The Present and Future for American Agriculture: A Perspective From the Organic Trade AssociationAugust 29, 2006Caren Wilcox, ED & CEOAt the request of the USDA Advisory Committee on Biotechnology & 21st Century Agriculture

What is the Organic Trade Association?

Founded in 1985Serves the organic system of agriculture, food/fiber distributionHas grown with the industryHelps to maintain the chain of organic integrity from farm to table or farm to fashion

OTA coordinates with many state, regional and local groups of organic producers, certifiers or processorsDiverse membership in both size and scope60% of OTA membership declare less than $100,000 in annual revenue from organic sales

State and Regional StrengthsMany state and regional groups with which we coordinateOrganic farm organizationsCooperativesOrganic Certifier OrganizationsMost are members of OTA

StatesOrganic grew up in many placesPrimary states today and yesterday California, Texas, ColoradoVermont, New HampshireIowa, Wisconsin, MinnesotaPennsylvania and New Jersey

Size and ScaleDiverse in size and scope/business structure60% OTA Members declare less than $100,000 in organic sales revenuePublically traded: Hain-Celestial, United Natural Foods (UNFI), Whole Foods, Wild Oats

Chart5

8390.5971530249

2990.2128113879

1870.1330960854

450.0320284698

230.0163701068

120.0085409253

Organic Trade Association FY06 Trade Members by Gross Annual Organic Revenue

$5-15M3%

$1-5M13%

$15-50M2%

>$50M1%

AllStats

FY All Stats Comparison

20062005200420032002Dues LevelFY06FY05FY04FY03FY02

Agricultural Processor2%2%2%1%2%Count% of MembershipCount% of MembershipCount% of MembershipCount% of MembershipCount% of Membership

Association2%3%4%5%4%149124.02%68135.84%70440.37%68243.75%67743.85%

Broker2%2%2%2%3%2743.62%1206.32%955.45%855.45%1117.19%

Certifier2%2%2%3%3%3874.26%1457.63%1448.26%1328.47%1278.23%

Consultant7%9%10%9%9%4884.31%1528.00%1558.89%1559.94%15610.10%

Distributor5%5%5%6%6%5502.45%683.58%653.73%603.85%634.08%

Exporter1%1%1%1%1%6200.98%331.74%331.89%392.50%332.14%

Farm Supplies3%4%4%5%6%7180.88%271.42%150.86%120.77%120.78%

Grower/Farmer8%8%11%13%14%8120.59%120.63%120.69%120.77%90.58%

Importer3%4%4%3%4%970.34%100.53%110.63%150.96%140.91%

Individual1%1%2%2%3%10110.54%150.79%110.63%140.90%120.78%

Ingredient Supplier7%7%6%6%5%1150.24%120.63%110.63%110.71%40.26%

Manufacturer23%22%21%21%19%1260.29%90.47%40.23%120.77%40.26%

Organic Fiber11%11%9%9%8%1320.10%60.32%40.23%50.32%50.32%

Packaging Supplier$50M1%

$15-50M2%

$1-5M13%

$5-15M3%

DropReasons

FY06 Drop Reasons by Quarter

Drop ReasonsFYTotal4th QTR3rd QTR2nd QTR1st QTR

Cost of Dues3213163-

Dissatisfied15-942

Don't See Value32-1-

Mergers & Acquisitions4-3-1

No Longer Organic61221

Not Interested63-21

Other155226

Out of Business4112-

Reconsider in the Future32-1-

No Reason Given43212712510773

Total Dropped52015415812484

Data Source: stat-ExpiredMembersFY : select query (lists each individual company separately, need to group and tally drop reasons)

&L//Ota-server/data_d/DOCS/MEMBERSH/Statistics/FY06/FY06 Stats.xls&RLast Updated 8/24/06

ExpandedDropReasons

FY06 Drop Reason Notes

Drop DateExp DateDrop ReasonNotes

4/30/20063/31/2006Cost of duesAlso emailed that he did not see the value.

4/6/20063/31/2006Cost of duesbudget restraints

7/31/20066/30/2006Cost of duesdoesn't believe OTA value small businesses.

7/30/20066/30/2006Cost of duesHarvey lawsuit, restructuring of the committees

3/3/20063/31/2006Cost of duesincrease too much for a small business

6/30/2006Cost of duesIsn't making contacts as she'd hoped

1/30/200612/31/2005Cost of dueswill consider in future as budget gets worked out. LL

7/31/20066/30/2006Cost of dueswill reconsider in the future

12/31/2005Cost of dueswill renew asap

3/31/20063/31/2006DissatisfiedAlso funds restraints. Spoke with Stephanie re her marketing needs.

1/2/20053/31/2006Dissatisfiedbelieves OTA damaged the integrity of the organic label

4/28/20063/31/2006Dissatisfieddid not agree with our policy

4/10/20063/31/2006DissatisfiedDid not agree with our political activity.

