Recent Growth Patterns in the U.S. Organic Foods Market

Introduction

Burgeoning consumer interest inorganically grown foods has openednew market opportunities for produc-ers and is leading to a transformationin the organic foods industry. Once aniche product sold in a limited num-ber of retail outlets, organic foods arecurrently sold in a wide variety ofvenues including farmers markets,natural product supermarkets, conven-tional supermarkets, and club stores.Many U.S. manufacturers and distrib-utors are specializing in processingand marketing organic products,while some longtime manufacturersof conventional products have intro-duced organic items to their productlines. As a result, an ever-wideningarray of organic agricultural and foodproducts is now available. Since theearly 1990s, certified organic acreagehas increased as producers strive tomeet increasing demand for organicagricultural and food products in theUnited States. The dramatic growthof the industry spurred Federal policyto facilitate organic product market-ing, and is leading to new govern-ment activities in research and educa-tion on organic farming systems.

This report summarizes growth pat-terns in the U.S. organic sector inrecent years, by market category, anddescribes various research, regulatory,and other ongoing programs onorganic agriculture in the U.S.Department of Agriculture.

MarketplaceCharacteristics of U.S. Organic Sector

The U.S. organic food industrycrossed a threshold in 2000: for thefirst time, more organic food was pur-chased in conventional supermarketsthan in any other venue. Industry esti-mates suggest that nearly half of the$7.8 billion spent on organic food in2000 was purchased in conventionalretail outlets. Organic products arenow available in nearly 20,000 natu-ral foods stores (Natural Foods Mer-chandiser), and are sold in 73 percentof all conventional grocery stores(Food Marketing Institute).

Growing consumer demand fororganic products has been manifestedin the market in many ways. Acreageof certified organic farmland isincreasing to meet growing consumerdemand. According to the most recentUSDA estimates, U.S. certifiedorganic cropland doubled between1992 and 1997, to 1.3 million acres.Preliminary estimates for 2001 sug-gest that certified organic acreage sig-nificantly increased between 1997and 2001. From the consumer side,new products are being introducedrapidly. For example, over 800 neworganic products were introduced inthe first half of 2000. Desserts madeup the majority of new products in2000, while most new products intro-duced in 1999 were beverages (Myersand Rorie).

The new U.S. Department of Agricul-ture standards for organic food, slatedto be fully implemented by October2002, are expected to facilitate furthergrowth in the organic foods industry.The USDA standard defines organicproduction as “A production systemthat is managed in accordance withthe [Organic Foods Production] Actand regulations in this part to respondto site-specific conditions by integrat-ing cultural, biological, and mechani-cal practices that foster cycling ofresources, promote ecological bal-ance, and conserve biodiversity.”1 Thenational organic standards address themethods, practices, and substancesused in producing and handlingcrops, livestock, and processed agri-cultural products (see box). All agri-cultural products that are sold,labeled, or represented as organicmust be in compliance with the regu-lations after October 2002.

Organic food is sold to consumersthrough three main venues in theUnited States—natural foods stores,conventional grocery stores, anddirect-to-consumer markets—and asmall amount is exported to foreignmarkets. USDA does not have nation-al statistics on organic retail sales.Industry sources have reported retailsales for organic food, but those dataare fragmentary and, at times, incon-

Economic Research Service/USDA Recent Growth Patterns in the U.S. Organic Foods Market / AIB-777 • 1

Recent Growth Patterns in the U.S. Organic Foods MarketCarolyn Dimitri and Catherine Greene

1National Organic Program, Final Rule,Federal Register 7CFR Pt 205, December 21,2000.

sistent. A trade publication, the Nat-ural Foods Merchandiser (NFM)reported estimates of total U.S. retailsales of organic foods for 1990through 1996. NFM estimated totalorganic sales through all marketingoutlets rose steadily from about $1billion in 1990 to $3.3 billion in1996, the last year that total saleswere reported. Since 1999, PackagedFacts, a market research firm, hasbeen reporting organic food sales.According to Packaged Facts, organicfood sales in all venues totaled $6.5billion in 1999 and $7.8 billion in2000. This increase continues thestreak of industry growth equal to 20 percent or more annually since1990.

Purveyors of natural products werethe primary sales force for organicfood since the beginning of the organ-ic food movement over half a centuryago. Until 2000, the largest retail out-let for organic food was natural foodsstores followed by direct markets(such as farmers markets), accordingto NFM data (fig. 1). In 2000, 49 per-cent of all organic products was soldin conventional supermarkets, 48 per-cent was sold in health and naturalproducts stores, and 3 percentthrough direct-to-consumer methods(Packaged Facts). In contrast, in1991, 7 percent of all organic prod-ucts were sold in conventional super-markets and 68 percent were sold inhealth and natural products stores(NFM).

Fresh produce remains the top-sellingorganic category (see fig. 2), followedby nondairy beverages, breads andgrains, packaged foods (frozen anddried prepared foods, baby food,soups, and desserts), and dairy prod-ucts. During the 1990s, organic dairywas the most rapidly growing seg-

ment, with sales up over 500 percentbetween 1994 and 1999. Sales oforganic yogurt and kefir increased56.4 percent between 1999 and 2000.Following closely, sales of nondairybeverages (for example, juice andsoymilk) increased 53.1 percent andsales of fresh produce grew by 51.4percent between 1999 and 2000,according to industry sources. Over-all, according to Packaged Facts,organic sales in natural productsupermarkets and conventional storesincreased by 20 percent between1999 and 2000.

Organic farmers market their fooddirectly to consumers much more fre-quently than conventional farmers do,and the last decade has seen a renais-

sance in the use of farmers marketsacross the country. Producers capturea much higher share of the consumerfood dollar when they market theirproduce directly to consumers. Sever-al surveys of certified organic produc-ers show similar findings on theirheavy use of direct-to-consumer mar-keting. A 1997 survey of certifiedorganic producers in the UnitedStates conducted by the OrganicFarming Research Foundation(OFRF)—a California nonprofitgroup that sponsors research onorganic farming—found that directmarket use is extensive and varies bycommodity sector, with fruits andvegetables the highest. Organic pro-ducers reported selling produce fromabout 23 percent of their vegetableacreage directly to consumers throughon-farm sales (9 percent), farmersmarkets (8 percent), “community sup-ported agriculture” subscriptions (4percent), and other types of direct-to-consumer markets (2 percent). Also,produce from about 20 percent of theorganic fruit and vegetable acreagewas marketed directly to groceryretailers and restaurants. A 1994USDA survey of certified organicvegetable producers in the UnitedStates found that the use of direct-to-consumer markets varied with farmsize, with 60 percent of the growerswith under 10 acres (three-quarters ofthe respondents) using this channelcompared with 12 percent with 10acres or more (Fernandez-Cornejo etal.). Smaller growers tended to mar-ket directly to grocery retailers (11percent versus 6 percent for largergrowers) and through grower cooper-atives (10 percent versus 3 percent forlarger growers), while the largergrowers marketed more heavily tovegetable packer/shippers, brokers,and food processors.

2 • Recent Growth Patterns in the U.S. Organic Foods Market / AIB-777 Economic Research Service/USDA

Natural Product and ConventionalSupermarkets

From 1990 to 1996, natural prod-ucts retailers sold two-thirds oforganic foods. Sales of organicfood in natural products storesincreased 20 to 25 percent annu-ally since the early 1990s.

Natural product retailers comprise1 percent of all foodstores in theUnited States, and sold 48 per-cent of all organic food in 2000.

Conventional foodstores beganoutselling natural products super-markets in several categories in1999, including organic milk, halfand half, cream, nondairy bever-ages, cold cereals, cookies andsnack bars, and tofu.

In 2000, conventional supermar-kets comprised 99 percent of allfoodstores and sold 49 percent ofall organic products.

