hectare for certification.

Indian government has designated six organizations to accredit certifyingagencies (international or domestic) undertaking inspection andcertification of organic products. These are APEDA, the Tea Board, theSpices Board, the Coffee Board, the Coconut Development Board, andthe Directorate of Cashew and Cocoa. National organic standards havebeen established under NPOP. Currently, 11 accredited certifying agenciesare functional in India. IMO (Switzerland), ECOCERT (Germany), SKAL(The Netherlands), SGS (Switzerland), and Lacon (Germany) are some

of the International ones. Indocert, based in Kerala, is among the accrediteddomestic agencies.

The burgeoning European and US organic markets provide enormous

scope for Indian exporters. US retail sale for organic product has grown20-24% per year for the past 12 years and the same growth trends areexpected to continue for future. Europe is the second largest market oforganic produces in the world and consumes around half of the worldorganic produce. European market for organic food is estimated to bearound US$ 9 billion and expected annual growth rate is of around 20%,depending on the markets. Japan is the largest organic food market in Asia.Retail sales of organic food and beverage is around US$ 2.5-3.0 billion(2003). Of this, imports are estimated to be to the tune of around US$ 360million. Though the organic food market is not more than 0.5% of totalfood market of Japan but according to the Japanese Integrated MarketInstitute, import of organic products is likely to grow by 40%. Other globalmarkets for organic products are Saudi Arabia, UAE and South Africa.

Currently Indias share in the USD 150 million global organic coffeemarket is 1% and its share in the USD 3.2 million organic spices marketis 3%, which has considerable potential to grow due to Indias production

advantage. Fruits and vegetables are the major organic imports into theUS and the EU (40%). India has huge potential in this segment if thechallenges of post-harvest infrastructure and cold chain are adequatelytackled. Dairy is another segment where India has production advantagesand can harness its potential in organic dairy as majority of the cattle feedused is chemical free, as a part of controlled production that avoids use ofchemical inputs l ike medicines in Indian dairy industry.

The matrix below reveals that India has demonstrated capabilities ofexporting some key agricultural commodities to most of the major globalmarkets, where there is a considerable demand for organically producedcommodities attracting price premiums ranging from 10-100%. The matrixthus, showcases window of opportunities in these markets for Indianexporters and producers of organic agricultural commodities, which is

yet to be exploited to its maximum potential.

Fig 3. Conventional agricultural products & their export market and prospective market for Indian organic products

Source : FAO

Reference: FAO Agricultural and Processed Food Products Export Development Authority (APEDA)

USA ` ` ` ` `

UK ` ` ` `

JAPAN ` ` ` ` `

FRANCE ` ` ` `

GERMANY ` `

ITALY `

CIS ` ` ` ` `

NETHERLANDS ` ` `

SWITZERLAND `

EGYPT ` ` `

UAE ` ` ` `

SAUDI ARABIA ` ` `

POLAND ` `

BELGIUM ` `

SOUTH AFRICA `

AGRICULTURALCOMMODITIES

Rice Wheat Tea Coffee Tobacco Spices Cashew OilMeals

Cotton CastorOil

Sugar Fruits/Vegetables

` Existing conventional export market for Indian producers for particular product

Prospective market for Indian organic products

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ORGANIC CITRUS AND CITRUS JUICES: WORLD MARKET REVIEW

Citrus products labelled as organic are those certified as having beenproduced through clearly defined organic production methods.

Fresh Organic Citrus

Production

World production of certified organic citrus in approximately 30 countrieswas about 600,000 metric tons in 2001 accounting for 0.6% of totalcitrus production. Organic citrus is produced in a majority of citrusproducing countries in the Americas, the Caribbean, the Mediterraneanrim, Africa and Asia. The largest producing countries are, by decreasingorder of importance: Italy, the United States, Brazil, Costa Rica, Greeceand Spain.