4/20/20063/31/2006Dissatisfieddidn't like the way the rider was handled

5/25/20063/31/2006Dissatisfieddisagred with harvey solution

5/31/20063/31/2006DissatisfiedHarvey

1/30/200612/31/2005DissatisfiedOTA's actions with the amendment

4/13/20063/31/2006DissatisfiedWas not happy with the way the Harvey case was handled. The dues issue is also an issue. Will reconsider in the future

4/28/20063/31/2006Dissatisfiedwith Harvey decision

1/25/200612/31/2005Dissatisfied"When I read Michael Potter's remarks a month or two ago about why Eden doesn't belong, I realized that what he was saying was more representative of how we felt than what OTA was doing."

11/7/20059/30/2005DissatisfiedDid not agree with our efforts to "weaken the organic standards"

10/28/20059/30/2005DissatisfiedDisagreed with OTA process for Restore Rule Campaign. Nell Spoke with KTD.

1/26/200612/31/2005DissatisfiedIs unhappy due to the Canadian show. LL

12/31/2005Dissatisfiedour amendment efforts

5/22/20066/30/2006Don't see valueThey believe they don't receive value being a foreign company. LL

10/14/20059/30/2005Don't see valueWill reconsider in future. Was kept updated by comminications, but rest of membership not useful to his business.

6/2/20053/31/2006Mergers & Acquisitions6/2/05 acquired by Mastertase on 5/7/04-aw

3/31/20063/31/2006Mergers & AcquisitionsDue to illness. Stemlit taking over their sales.

5/6/20063/31/2006Mergers & Acquisitionssold to Kerr Concentrates

10/13/20059/30/2005Mergers & AcquisitionsThis is the same company as the paying Garin Millers, merged records together-aw

10/14/20059/30/2005No longer involved in organicunable to make products organic affordable for sale.

3/6/20069/30/2005Not interestedthey have not yet developed organic.

3/6/200612/31/2005Not interestedwill consider in the future. They are in ATO 2006

4/10/20063/31/2006Otherbecause they are not going to ATO this year. LL

1/27/200612/31/2005Otherbegan a new association and will consider in the future. L

9/29/20059/30/2005OtherBelongs to many other organizations and had to cut down.

4/5/20063/31/2007OtherCannot be an individual.did not respond. L

6/30/20066/30/2006OtherDID NOT RECEIVE RENEWAL

7/31/20066/30/2006Otherdid not renew

5/25/20063/31/2006OtherHarvey handling

5/19/20066/30/2006Otherno explanation other than not interested in renewing. LL

11/2/20059/30/2005Otherno longer affliated with Kamut Assn. Per Debby

7/26/20066/30/2006Otherother priorities

10/28/20059/30/2005Otherwill consider in the future. They just wanted to contribute to our fund raising effort.

9/7/20059/30/2005Otherwill not be renewing. Waiting for reason. 9.7.05 LL

10/12/20059/30/2005Otherwould not give reason.

12/31/200512/31/2005Out of businessand due to illness.

7/31/20066/30/2006Reconsider in futureBusiness currently in a slump

Source: Cut and pasted from stat-ExpiredMembersFY

&L//Ota-server/Data_d/DOCS/MEMBERSH/Statistics/FY06/FY06 Stats.xls&RLast Updated 8/22/06

Developing the Organic MarketFirst efforts at standardization were voluntary, local, state1990 Federal Law passesOrganic Foods Production Act (OFPA)Benefits: national organic label, certifiers accredited, national and international presence

Developing the Organic Market

Many iterations of the ruleFinal rule finished in 2000Initial standards and label introduced in October 2002

Basics of the Rule

Farms that sell more than $5000 of organic product must be certified to make the claimProcessors are certified

Basics of the RuleThree Excluded Methods of Production or Processing:No use of genetically modified organismsNo use of sewage sludgeNo use of irradiation

Basics of the Label

Products that are 100% organic can be labeled as such and use the USDA Organic seal95% organic ingredients can opt to use the USDA Organic sealAt least 70% organic can make the claim made with organicRemaining 30% - no use of excluded methods

Imported Products

U.S. law requires agricultural product sold as organic in U.S. must meet or exceed U.S. standards regardless of source or processing site

Organic Grows and Promotes ItselfOrganic had to make its own system of production and distribution

Segment truly grew at the grassroots

Consumer demand for environmentally sound production methods

Organic Grows and Promotes ItselfOrganic responds to desire for Consumer ChoiceShoppers seek to live more healthfullyConsumers seeking products for:healthy life styleenvironmental benefits

Desired AttributesStudies show consumers want:Foods and fiber grown without use of toxic and persistent pesticidesFoods that are natural without artificial preservatives, flavors, colors, no gmosFoods grown on farms with sustainable practices

Desired AttributesConsumers want good taste and qualityOrganic producers responded and developed attractive, tasty products73% of shoppers have purchased organic products 23% buy each week

Organic MarketplaceOrganic products are everywhere

Organic is now 2.5% of food and beverage in U.S. (up from 0.81% in 1997)

Organic Food Sales by Channel, 2005Source: OTAs 2006 Manufacturer Survey & Nutrition Business Journals organic industry model.