Organically grown food is widelyavailable in farmers markets acrossthe United States, and organic-onlyfarmers markets have been organizedin Oregon, Illinois, Missouri, andother States. The renaissance in farm-ers markets in the United States dur-

ing the 1990s—fostered by State andlocal municipalities wanting to revi-talize neighborhoods and preserveregional farmland and open space—has been a boon to organic farmerswho use this marketing outlet muchmore heavily than conventional farm-

ers do. States are also producingdirectories of farm stands and pick-your-own farms, including organicdirectories, and developing logos like“Jersey Fresh” to promote locallygrown food.

Community-supported agriculture(CSA) is an innovative direct market-ing arrangement that organic farmershave been pioneering in the UnitedStates for about a decade. Consumerssubscribe to the harvest of a CSAfarmer for the entire upcoming sea-son, and pay for their produce inadvance. Under a CSA arrangement,consumers share the production risksand variable harvests of the farmer—including especially abundant har-vests—and sometimes participate infestivals and other social activities atthe farm. Over 800 CSAs are current-ly listed in the U.S. database main-tained by USDA and the Robyn VanEn Center at Wilson College. Most ofthe CSA farms use organic produc-tion systems.

ProductionCharacteristics of U.S. Organic Sector

A growing body of research in theUnited States has been devoted to theeconomics of organic production sys-tems—its yields, input costs, income,profitability, and other economiccharacteristics. A 1990 review of theU.S. literature concluded that the“variation within organic and conven-tional farming systems is likely aslarge as the differences between thetwo systems” and found mixed resultsin the comparisons for most charac-teristics (Knoblauch, Brown, andBraster, 1990).

Several more recent U.S. studies haveindicated that organic price premiums


Conventional retailers

Other

Natural productsretailers

100

80

60

40

20

0

Percent

1991 1995 2000

Notes: Other is direct sales and exports.Source: Natural Foods Merchandiser, Packaged Facts.

Figure 1—Share of organic sales by venue

Fresh fruits and vegetables

Nondairybeverages

Breads andgrains

Packagedfoods

Dairy products

Million dollars

Source: Nutrition Business Journal.

Figure 2—Sales of top five organic foods, 2000

0

500

1,000

1,500

2,000

2,500

are key in giving organic farming sys-tems comparable or higher whole-farm profits than conventional chemi-cal-intensive systems, particularly forcrops like processed tomatoes andcotton (Klonsky and Livingston,1994; Batte, Forster, and Hitzhusen,1993; Assadian, Esparza, and Ponce,1999). Other studies have found thatorganic systems may be more prof-itable than conventional systems,even without price premiums. Forexample, some Midwestern organicgrain and soybean production wasfound to be more profitable than con-ventional systems, even without pricepremiums, due to higher yields indrier areas or periods, lower inputcosts, or crop mix (Welsh, 1999).Also, a recent study comparingorganic and conventional apple pro-duction in California’s Central Coastshowed higher yields as well as high-er returns under the organic systems(Swezey et al., 1994). And anotherrecent study compared organic, con-ventional, and integrated apple pro-duction systems in Washington Stateover a 6-year period, and found thatthe organic system was more prof-itable, had similar yields, better tast-ing fruit, and was more environmen-tally sustainable and energy efficientthan the other systems (Reganold etal.). We are not aware of recentlypublished research that finds farmingwith organic methods is less prof-itable than farming with conventionalmethods. Of course, net returns tovarious production systems may varywith biophysical and economic fac-tors (such as soil type, climate, andproximity to markets), and a systemthat is optimal in one location maynot be optimal in another. Also, fac-tors not captured in standard profitcalculations, such as convenience,longer-term planning horizons, andenvironmental ethics, can motivate

rational adoption of a particular prac-tice or farming system. Furtherresearch is needed to improve ourunderstanding of the factors influenc-ing net returns to organic farmingsystems.

The promising results from the limit-ed number of economic studies todate have led to an increase inresearch on organic farming systems.USDA, universities, and other U.S.institutions are increasingly examin-

ing the long-term economics oforganic farming systems throughreplicated field trial research and amultidisciplinary systems approach.Most of these projects are less than adecade old, and promise to answerbasic research questions about yieldsand profitability as well as to addressfarmer-defined management and pro-duction obstacles to the more wide-spread adoption of organic productionsystems.


Examples of U.S. long-term farming systems trials

Rodale Institute's Farming Systems Trial™, in Kutztown, Pennsylvania, wasbegun in 1981 and is one of the longest running experiments designedspecifically to study organic cropping systems. The project focuses on cornand soybean production and studies the transition process that occurswhen converting from conventional to organic farming.

The Sustainable Agriculture Farming Systems Project, at the University ofCalifornia, Davis, has been examining processing tomato, safflower, bean,and corn production under conventional, low-input, and organic systemssince 1988 on a 28-acre site in the Sacramento Valley.

Elwell Agroecology Farm, in conjunction with the University of Minnesota'sLamberton Experiment Station, began adding long-term, organic croppingsystems trials in 1989; rotations include corn, soybeans, alfalfa, and oats.

The Living Field Laboratory, a project of the C.S. Mott Chair of SustainableAgriculture, Michigan Agricultural Experiment Station, and others, wasestablished in 1993 and is examining corn, soybean, and wheat productionunder organic, conventional, and other management systems.

USDA's Agricultural Research Service began investigating organic farmingsystems through long-term farming systems trials in 1993. The FarmingSystems Project, at USDA's Beltsville (Maryland) Agricultural ResearchCenter, is a long-term comparison of seven cropping systems with variousrotations of corn, soybean, wheat, and alfalfa that are typical in the mid-Atlantic region.

The West Virginia University (WVU) converted its entire 60-acre Horticul-ture Farm to organic production in the fall of 1999. The WVU OrganicResearch Farming Project is studying market garden/vegetable productionsystems, as well as field crop/livestock systems, in replicated plots, and isevaluating changes in various aspects of the fauna, flora, and soil asorganic practices are followed.

Farmers in 49 States used organicproduction methods and third-partyorganic certification services on 1.35million acres of farmland in 1997,according to an Economic ResearchService (ERS) study. Crops weregrown on about two-thirds of the cer-tified U.S. organic farmland, and therest was pasture. The ERS study ana-lyzed data from 40 State and privatecertifiers (see box, p. 8, on organicstandards and certification). Uncerti-fied acreage was excluded, eventhough it may represent a large seg-ment of organic production, becauseof the difficulty in determining theproduction criteria used by uncerti-fied growers. ERS reports statisticson certified organic U.S. acreage inthe Organic Farming and MarketingBriefing Room (www.ers.usda.gov/briefing/organic).

Organic farming has made deeperinroads in the fruit, vegetable, andother high-value specialty crop indus-tries than in the major grain andoilseed industries. While less thantwo-tenths of 1 percent of the U.S.corn, soybean, and wheat crops weregrown organically in 1997, over 1percent of the dry peas and tomatocrops and about 2 percent of theapple, grape, lettuce and carrot cropswere organic. And nearly a third ofthe U.S. herb and “mixed vegetable”crops were grown organically in1997. (A “mixed vegetable” crop is amixture of numerous horticulturalcrops (mostly vegetables) grown on asmall farm or parcel.)

The markets for organic vegetables,fruits, and herbs have been develop-ing for decades in the United States,and these crops are grown organicallyin more States than any other type ofcommodity. State and private certify-ing groups certified over 180,000

acres of these crops in 44 States in1997, more than double the amountcertified in 1994, with the biggestgains for cultivated and wild-harvest-ed herbs such as St. John’s Wort.

About 2 percent of the major fruitand vegetable crops—apples, carrots,lettuce, and grapes—were grownorganically, and a third of the organicvegetable acreage was devoted to pro-ducing “mixed vegetables” in 1997.Mixed vegetable farms, as defined inthe census of agriculture, are smallfarms—less than 50 acres—that pro-duce a large number of vegetables.Large farms produce processingtomatoes, organic wine grapes, andother high-value crops on a commer-cial scale, while numerous smallfarms still specialize in mixed veg-etable production for direct marketingto consumers and restaurants. The topproducer of organic fruits and vegeta-bles was California, followed by Ari-zona, Florida, Texas, and Washington.