MarketsThe European Union (EU) market for both certified organic fruit andvegetables was estimated at US$ 1.7 billion in 2002, with fresh organiccitrus representing 5-7% of all fresh fruit and vegetables sales and 37% ofall organic fruit sold. However, consumption of fresh organic citrus inthe EU is still relatively low compared with overall fresh fruit use. Someof the constraints responsible for this trend and need to be addressed arepoor fruit quality, packaging, short shelf life of organic citrus andinefficiencies in the marketing chain.

Major exporters of organic fresh citrus to the EU include Italy, Spain,Argentina, the US and Greece. Italy is the main supplier of fresh organiccitrus for the EU, producing 222,000 metric tonnes of fresh organiccitrus, which includes oranges, tangerines, and lemons. Spain is the next

largest supplier of organic citrus producing around 25,000-30,000 metrictonnes of the fruit. Together, Italy and Spain supply over 95% of the freshorganic citrus consumed in the EU. The remaining 5% is imported fromMediterranean countries like Morocco (primarily oranges), Israel(primarily grapefruit), Argentina, South Africa, the USA and Uruguay,especially during the EU-off season when the citrus producing membercountries are not shipping fresh fruit.

Survey of main markets within the EU reveals that selected EU countriesimported approximately 48-50,000 tonnes of fresh organic citrus in 2000-01 with Germany, France, the UK and Austria being major importers.Austria and Denmark have the highest per capita consumption of organicproducts in general. The fresh citrus import market in the Netherlands isunique because this country is a key entry point, re-exporting importedcitrus to other EU countries, partially due to less complicated organicimport procedures than other EU countries.

Fresh fruit and vegetables are the leading organic food category in theUnited States retail food market. Organic oranges are among the mostconsumed organic fruit, together with apples and bananas. The US is amajor citrus producer. Production in 2001-02 was 14.7 million tonnes,however, a very small share of the citrus harvest is grown organically.The US imports small quantities of organic citrus mainly from Mexico(oranges and limes), Honduras (lemons), Guatemala, Brazil (oranges)and South Africa (oranges and grapefruit).

In general sale of fresh organic fruit and vegetables is very small inJapanese markets. Japan produces small quantities of organic mandarins.The lack of domestic supply of organic citrus is compounded by tough

Japanese organic standards Agricultural Standard (JAS), phytosanitaryrestrictions and high ad valorem tariffs on imports of fresh citrus, currentlyabout 0.1-0.2% of the total citrus market.

Table 1. Estimated net imports of fresh organic citrusin selected EU countries (2000-01)

Importing Country Exporting Country Metric tons

Austria Spain, Greece, Israel 7 8,000

Belgium 500 1,000

Denmark Spain, Italy 2,000

France Italy, Spain, Israel, South Africa 9,000

Germany Italy, Spain 13,000

Netherlands 7,000

Sweden Spain, Italy 500 1,000

UK Italy, Spain 8,000

Finland Spain, Italy 500

Ireland, Luxembourg 500

Total 48 50,000

Source: Pascal Liu 2003

Prices

Fresh organic citrus prices in EU vary with seasonal availability of fruit,market location and type of retail outlet. Prices of imported citrus aregenerally higher during the off-season for EU citrus production. On anaverage, fresh organic citrus sells for 65% higher than conventionallygrown citrus, however, premiums range from 17% in Greece to 144% inFinland. Organic citrus is also cheaper in countries where a substantialshare of organic produce is sold in supermarkets rather than smaller

health food stores.In the US the premium for organic versus conventional fresh producegenerally ranges from 11% to 121% in the conventional stores and from50 to 167% in the natural food market.

Organic Citrus Juice

The bulk of organic citrus juice consists of orange juice. Juice volumes ofother organic citrus products such as organic grapefruit juice (e.g. inCuba, Israel and the United States) and lemon juice (Argentina, Spain)have been very low so far. Orange juice is marketed in two main forms:frozen concentrated (FCOJ) and not-from-concentrate (NFC), with recentsales for NFC increasing more than that of FCOJ.