Organic MarketplaceGrowth rates in double digits since about 1990

Currently at about 16% Conventional at about 2 -4 %

Organic Foods Sales and Penetration, 1997-2005 Source: Nutrition Business Journal estimates based on OTAs 2006 Manufacturer Survey, annual Nutrition Business Journal surveys of manufacturers, SPINS, and other sources.

Sheet1

Organic Food ($Mil)Organic Food GrowthTotal Food Sales ($Mil)Organic Penetration

1997$3,594na$443,7900.81%

1998$4,28619.20%$454,1400.94%

1999$5,03917.60%$474,7901.06%

2000$6,10021.00%$498,3801.22%

2001$7,36020.70%$521,8301.41%

2002$8,63517.30%$530,6121.63%

2003$10,38120.20%$535,4061.94%

2004$11,90214.60%$544,1412.19%

2005$13,83116.20%$556,7912.48%

Sheet2

Sheet3

Organic Food Sales 2005by Category Source: OTAs 2006 Manufacturer Survey. Category and growth estimates derived from survey responses, Nutrition Business Journals organic industry model, SPINS retail data, and other sources.

Sheet1

Organic Food ($Mil)Organic Food GrowthTotal Food Sales ($Mil)Organic Penetration

1997$3,594na$443,7900.81%

1998$4,28619.20%$454,1400.94%

1999$5,03917.60%$474,7901.06%

2000$6,10021.00%$498,3801.22%

2001$7,36020.70%$521,8301.41%

2002$8,63517.30%$530,6121.63%

2003$10,38120.20%$535,4061.94%

2004$11,90214.60%$544,1412.19%

2005$13,83116.20%$556,7912.48%

Sheet2

Organic Food CategoriesSales ($Mil)% Growth 2005

Dairy2,14023.60%

Bread & Grains1,36019.20%

Beverages (incl. non-dairy)1,94013.20%

Fruit & Vegetables5,36910.90%

Snack Foods66718.30%

Packaged/Prepared Foods1,75819.40%

Sauces/Condiments34124.20%

Meat/Fish/Poultry25655.40%

Total Org Consumer Food Sales13,83116.20%

Sheet3

MBD00127B1F.xls

Organic Food Category Share, 2005Source: OTAs 2006 Manufacturer Survey. Category and growth estimates derived from survey responses, Nutrition Business Journals organic industry model, SPINS retail data, and other sources.

Forecasted Average Annual Organic Food Sales Dollar Growth, 2007-2010

Source: Organic Trade Associations 2006 Manufacturer Survey and Nutrition Business Journal analysis

Organic Marketplace

Expanding by consumer demand

Our challenge to meet the demand! A nice problem to have!

U.S. Government Support? For Organic# 1 Organic is grateful for the professionals at the National Organic Program in AMSLimited support from other areas of USDA include small economic research projectsIncreasing acknowledgment in REE and NRCS

Comparative Studies

One study done by ERS concerns EU vs. US support for organic and it is very instructive

OTA Supports USDAIn this Appropriations CycleNOP seeking $3.13 vs $2.026Price informationCrop and Livestock AnalysisStudy of number of acres and organic farms in U.S.

OTA Supports USDAResearch money is essentialHouse Floor action to put $5 million in Ag Appropriations supported by all organicTransition money via organic certification cost share dollars

USDA Supports OrganicFunds have been allocated and programmed to benefit organic in a few casesCSREESEQIPNRCSFAS

Is there Equity and Parity in Support?

2006 Support for Biotechnology in USDA ONLY

Approximately $170,000,000

Impact of Lack of Support

Organic producers and processors need production and price dataBasis for marketplace, risk insuranceFarm map request!

Will OTA Work for Change?

OTA, with others in the organic community, will be seeking parity in the next Farm Bill.

The Elephant in the RoomBiotechnology Regulation

Potential losses to organic sector

Co-existence?The concurrent but separate existence of two or more nations of assertedly great ideological disparity Amer. Heritage Dictionary

Lebanon-Israel? Former East & West Germany?

Successful Co-existenceStrict and neutral parties enforce the separationProtect the weak and underfinanced from the strong and wealthyEncourage societal responsibility, enhance human life and environment

Organic is a good neighbor not a nation of great ideological disparity

True coexistence is characterized by a desire to live in harmony with neighbors

The Future for OrganicThe future of organic is bright in the United States and worldwide

We believe we are the agriculture of the 21st Century

Learn more at www.ota.com .

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