About a third of the total certifiedorganic vegetable acreage in 1997was for mixed vegetables. In 1997,U.S. farmers certified nearly 3,000acres of organic mixed vegetables onfarms or parcels that were 5 acres orless, and over 14,000 acres on farmsand parcels over 5 acres. New Yorkorganic producers had over 1,400acres in the 5-acres-or-less category.Mixed vegetable producers often tar-get farmers markets, community-sup-ported agriculture subscriptions,restaurants, and other direct market-ing outlets.

Organic farmers are also growingmajor grains and oilseeds on a smallportion of the planted area in theUnited States. Wheat was producedunder certified organic farming sys-tems on over 125,000 acres in 1997,

corn was grown on over 42,000 acres,and soybeans were produced on about82,000 acres. Other field crops pro-duced organically in 1997 includebarley, oats, sorghum, rice, spelt, mil-let, buckwheat, rye, dry peas, lentils,dry beans, flax, and sunflowers.Organic acreage of these crops, espe-cially soybeans, has undoubtedlyincreased since 1997.

Thirty-nine States had certified organ-ic hay and silage production, withmost acreage in Idaho, Wisconsin,and New York. Acreage of these cropsexpanded 51 percent between 1995and 1997 as the number of certifiedorganic milk cows more than doubledduring that period.

Organic meat and poultry marketshave lagged behind those for cropspartly because meat and poultry couldnot be labeled as organic until Febru-ary 1999, when a provisional labelwas approved by USDA. Food cropsand non-meat animal foods (eggs anddairy products) are regulated by theU.S. Food and Drug Administration,which allowed food packages to carryan organic label throughout the1990s.2 While the number of certifiedorganic beef cows, hogs, sheep, andlambs declined during the study peri-od (1992-97), the number of dairycows and layer hens increasedsharply. The market for organic meatproducts is beginning to grow nowthat organic labeling is permitted, andthe growing market for organic milkand eggs has been pushing up the useof certified organic pasture and thedemand for certified organic grainsand oilseeds.


2Traditionally, USDA has regulated labelingof all meat products and FDA has regulatedlabeling of nonmeat animal products and otherfood products. The new USDA organic label,however, will apply to all food products.

Farmers and ranchers raised a smallnumber of certified organic cows,hogs, and sheep in 23 States in 1997.Dairy cows were raised organically in13 States in 1997, and New York,Wisconsin, and Minnesota were thetop three producers. The number ofcertified organic milk cows in theUnited States nearly tripled between1992 and 1994 and more than dou-bled between 1994 and 1997. Califor-nia was the leader in organic poultryproduction, followed by New Yorkand Virginia. Other organic animalspecialties, including goats, fish, andcolonies of bees, were certified inseveral States.

ConsumptionCharacteristics of theU.S. Organic Sector

A number of academic and industrystudies have been conducted to exam-ine consumer behavior and identifytheir motivation for purchasing organ-ic foods. Many of the industry studiesuse consumer surveys, which seek toidentify how often consumers pur-chase organic food, their motivationsfor purchasing organic food, anddemographic data on organic foodpurchasers. University studies haveadopted different approaches toassess consumer buying behavior andto identify which characteristics (forexample, income, food quality, educa-tional level, concern for the environ-ment, or family size) affect whetherconsumers will purchase organicfood.

Several industry groups have sur-veyed consumers about their prefer-ences and buying habits for organicfood. The results of the different sur-veys are not always consistent. TheNutrition Business Journal reportedthat 11 percent of consumers pur-

chased some organic food in 2000,and less than 2 percent are regularpurchasers. Results of the HartmanGroup’s 2000 survey suggest that 3percent of consumers regularly buyorganic products. The Walnut AcresSurvey (2001) found that 63 percentof respondents purchased organicfood at least sometimes, and 57 per-cent of the purchasers had been doingso for at least 3 years. The Food Mar-keting Institute’s survey (2001) foundthat 66 percent of surveyed shoppersbought organically grown foods.

In 2001, the Food Marketing Insti-tute’s survey indicated that 37 percentof shoppers said they purchasedorganically grown food to maintaintheir health; and 44 percent of theseshoppers had purchased organic foodin the past 6 months. Consumers sur-veyed by the Hartman Group (2000)gave the following reasons for pur-chasing organic food: health andnutrition (66 percent), taste (38 per-cent), environment (26 percent), andavailability (16 percent).3 The FreshTrends (2001) survey revealed that 12percent of the shoppers surveyedreported that whether a product isorganic is a primary factor in theirpurchasing decision. Sixty-three per-cent of the respondents of the WalnutAcres Survey believed that organicfood and beverages were better forthem and were more healthful thantheir conventional counterparts. FreshTrends (1996, 1998, 2000, 2002)found little difference between thepurchasing habits of men and women.

Over the years, Fresh Trends foundthat, of the shoppers that had pur-chased organic produce in the previ-

ous 6 months, more purchased veg-etables than fruit (according to the1996 survey, 24 percent purchasedfruit and 84 percent purchased veg-etables; according to the 2000 survey,35 percent purchased vegetables).Apples and tomatoes led the list offruit and vegetables purchased by theshoppers surveyed by Fresh Trends.According to the Hartman Survey(2000), the top 10 organic productspurchased were strawberries, lettuce,carrots, other fresh fruit, broccoli,apples, other fresh vegetables, grapes,bananas, and potatoes. The Hartmansurvey also suggested that fruits andvegetables were “gateway categories”(typically the first organic productspurchased by consumers). The WalnutAcres Survey (2002) indicated that 68percent of consumers revealed thatprice is the main reason they did notpurchase organic food.

Academic researchers have taken aslightly different tack in studyingorganic consumers by complementingsurveys with statistical analysis todepict the typical consumer. Somestudies reveal conflicting results,most likely because of the differentmethodological approaches. Con-sumers considered the following fac-tors important when purchasing freshproduce: price, size and packaging,whether the item is on sale, andwhether the item is organic (Estesand Smith). Age, gender, and havinga college degree had little impact on ashopper’s decision to buy organicproduce (Thompson and Kidwell).Consumers with higher incomes andhigher levels of education are willingto pay more for organic potatoes(Loureiro and Hine), while con-sumers with advanced degrees areless likely to buy organic produce(Thompson and Kidwell). Appear-ance of fresh produce mattered, and


3Consumers gave more than one reason forpurchasing organic food. Thus, the percent-ages sum to more than 100.


Summary of Methodology Used in Consumer Studies

Study Year Published Methodology

Walnut Acres Survey 2001 Telephone interviews with nationallyrepresentative sample of 1,000adults. Sample collected March 1 - March 5, 2001.

Food Marketing 2001 Telephone interviews with nationallyInstitute Survey representative sample of 1,200 adults.

Hartman Group, the 2000 Mail questionnaire sent to 40,000 households,Organic Consumer Profile nationwide, selected from a panel of 550,000

households. The panel conforms to a cross-sectionof the population based on the 2000 census;26,434 consumers responded.

Fresh Trends Survey Biannual Two separate surveys. The first survey was atelephone survey of 1,000 nationally representative households. Average phone conversation was10 minutes. The second survey covered 5,000consumer in-store interviews in June 2001 andAugust 2001. Interviews took place in one retailer

(five stores each) in five different marketsacross the United States.

Estes and Smith 1996 Hedonic analysis of demand for organic produce.Data collected using focus groups and mall interviews.

Thompson and Kidwell 1998 Collected data on items purchased by examining shopping carts of consumers in Tucson, AZ, and collected demographic data.

Glaser and Thompson 1999, 2000 Econometric analysis (using scanner data) of demand for organic frozen vegetables and organic milk.

Reicks, Splett, and Fishman 1999 Experimental design for effectiveness of shelf labeling.

Govindasamy and Italia 1999 Estimated consumer willingness to pay a 10-percent premium for organic produce.

Thompson and Glaser 2001 Econometric analysis (using scanner data) ofdemand for organic baby foods.

Loureiro and Hine 2001 Estimated the willingness to pay for Colorado potatoes.