Markets

The main markets for all organic fruit and vegetable juices combined arethe UK, Germany, Italy, France and Scandinavian countries with retailsales increasing more than 20% per year since 1998. The present EUmarket for organic juice in general is only 0.57% of the total EU juicemarket. Organic citrus juice accounts for only 0.3% of total citrus juiceconsumption.

Table 2. Estimated imports of not-from-concentrate organic citrus juice in EU

Supplying Countries Reported exports to Europe

in 2002 (MT)

Israel 5 6,000

Brazil 1,500

United States 1,000Costa Rica 1,000

Argentina (2001) 114

Source: Data provided by suppliers and importers

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Table 3. Estimated imports of frozen concentrate organic citrus juice in EU

Supplying Product Reported exports

Countries to Europe in2002 (MT)

Brazil Orange 2,000 2,500

United States Orange and grapefruit 1,000

Cuba Orange and grapefruit 350

Israel Orange, grapefruit, 100mandarin

Costa Rica Orange 200

Argentina (2001) Lemon 28

Source: Data provided by suppliers and importers

Brazil is the largest supplier of FCOJ for the EU, followed by the USA,Cuba, Israel and Costa Rica. Highly competitive in the conventionally

produced FCOJ market, Brazil is expected to maintain this lead in theorganic FCOJ market.

The US is the largest market for orange juice in the world. The bulk ofUS orange juice is produced in Florida, where production is split almostequally between FCOJ and NFC juice. In addition to its domestic supply,the US imports organic citrus juices, mainly from Mexico and Brazil.The tariff on concentrated citrus juice imports ranges between 34 and38% in ad valorem equivalent. The tariff on non-concentrated citrusjuice is much lower (below 5% in ad valorem equivalent). Japan is thethird largest market for citrus juices after the US and the EU. Japanconsumed over 635,000 tonnes of citrus juices in 2000, 70% of whichwas imported. Japan imports organic FCOJ from Brazil and organic NFCjuice from the US.

Market Prospects

Fresh Organic CitrusThe EU market for fresh organic oranges, tangerines and lemons isdominated by Italy and Spain. However, with the two countries remainingthe main supplier of organic citrus in the EU, other marketingopportunities will fall to those with preferential trade agreements withthe EU, with fruit available from May to September when EU localproduction is low or absent. There are also opportunities for exportingorganic grapefruit and limes, which are short in supply. There are moreopportunities for fresh citrus exports to the US and Japan. Although theUS produces organic citrus, demand may exceed supply and its importtariffs on fresh citrus are very low. The Japanese market for fresh organiccitrus also offers interesting prospects if exporters can meet the new JAS

organic regulations and the tough phytosanitary requirements. Given itslarge population with a relatively high per capita income and focus onhealth concerns, conservative estimates predict Japans organic marketfor fresh organic citrus fruit could grow to mature market potential of3-5% of the total citrus market by 2010.

Organic Citrus JuiceThe market for organic citrus juices is presently extremely small. FAOhas projected the volume of organic citrus juice consumption in the

world until 2010 using 2 different growth scenarios. Based on theobservation of past growth for other organic product categories the firstscenario assumes the market for organic orange to grow up to 40% andthen gradually decreases to 10% in 2010. In the second scenarioconsumption grows at 20% annually until 2006. Then annual growthdecreases gradually to reach 10% in 2010.