Organic farming systems rely on ecologically basedpractices, such as biological pest management andcomposting; virtually exclude the use of synthetic chemi-cals, antibiotics, and hormones in crop production; andprohibit the use of antibiotics and hormones in livestockproduction. Under organic farming systems, the funda-mental components and natural processes of ecosys-tems—such as soil organism activities, nutrient cycling,and species distribution and competition—are used asfarm management tools. For example, food and shelterare provided for the predators and parasites of croppests, planting and harvesting dates are carefullyplanned and crops are rotated, and animal manure andcrop residues are cycled in organic production systems.Organic livestock production systems attempt to accom-modate an animal’s natural nutritional and behavioralrequirements, requiring dairy cows and other ruminants,for example, to have access to pasture.

Private organizations, mostly nonprofit, began develop-ing certification standards in the early 1970’s as a way tosupport organic farming and thwart consumer fraud.Some States began offering organic certification servic-es in the late 1980’s for similar reasons. The resultingpatchwork of standards in the various certification pro-grams, however, caused a variety of marketing prob-lems. Congress passed the Organic Foods ProductionAct of 1990 to establish national standards for organical-ly produced commodities, and USDA promulgated finalrules for implementing this legislation in December 2000.USDA is currently implementing these organic regula-tions, and all agricultural products that are sold, labeled,or represented as organic must be in compliance withthe regulations after the 18-month transition period iscompleted in October 2002. These regulations requirethat organic growers and handlers (including foodprocessors) be certified by a State or private agencyaccredited under the uniform standards developed byUSDA, unless the farmers and handlers sell less than$5,000 a year in organic agricultural products. Retailfood establishments that sell organically produced agri-cultural products but do not process them are alsoexempt from certification.

The national organic standards address the methods,practices, and substances used in producing and han-dling crops, livestock, and processed agricultural prod-

ucts. Although specific practices and materials used byorganic operations may vary, the standards requireevery aspect of organic production and handling to com-ply with the provisions of the Organic Foods ProductionAct. Organically produced food cannot be producedusing genetic engineering and other excluded methods,sewage sludge, or ionizing radiation. These standardsinclude a national list of approved synthetic, and prohib-ited nonsynthetic, substances for use in organic produc-tion and handling.

USDA organic standards for food handlers require thatall nonagricultural ingredients, whether synthetic or non-synthetic, be included on the national list. Handlers mustprevent the commingling of organic with nonorganicproducts and protect organic products from contact withprohibited substances. In a processed product labeledas “organic,” all agricultural ingredients must be organi-cally produced unless the ingredient(s) is(are) not com-mercially available in organic form.

The labeling requirements under the national standardsapply to raw, fresh, and processed products that containorganic ingredients and are based on the percentage oforganic ingredients in a product. Agricultural productslabeled “100 percent organic” must contain (excludingwater and salt) only organically produced ingredients.Products labeled “organic” must consist of at least 95-percent organically produced ingredients. Productslabeled “made with organic ingredients” must contain atleast 70-percent organic ingredients. Products with lessthan 70-percent organic ingredients cannot use the termorganic anywhere on the principal display panel but mayidentify the specific ingredients that are organically pro-duced on the ingredients statement on the informationpanel. The USDA organic seal—the words “USDAorganic” inside a circle—may be used on agriculturalproducts that are “100 percent organic” or “organic.” Acivil penalty of up to $10,000 per violation can be leviedon any person who knowingly sells or labels as organica product that is not produced and handled in accor-dance with these regulations.

For further information, visit USDA’s Agricultural Market-ing Service/National Organic Program (NOP) website atwww.ams.usda.gov/nop/.

Organic Standards and Certification

the larger the number of cosmeticdefects, the less likely would anorganic product be purchased (Estesand Smith, Thompson and Kidwell).

One picture of the typical organicshopper is a younger household inwhich females do the shopping;smaller and higher income house-holds are the most likely purchasersof organic produce (Govindasamyand Italia) and organic apples(Loureiro et al.). Households knowl-edgeable about alternative agricultureare more likely to purchase organicproduce (Govindasamy and Italia)and those concerned about the envi-ronment are more likely to purchaseorganic apples (Loureiro et al.).Those concerned about food safetyare more likely to buy organic pro-duce (Govindasamy and Italia) andorganic apples (Loureiro et al.).Those who enjoy trying new productsare more likely to purchase organicproduce (Govindasamy and Italia).Households with children under 18are more likely to purchase organicproduce (Thompson and Kidwell) andorganic apples (Loureiro et al.). Con-sumers with children are willing topay less for organic potatoes(Loureiro and Hine) and more likelythan other households to purchaseorganic apples (Loureiro et al.).

Strategies to increase purchases oforganic food include shelf-labeling,which had a mixed effect on sales inan upscale grocery store but a signifi-cantly positive effect on sales of dairyproducts, pasta, bread, cereal, andcarrots in a discount retailer in theMinneapolis and St. Paul markets(Reicks, Splett, and Fishman).

The recent addition of organic foodsales to scanner data, by AC Neilson

and Information Resources, Inc., hasmade possible econometric studies ofconsumer demand for organic food.Frozen organic vegetables, organicmilk, and organic baby food allexhibited high price elasticity ofdemand, meaning that the quantitypurchased responds greatly to pricechanges (that is, quantity purchasedincreases by more than 1 percentwhen prices fall by 1 percent) (Glaserand Thompson, 1999, 2000; Thomp-son and Glaser, 2001). For somefrozen vegetables, there was littlecrossover between purchases oforganic and conventional products, sothat changes in prices of either com-modity had no significant impact onquantities purchased (Glaser andThompson 1999). For other products(milk and baby food), the convention-al and organic products are substi-tutes, so that increases in the price ofthe conventional product result inconsumers’ purchasing a greaterquantity of the organic products(Glaser and Thompson, 2000;Thompson and Glaser, 2001).

The Marketing Chain:From Farm to Market

Food passes through many hands as itmoves from farm to consumer. Somefoods are fresh when delivered(apples and eggs) while others areprocessed before delivery (pasta andbread). Regardless of whether theyare fresh or processed, higher qualityproducts and products with uniqueattributes (such as organic foods) gen-erally have a higher selling price. Asa result, farmers have a strong incen-tive to produce and sell commoditieswith quality and other price-enhanc-ing attributes intact. Yet, since mostfoods pass through a number of inter-mediaries as they move from the farm

to the consumer, maintaining premi-um product integrity along the mar-keting chain can sometimes be a chal-lenge. To do so, each agent along themarketing chain must begin by mov-ing the product to the next agentquickly. Farmers need to sell theirperishable commodities immediatelyafter harvesting, while distributors,brokers, and wholesalers need to getfresh products to retailers as quicklyas possible. Retailers want to be ableto purchase a consistent and largeenough supply of a wide variety ofuniform quality fresh food. Con-sumers want to be able to buy a widevariety of fresh food that is both highquality and low priced. Organic foodconsumers, in particular, want to feelconfident that they are buying foodthat not only was grown organically,but also has kept its organic integrityat each stage in its journey to themarket.

Each commodity, depending in largepart on whether it is fresh orprocessed, follows an individualizedpath from farm to market. Becausefresh foods rapidly deteriorate, theymust be delivered to the marketquickly. The storage and transporta-tion systems along the way must pro-vide the proper temperature and otherconditions that help maintain fresh-ness. Processed foods, on the otherhand, have a longer shelf life—butthe products that go into them mustbe harvested at the right time, deliv-ered at the right time and satisfy theprocessor’s quality requirements. Inthe next sections, we trace the pro-duction and marketing chains for themajor organic commodities in theUnited States, noting applicable regu-lations as well as observed marketingtrends.



Organic Fresh Fruits and Vegetables

The first stage in the organicfresh fruit and vegetable mar-

keting chain—the production andpreparation of produce for ship-ment—involves growers, packersand shippers, working together ina number of possible combina-tions. In some cases, one firmgrows, packs, and ships the pro-duce, while in others one firmgrows and another packs andships. After it is shipped, producecan either be sold to retailers by abroker or delivered to a terminalmarket, where it is sold to retail-ers by wholesalers. In practice,most organic produce is soldthrough a specialty broker ratherthan in a terminal market (Dimitriand Richman). In some instances,when a specific variety, quality orquantity is desired, larger retailers

may buy fresh fruits and vegeta-bles directly from the produceshipper. Organic produce can alsobe sold directly to consumersthrough farmers markets, commu-nity-supported agriculture, andfarm stands.

Fruit and vegetable marketing chains:

Fresh produce:

Farm – shipper – wholesaler – natural foods retailer

Farm – shipper – wholesaler – conventional retailer

Farm – shipper – specialty broker – retailer

Farm – shipper – natural foods retailer

Farm – shipper – conventional retailer

Farm – consumer farmers markets, roadside stands, U-pick, community supported agriculture

What are organic fruits and vegetables?Organic fruit and vegetable production relies onecologically based practices, such as biologicalpest management and composting, and cropsare produced on land that has had no prohibit-ed substances applied to it for at least 3 yearsprior to harvest. Soil fertility and crop nutrientsare managed through tillage and cultivationpractices, crop rotations, and cover crops, sup-plemented with manure and crop waste materi-al and allowed synthetic substances. Croppests, weeds, and diseases are controlledthrough physical, mechanical, and biologicalcontrol management methods.

Organic fruits and vegetables must be storedand shipped separate from conventionallygrown produce. Organic produce is shipped orpacked in containers free from synthetic fungi-cide, preservative, or fumigant.

Credit: USDA.


Fruit and vegetable market facts:

Organic produce accounts for 42 percent of all organic foodsales (Packaged Facts, 2001).

According to Spins, fresh produce (UPC coded) is the organ-ic category with the third largest level of sales in conventionalsupermarkets, with sales equal to $93,978,272 in the 12-month period ending June 2001.

Sales of fresh organic produce in natural foods supermarketstotaled $708 million in 1998. Fresh organic produce sales(UPC and nonUPC coded) summed to $833 million in 1999,which was 69.4 percent of total fresh produce sales in naturalfoods supermarkets. Fresh produce was the top-sellingorganic food category (NFM).

According to Fresh Trends survey, the organic products mostoften purchased are tomatoes, leafy vegetables, carrots, andapples.

According to the Hartman survey, the organic products mostoften purchased are strawberries, lettuce, and carrots.

Fruits and vegetables are the “gateway” category into organicfoods (Hartman Group, 2001).

Million dollars

1990 1997 1999 2000

Source: 1997 data. Food Industrial Management Program at Cornell University; 1999, 2000, Nutrition Business Journal.

Figure 3—Sales of organic fruits and vegetables: 1990, 1997, 1999, and 2000

0

500

1,000

1,500

2,000

2,500

Price premiums for organic producein the Boston wholesale market during 2000 - 2001Organic broccoli – 30 percent higher, on average, than conventional prices

Organic carrot – 25 percent higher, onaverage, than conventional prices

Organic mesclun – 10 percent higher,on average, than conventional prices

Source: Sok and Glaser.

Certified organic acreage in 1997

California had the most certified organic vegetableacreage, 22,886 acres in 1997. Colorado and Washingtonfollowed with 3,716 and 3,140 acres certified in 1997. Ari-zona, Oregon, Minnesota, New York, Illinois, and Floridaeach had over 1,000 acres of certified organic vegetables.

Almost 2 percent of U.S. lettuce acreage, 2.4 percent ofcarrot acreage, and 1 percent of tomato acreage was cer-tified organic.

Over 49,000 acres of organic fruit and nut crops were cer-tified in 36 States. Organic grapes accounted for 39 per-cent of the acreage certified, followed by apples (18 per-cent), citrus (12 percent), and tree nuts (10 percent); 21percent of the total was unclassified as to the crop grown.

Growers in California had 32,582 acres of certified organicfruit and nut acreage, over two-thirds of the total. Arizonawas second (4,361 acres), and Washington third (2,978acres).

Source: Greene.

Credit: PhotoDisc.


What are organic grains, oilseeds,and legumes?Organic grain, oilseed, and legume production relies on ecologicallybased practices, such as biological pest management and composting,and crops are produced on land that has had no prohibited substancesapplied to it for at least 3 years prior to harvest. Soil fertility and cropnutrients are managed through tillage and cultivation practices, croprotations, and cover crops, supplemented with manure and crop wastematerial and allowed synthetic substances. Crop pests, weeds, and dis-eases are controlled through physical, mechanical, and biological con-trol management methods.

When being stored and shipped, organic grains, oilseeds, and legumesmust be kept from commingling with conventionally grown grain. Theseorganic products cannot be shipped or packed in containers containingsynthetic fungicide, preservative, or fumigant.

Organic Grains, Oilseeds, and Legumes

Organic grains, oilseeds, andlegumes are used as inputs to

manufactured products, as feedgrain and as final food productssuch as rice and tofu. Crops pro-duced by organic grain and oilseedfarmers include traditional grainsand oilseeds such as corn, soybeans,wheat, barley, oats, and rice, as wellas nontraditional grains, includingmillet, buckwheat, rye, and spelt.

Organic grains, oilseeds, andlegumes may be contracted prior toplanting. Several companies offerproducers contracts for organicwheat, corn, soybean, black bean,buckwheat, sunflower, popcorn,spelt, and millet crops. Contractsfor organic grains varyconsiderably— for example, somemake producers responsible forgrain cleaning or shipping chargesor both while others do not makethe producer responsible for either(Born and Sullivan).

Marketing chain for organic grains, oilseeds, and legumes:

Farmer – cooperative – cleaner – manufacturer – distributor

Farmer – cleaner – manufacturer – distributor

Farmer – cooperative – cleaner – broker – manufacturer – distributor

Farmer – cleaner – broker – manufacturer – distributor

Farmer – marketing agent (often contracts with farmer, and cleans) – manufacturer

Farmer – cooperative – processor of feed grain – distributor – livestock producer

Farmer – processor of feed grain – distributor – livestock producer

Top-selling products made with organicgrains and legumes:

Soy milk and rice milk: the organic nondairybeverage category had sales in all venues of$316 million in 1999 and $395 million in 2000(NBJ).

Organic nondairy beverages made up 62 per-cent of U.S. sales of nondairy beverages in allvenues in 1999 (NBJ).

Sales of organic breads and grains increasedfrom $700 million in 1999 to $848 million in2000 (NBJ).

Sales of organic tofu totaled $40.8 million in1999 and $46.3 million in 2000. Slightly morethan half of organic tofu sales (52.8 percent)were made in conventional supermarkets(NFM, 2001).

Credit: Comstock Images.

Credit: PhotoDisc.


U.S. farmers produced certified organic grain crops on over291,000 acres in 1997. A variety of certified organic grainswas grown in 35 States in 1997 (Greene).

North Dakota was the top producing State, with over50,000 acres. Another dozen States—Montana, Minneso-ta, Idaho, Colorado, Nebraska, Iowa, Utah, Kansas, Cali-fornia, South Dakota, Wisconsin, and Texas—had at least10,000 certified organic acres of grain crops (Greene).

Corn, wheat, and oats were grown organically in over 24States in 1997. Wheat was produced under certified organ-ic farming systems on over 125,000 acres in 1997, cornwas grown on over 42,000 acres, and oats and barleywere each grown on almost 30,000 acres. Other certifiedorganic grain crops—sorghum, rice (including wild rice),spelt, millet, buckwheat, and rye—were grown on under15,000 acres each. State and private groups certifiedanother 22,967 acres of organic grain crops in 1997 thatcould not be broken out into acreage for specific crops(Greene).

Certified organic grain acreage was well under 1 percentof the U.S. total for corn, wheat, barley, and rice. However,between 1 and 3.5 percent of the U.S. oats, millet, and ryecrops were certified organic in 1997. About a third of twospecialty grain crops—spelt (used in cereals and otherfood products) and buckwheat—were grown under certifiedorganic farming systems in 1997 (Greene).