Brazil is the largest supplier of FCOJ and is expected to retain its lead inthe organic FCOJ market. For other developing countries located nearthe main markets, producing citrus juices and exporting organic NFCjuice, may be a better option. Distance to markets matters more for NFCjuice than for FCOJ due to the higher transportation costs of NFC. Dueto the relatively high tariffs on orange juice, countries, which enjoypreferential trade agreements with the major markets, will have acomparative advantage. However, for exporters seeking to supply organiccitrus and citrus juices to the developed countries major considerationsshould include:

l Ability to meet specific requirements of the target market (phytosanitoryrequirements, quantity and quality, packaging, consistency, andscheduling deliveries)

l Profit margins in terms of production costs and various price premiumscenarios

l Targeted market tariffs and preferential market access agreements

l Target market acceptance of organic certification

Reference:

FAO

Source: FAO

highgrowth

slowgrowth

Projected consumption of organic citrus juices : 2 scenariosTonnes S S E600,000

500,000

400,000

300,000

200,000

100,000

0

2 00 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 2 00 9 2 01 0Year

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The news items and information published herein have been collected from various sources, which are considered to be reliable. While every care has been taken for authenticity

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NEWS FOCUS

Japan again halts imports of U.S. beefJapan halted imports of United States (U.S.) beef just a month afterlifting a ban, following the discovery of spinal material in a shipment thatshould have been removed due to the risk of mad cow disease. Japan firststopped all purchases of beef from the United States after a case of thebrain-wasting mad cow disease in December 2003, halting annual tradeworth about USD 1.4 billion. Japan accounted for almost one-third ofall U.S. sales. A total of 390 kg (860 lb) of beef imported from a meatpackerin New York was found to contain parts of a spinal cord when it wasinspected on arrival at Narita International Airport near Tokyo. Expertsbelieve humans can contract a fatal variant of mad cow disease, formallyknown as bovine spongiform encephalopathy (BSE), by eatingcontaminated meat. Japan imports only U.S. beef from cattle aged 20months or younger. It requires all animal material linked to mad cow,including the spinal cord, to be totally removed.

Source: U.S. Food Policy Updates, January 20, 2006

Australia: AOS Organic Standard Unveiled

Biological Farmers of Australia (BFA) has launched the Australian OrganicStandard (AOS) 2006. This standard follows on from Organic StandardV. 6. The AOS outlines requirements that all operators certified throughAustralian Certified Organic (ACO) have to adhere to. AOS is overseenby the Standards Subcommittee, which is made up of a broad mix oftechnically skilled people, while taking feedback from other subcommitteegroups, industry members and the public. AOS 2006 is current from

1 March 2006 and takes effect as of 1 July 2006.

Source: The Organic Advantage, March 1, 2006

Uganda Farmers begin Organic Juice & Wine ProcessingUnder the National Organic Movement, organic farmers in Ugandahave started juice and wine processing. Initially, organic farmers hadproblems finding markets for their produce, but through sponsors, theyhave learnt to add value to their produce. Juice and wine extracted fromorganically grown pineapples, passion fruits and bananas is the latest onthe Ugandan market. A 750ml bottle of the juices costs sh 5,000 whilea jerrycan costs sh 30,000.

The juice is produced by farmer groups trained, equipped and funded byan NGO. The National Organic Movement of Uganda has also set up amall at Kansanga, Kampala to market organically produced goods.Ugandas organic products are gradually becoming popular. So far, 15companies export fresh and dried organic produce from Uganda.

Source: Organic Monitor, January 2006

Czhech Republic: Action plan for more awareness on Organic

Agriculture

Twenty new organic manufacturers were registered in the Czech Republicin 2005, making it to a total of 125 registered organic manufactures inthe country. The organic market value according to an estimate fromGreen Marketing is 12 million EUR. The export of organic productsgrew in 2005, mainly to neighbouring countries like Austria and Germany.Due to the lack of processing facilities in the Czech Republic, a largeproportion of organic raw materials, mainly grain, is exported. The Czech

governments Organic Action Plan sets a goal of 10 % of agriculturalland under organic management by 2010. The Czech State MarketingAgency applied to the EU recently for support for a large-scale informationand communication campaign to promote organic food consumption. Ifthe EU supports the programme, more than 2 million EUR will be spenton consumer education in the next three years in the country.

Source: BioFach Newsletter, March 2006