Organic grain market facts:

Organic soybean and legume market facts:

Soybeans are the top legumecrop grown under certifiedorganic farming systems. U.S.growers produced over82,000 acres of certifiedorganic soybeans in 1997.Organic soybeans accountedfor 0.1 percent of total soy-bean acreage in the UnitedStates (Greene).

Certified organic dry peasand lentils were grown onnearly 5,200 acres in theUnited States in 1997. Mon-

tana and North Dakota ledwith over 1,500 acres each.Organic dry peas and lentilsaccounted for about 1 per-cent of the total dry pea andlentil acreage in the UnitedStates in 1997 (Greene).

Certified organic dry beanswere grown on over 4,600acres in 1997, and Californiahad almost a quarter of thoseacres (Greene).

Certified organic oilseeds—including flax and sunflow-ers—were grown on 31,400acres in 18 States in 1997.Certified organic sunflowerswere grown on almost 11,000acres, and flax was grown onover 8,000 acres. NorthDakota was by far the biggestproducer, with over 7,000acres of flax and 4,500 acresof sunflowers. Certifiedorganic flax representedalmost 6 percent of total U.S.flax acreage in 1997, whileorganic sunflowers represent-ed 0.4 percent of the totalsunflower acreage (Greene).

Price premiums for organic grains and oilseeds for the time period between 1995 and 2000

1995 1996 1997 1998 1999 2000 2001

Percent

Corn 35 43 73 88 98 89 59

Soybeans 114 85 141 202 217 175 177

Spring wheat 54 59 73 8 87 103 94

Oats 35 59 73 83 77 71 41

Note: The premiums are reported as the percent higher than prices for the conventionally produced equivalent.Source: Bertramsen and Dobbs, 2002.

Photo courtesy of Organic Valley FamilyTM of Farms, 2002.


What are organic processed products?A certified organic processed product, such as pasta or frozenpizza, is first prepared using at least 95 percent organic ingredi-ents. Conventionally grown ingredients may be used only whenan organic ingredient is not commercially available. For productsthat contain 70 to 95 percent organic ingredients, processorsmay label the organic ingredients on the package.

Organic and conventionally grown ingredients must be kept sep-arate, and the organic ingredients must be stored in containersthat do not compromise the organic nature of the food. Bothorganic and conventional ingredients must not be treated withionizing radiation, excluded methods, and synthetic solvents.

Processed Organic Foods

Organic processed foods include frozen vegeta-bles and entrees, pasta, canned vegetables,

sauces in jars, and shelf-stable entrees. Specificproducts must be used to manufacture thesefoods—for example, pasta processors need to use a particular variety and grade of organic wheat,while frozen fruit and vegetable processors needorganic produce of a specific size and quality. Allprocessors want uniform quality, so they can offerproducts that consistently taste the same. Conse-quently, the biggest challenge facing organic manu-facturers is how to secure a steady supply of organ-ic ingredients of a consistent quality. Often, manu-facturers will recruit new farmers, assisting themwith converting from conventional to organic pro-duction. Retailers with private label organic prod-ucts may also provide on-farm assistance to pro-ducers. The next biggest challenges are how totransport the processed goods to the supermarketand how to secure shelf space.

There are two basic marketing channels forprocessed foods. In both cases, farmers first pro-duce raw commodities. In the first case, these com-modities are then sent to the manufacturer, whoconverts them into a processed product. A distribu-tor acts as a middleman, moving processed prod-ucts from manufacturers to retailers. In the secondscenario, a middleman (shipper) procures raw com-modities from farmers and delivers them to manu-facturers. After creating the processed good, themanufacturer moves the products through to retail-ers. The middleman secures the quantities needed;he or she also ensures that the commodities arehigh quality and meet the manufacturer’s organicstandards.

Processed products marketing chain

Farm – manufacturer – wholesaler – retailer

Farm – shipper/procurer – manufacturer – wholesaler – retailer

Select manufactured organic food sales by venue

Frozen CannedStore Entrees Desserts foods & jarred* Pasta Cereal Oils Soy

Percent

Health/natural foods stores 42 82 47 68 59 64 75 21

Conventional stores 55 10 47 30 41 31 11 77

*The category includes soups, canned fruits and vegetables, and baby food.Note: The percentages do not sum to 100 because manufacturers sell in other venues, such as food service and club stores, which are not listed.Source: OTA 2001 Manufacturers’ Survey; for products that contain at least 50 percent organic ingredients.

Average price premiums for organicfrozen vegetables, 1991-1996

Frozen broccoli 72 percent

Frozen sweet corn 25.8 percent

Frozen green peas 109.7 percent

Frozen green beans 75.7 percent

Note: The premiums are reported as the percenthigher than prices for the conventional equivalent.Source: Glaser and Thompson, 1999.

Credit: Comstock Images.


Fresh fruits andvegetables

Nondairybeverages

Breads andgrains

Packaged foods

Dairy products

Million dollars

Source: Nutrition Business Journal.

Figure 4—Sales of select processed organic foods

0 50 100 150 200 250

1999

2000

Organic baby food

In 2000, 73.9 percent of organic babyfood was sold in conventional super-markets, and 21 percent was sold innatural foods stores (NFM, 2001). Inthe 12-month period ending June2001, sales of organic baby food inconventional supermarkets totaled$50.6 million.

Organic baby food sales comprised4.5 percent of all baby food sales in1999. (NBJ, 2001).

Price premiums for organic baby foodsold in conventional supermarketsranged from 35 to 53 percent in 1999(Thompson and Glaser, 2001).

Organic processed foods market facts:

Frozen organic fruit and vegetable sales as a share of total U.S. frozen fruit and vegetable sales: 1.34 percent.

Canned organic fruit as share of total U.S. canned fruit:0.63 percent.

Canned organic vegetables as share of total U.S. cannedvegetables: 0.43 percent. Source: Nutrition Business Journal

In 2000, frozen prepared foods were among the fastestgrowing processed foods categories.

Packaged groceries accounted for 15 percent of total organic sales.

Frozen foods accounted for 8 percent of organic sales.Source: Packaged Facts

Sales of four types of frozen organic vegetables (corn, broc-coli, peas, and green beans) increased by 58 percent peryear between 1991 and 1996 (Glaser and Thompson, 1999).

In the first half of 2000, more than 800 organic newprocessed products were introduced; the number of dessertitems increased the most (Meyers and Rorie).

In 2001, 45 percent of organicmanufactured products weresold in conventional grocerystores compared with 31 per-cent in 1998 (OTA Manufactur-ers’ Survey, 2001).

In 2000, 51.3 percent of frozenorganic entrees, pizza, andconvenience foods were sold inconventional supermarkets,which increased to 53.1 percent in 2001 (NFM, 2002,2001).

The dollar amount of frozenorganic entrees, pizza, andconvenience foods sold in con-ventional stores, in the 12-month period ending June2001, was $74 million (Spins,as quoted in Organic and Nat-ural Business News).The dollaramount sold in all venues in2001 totaled $152 million(NFM, 2002).

Organic packaged grocerysales in natural products storestotaled $652 million in 2000and increased to $1.6 billion in2001. Organic frozen/refrigerat-ed product sales totaled $333million in 2000 and increasedto $823 million in 2001 (NFM,2001).

In 2001, 49 percent of manu-factured organic foods weresold in health and natural foodsstores, and 45 percent in con-ventional grocery channels.

In 1998, 62 percent of manu-factured organic foods weresold in health and natural foodsstores; 31 percent through con-ventional grocery channels(OTA,1998).

Where are organicmanufactured foods sold?

Credit: PhotoDisc.


Organic Dairy Products

Organic dairy products, asdefined by the USDA, are

made from the milk of animalsraised under organic manage-ment. The cows are raised in aherd separate from convention-al dairy cows. The animals arenot given growth hormones orantibiotics. The animalsreceive preventive medicalcare, such as vaccines, anddietary supplements of vita-mins and minerals. All organi-cally raised dairy cows musthave access to pasture, the out-doors, shade, shelter, exerciseareas, fresh air, and direct sun-light suitable to their stage ofproduction, the climate, andthe environment.

To convert from conventionalto organic production, thecows must be fed a diet con-sisting of at least 80 percentorganic feed for 9 months andthen 100 percent organic feedfor 3 additional months, ormust be grazed on land that ismanaged under a certifiedorganic plan. Otherwise,organic dairy products mustmake use of milk from ani-mals raised organically for atleast 1 year prior to producingthe milk.

The process used to bottlemilk and to make and packcheese, ice cream, yogurt, andother dairy products must alsobe certified. The processor isrequired to keep organic andnonorganic products separated,and must prevent organicproducts from contact withprohibited substances. Nonor-ganically produced ingredientsmay be used when processingan organic product if there isno organic equivalent. Volatilesynthetic solvents and othersynthetic processing aids areprohibited.

Marketing Channels

Milk (from one or several farms) – on-farm dairy (pasteurize and bottle) – regional distributors

Milk (from one or several farms) – off-farm dairy (pasteurize and bottle) – regional distributors

Milk (from one or several farms) – off-farm processors of cheese, butter, yogurt, or dry milk – distribute regionally and nationally

Milk (from several farms) – dairy (pasteurize and bottle, or process into cheese or ice cream, for example) – distribute nationwide through a market-ing cooperative (under a brand name), mainly through private distribution networks, sometimes with a regional label.

Milk produced under contract (from several farms) – dairy (pasteurize and bottle, or process into cheese or ice cream, for example) – distributenationwide under a brand name, mainly through private distribution networks

Sales of organic dairy products,in millions of dollars

1999 2000

Milk, cheese, butter, eggs, yogurt 394 480

Frozen dairy, ice cream 85 106

Canned milk 2 2

Organic manufacturers’ 2001 sales of dairy products were distributed as follows:

Health and natural food stores: 65% cheese, 50%yogurt, butter, cheese, sour cream and kefir; 33%milk and cream

Conventional supermarkets: 33% cheese; 47%yogurt, butter, cheese, sour cream and kefir;65% milk and cream.

Source: OTA’s 2001 Manufacturers’ Survey.

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Organic milk first appeared in conventionalsupermarkets in 1993; 8 conventional supermar-kets sold organic milk in December 1996(Glaser and Thompson, 2000)

Organic milk, half and half, and cream sales inconventional markets:

1996: $15.8 million; (Glaser and Thompson, 2000)1997: $30.7 million (NFM).1998: $46.0 million (Glaser and Thompson, 2000)1999: $75.7 million (NFM)2000: $104 million (NFM)

Organic milk, cream, half and half sales in natu-ral products supermarkets:

1999: $40 million (NFM)2000: $55 million (NFM)

Price premium for organic milk over branded orprivate label conventional products was in therange of 50 – 72 percent between 1996 and1999 (Glaser and Thompson, 2000).

The price premium for organic milk ranged from 47 percent to 76 percent in the Twin Citiesregion of Minnesota between 1995 and 1997(Dobbs et al.).

The price premium for organic cheese rangedfrom 124 percent (1995) to 28 percent (1997) inthe Twin Cities region of Minnesota (Dobbs etal.).

Organic dairy products (milk, butter, cheese,eggs, yogurt) comprised 0.9 percent of total U.S. dairy sales in 2000 (Nutrition Business Journal).

In 1997, there were 12,897 certified organicdairy cows. New York was the top producer(3,386 dairy cows), followed by Wisconsin(2,509) and Minnesota (2,425). Pennsylvania,California, and Maine also had over 1,000organic dairy cows each (Greene).

The number of certified organic milk cows nearlytripled between 1992 and 1994 and more thandoubled between 1994 and 1997 (Greene).

Milk Market Facts:

Share of dairy product sales in natural foods supermarkets and conventional grocery stores

In conventional supermarkets, milk, half & half, and cream is the second leading category of organic food sales, with sales equal to$119,315,772 in the 12-month period ending June 2001*

Product 1999 2000 2001Natural Conventional Natural Conventional Natural Conventional

PercentMilk, half and half,

cream 35.1 64.6 34.6 65.3 30.53 69.25

Cheese and cheese alternatives 85.4 14.6 46.3 51.7 43.71 55.97

Yogurt and kefir 56.8 43.2 52.4 47.4 43.17 56.70

*SPINS, as quoted in Organic and Natural News, 2001.Source: Natural Foods Merchandiser, 2000, 2001, and 2002.

Photo courtesy of OrganicValley FamilyTM of Farms,2002.


Organic Meat, Poultry, and Eggs

Producing organic beef has threephases. The first is cow-calf, which

is the period from birth to weaning,when the calf weighs approximately500 pounds. The second phase is back-grounding, or the period between wean-ing and the time the calf weighs 900pounds. The finishing phase, done in afeedlot for conventionally producedbeef, is a 3- month period prior toslaughter, by which time the calfweighs between 800 and 1,200 pounds.During the cow-calf and backgroundingphases, the animals must be fed organi-cally grown pasture and hay; somefarmers choose to add organicallygrown grain to the cattle’s diet duringthe last months prior to slaughter.Organic farmers must maintain organicpasture for the cattle to graze onthroughout all three production stages(thus, the term “grass-fed”). The farmermay produce the supplemental feed,such as grain or hay, may grow a por-tion and purchase some, or may pur-chase all the feed. Organic grass-fedbeef production, from birth to slaughter,takes approximately 26 – 28 months.

Organic hog production begins with thegestating sow, right before giving birth(farrowing), building a cozy place to

birth her litter, where the sow and herlitter will live for 1 week after birth.After nursing for 5 weeks, the pigs areweaned and then pastured. Pigs notraised on pasture may live in indoor orindoor/outdoor housing. Since hogs eattheir bedding, it must be organicallyproduced. Bedding materials mightinclude small-grain straw, corn stalks,soybean straw, or grass hay (Gegner).Pasture-raised hogs eat grass, legumes,standing crops and other ground cover(Gegner). The farmer may produce thesupplemental feed, such as grain or hay,may grow a portion and purchase some,or may purchase all the feed. The hogsreach market weight (240 – 260pounds) in 6 to 6.5 months from birth.

Organic poultry (chicken and turkey)are raised organically, beginning fromat least the second day of life. Somefarmers purchase chicks from a certi-fied organic hatchery while othersbegin raising the chicks organicallywhen they arrive on the farm. The birdseat organically produced grain, and aremarket weight in 70 to 81 days. Thefarmer may produce the supplementalfeed, such as grain or hay, may grow aportion and purchase some, or may pur-chase all the feed.

Organic Beef Production and Marketing Channels

Nationwide Distribution

Cow/calf farm – pasture farm – cooperative (also processes) – retailer

Cow/calf & pasture farm – cooperative (also processes) – retailer

Cow/calf farm – pasture farm – farm – processor – distributor – retailer

Cow/calf & pasture farm – farm – processor – distributor – retailer

Local distribution:

Cow/calf farm – pasture farm – consumer

Cow/calf & pasture farm – consumer

Nationwide distribution often relies on a brand name or marketing cooperative.Several small, often family-run, farms raise livestock or poultry organically,which are processed by the cooperative or firm holding the brand name. Themeat products are distributed to retailers by the cooperative or a distribution firm.

Organic Pork & Poultry MarketingChannels

National distribution:

Farm – cooperative (also processes) – retailer

Farm – processor – distributor – retailer

Local distribution

Farm – consumer pickup on farm

Farm – consumer via farmers market

Farm – consumer via internet sales

Credit: USDA.

Photo courtesy of Organic Valley FamilyTM of Farms, 2002.


Organic meat, poultry, and eggs, asdefined by USDA, are made from animalsraised under organic management. Allorganically raised herds and flocks mustbe raised separate from their convention-al counterparts. The animals are notgiven growth-producing hormones orantibiotics. The animals receive preven-tive medical care, such as vaccines, anddietary supplements of vitamins and min-erals. They consume 100 percent organi-cally produced feed, free of animalbyproducts. Producers must provide livingconditions that accommodate the healthand natural behavior of the animals. Theanimals should have access to the out-doors, shade, exercise areas, fresh air,and direct sunlight suitable to theirspecies and stage of production. Allorganically raised cows must have

access to pasture. Their bedding must beclean and dry. Producers may not with-hold medical treatment from a sick animalin order to preserve its organic status.The producer must manage manure in away that does not contribute to soil,water, or crop contamination. In certaincases, the producer may temporarily con-fine animals because of weather, stage ofdevelopment, if the animal’s well-beingwould be compromised from being out-doors, or if there was a risk to soil orwater quality.

Livestock intended for meat productsmust be raised organically from the lastthird of gestation. Livestock used asbreeder stock can be brought from a con-ventional operation provided that the ani-

mal is raised organically for the last thirdof gestation, and the offspring is raisedorganically from birth.

Poultry and layer hens must be undercontinuous organic management from thesecond day of life (most producers startraising poultry from day-old chicks). Therecommended method of farming is forpoultry to have access to the outdoorsduring the months when it is feasible. Inorder to become certified, the producermust demonstrate how access to the out-doors will be encouraged and maximized.

Organically produced feed grain is creat-ed in certified organic mills. Cows, hogs,and poultry are processed in certifiedorganic plants.

What are organic meat, poultry, and eggs?

Eleven percent of the meat sold in natu-ral products stores in 2000 was organic(NFM).

Sales of organic eggs in natural foodsstores and conventional supermarketstotaled $37.3 million in 1999, and $42.3 mil-lion in 2000 (NFM, 2001). In 2000, con-sumers purchased 64.9 percent of all organ-ic eggs in conventional supermarkets, 35percent in natural foods stores, and 0.1 per-cent direct from the producer (NFM, 2001).

Organic meat comprised 3 percent oftotal organic sales in 2000 (Myers andRorie).

According to the OTA Manufacturers’ Sur-vey, members reported that sales of meatand poultry products increased 151 percentbetween 1999 and 2000. Members alsoreported that 78 percent of organic meatwas sold in natural foods stores and 15 per-cent was sold in conventional supermarkets(OTA 2001).

Certified organic livestock is well under 1percent of total U.S. livestock. However, thenumber of dairy cows and layer hens pro-duced under certified organic farming sys-

tems increased sharply during the 1990s,and the market for organic meat products isexpected to grow now that organic labelingis permitted (Greene).

Farmers and ranchers raised certifiedorganic cows, pigs, and sheep in 23 Statesin 1997 (table 15). Dairy cows led, with12,897 animals certified organic in 1997.New York was the top producer (3,386 dairycows), followed by Wisconsin (2,509) andMinnesota (2,425). Pennsylvania, California,and Maine also had over 1,000 organicdairy cows each (Greene).

Thirteen States contained 4,429 certifiedorganic beef cows in 1997, and almost 40percent of which were in Michigan. Only 482hogs and pigs were certified organic in 1997(Greene).

The United States had 537,826 certifiedorganic layer hens in 1997, along with38,285 organic broiler hens, 750 turkeys,and 221,389 unclassified organic poultryanimals. California was the leader in organicpoultry production, with 350,000 organicbirds, followed by New York (161,304) andPennsylvania (66,300 birds) (Greene).

Organic livestock, poultry, and egg market facts:

Photos courtesy of Organic Valley FamilyTM

of Farms, 2002.


Organic Fibers

Several types of fiber are organically pro-duced, including cotton, rayon, and linen.

Certified organic cotton was produced in 4States—Texas, New Mexico, Missouri, andCalifornia—on 9,974 acres in 1997. Texas hadover three-fourths of the U.S. organic cottonacreage in 1997, much of it operated by anorganic cotton marketing cooperative thatformed in the early 1990s and is still active.Certified organic cotton acreage in 1997 was70 percent lower than in 1995, and accountedfor only 0.1 percent of U.S. cotton acreage.Currently, the organic cotton market is moredeveloped than markets for other organicfibers.

Several major clothing companies tested organ-ic cotton clothing lines without commercialsuccess in the mid-1990s. These companieshave now switched to a new approach—blend-ing organic with conventional cotton—to helpstabilize the market and encourage organic pro-duction (Bunin, 2000).

What are organic fibers?Organic fiber production relies on ecologically based practices, such asbiological pest management and composting, and crops are produced onland that has had no prohibited substances applied to it for at least 3years prior to harvest. Soil fertility and crop nutrients are managedthrough tillage and cultivation practices, crop rotations, and cover crops,supplemented with manure and crop waste material and allowed synthet-ic substances. Crop pests, weeds, and diseases are controlled throughphysical, mechanical, and biological control management methods.

Acres of certified organic and transitional land and production by State

1997 2001 2000 production

Acres Acres Bales

Texas 8,134 8,338 3,128

Arizona 0 1,303 2,122

California 756 828 1,630

New Mexico 512 470 1,146

Missouri 572 400 510

Kansas 0 70 5

Tennessee 0 50 0Source: 1997, Greene; 2000 and 2001, Organic Trade Association.

Source: Organic Trade Association.

Acres

Figure 5—Organic cotton acreage, 1990 to 2001

01990 92 94 96 98 2000

5,000

10,000

15,000

20,000

25,000

Credit: Digital Stock


Organic Herbs and Flowers

Most organic herbs and flowers(excluding those used as an

intermediate good) are sold locallyand direct to the consumer, throughinternet sales, CSAs, or farmers mar-kets. Natural products supermarketsthroughout the United States sellorganic herbs (most of which aregrown locally). Natural productssupermarkets in the Pacific Northwesthave just begun selling organic flowers.

Marketing chain for organic herbsand flowers

For herbs as a final product and flowers:

Producer – consumer

Producer – processor – wholesaler – retailer

For herbs used an intermediate good:

Producer – processor – manufacturer

Organic herb and flower market facts:Organic herbs are used for culinary purposes, dietary supplements, such as St.John’s Wort, and for personal care products, such as body lotion. Those used forculinary reasons are either sold as spices to consumers or are sold in largequantities to manufacturers to use in manufacturing prepared foods (Frontier).

Certified organic herbs were cultivated on 6,407 acres in 1997, wild organicherbs were also harvested from an additional 83,388 uncultivated acres4

(Greene).

Producers grew certified organic herbs for culinary and medicinal uses in 32States. California was the largest producer of cultivated organic herbs, with 1,062acres, followed by Washington (846 acres) and Illinois (797 acres). Seven otherStates (Oregon, North Carolina, Florida, Missouri, Minnesota, Colorado, andWisconsin) had over 200 acres of cultivated herbs. Hundreds of different typesand varieties are being cultivated in these States (Greene).

Idaho had 52,000 acres of wildcrafted St. John’s Wort, a popular medicinal herb,in 1997. Florida had 25,000 acres of certified organic saw palmetto berries(which have medicinal uses) and maypop (which have culinary and medicinaluses), indigo (which is used as a natural hair dye), polk (a wild salad green), andother crops. Oregon certified 6,000 acres of lake algae (which has medicinaluses) and St. John’s Wort (Greene).

Certified organic cut flowers were produced in a dozen States on 288 acres in1997. California was the largest producer with 145 acres (Greene).4Wild crops are plants or portions of plants that are harvested from land that is not main-tained under cultivation or other agricultural management.

What are organic herbs andflowers?Organic herb and flower pro-duction relies on ecologicallybased practices, such as bio-logical pest management andcomposting, and crops areproduced on land that has hadno prohibited substancesapplied to it for at least 3 yearsprior to harvest. Soil fertilityand crop nutrients are man-aged through tillage and culti-vation practices, crop rota-tions, and cover crops, supple-mented with manure and cropwaste material and allowedsynthetic substances. Croppests, weeds, and diseasesare controlled through physi-cal, mechanical, and biologicalcontrol management methods.

Cred

it: U

SDA.

Recent Growth Patterns in the U.S. Organic Foods Market

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