Overview of the U.S. Organic Sector

Presented by:

Catherine Greene

Senior Agricultural Economist

Economic Research Service—USDA

www.ers.usda.gov/briefing/organic

U.S. Organic Production Systems

production system that is managed in accordance with the Organic Foods Production Act and regulations to respond to site-specific conditions by integrating cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity.

---USDA National Organic Program

1990 Organic Foods Production Act Government Role

SEC. 2102 - Purposes (1) to establish national standards governing the

marketing…of organically produced products;

(2) to assure consumers that organically produced products meet a consistent standard; and

(3) to facilitate interstate commerce in fresh and processed food that is organically produced

Final regulations implemented on Oct. 21, 2002

All domestic organic production and imports must be in compliance

Provisions include:- Organic Production & Processing Standards- Organic Labeling Requirements- USDA Organic Seal

- Producer/Handler Certification - Certifier Accreditation

USDA National Organic Program (NOP)

USDA Organic Certification Requirements

Certification required for producers and handlers--with an exception for those earning $5,000 or less in organic sales

Certification process involves preparation of an organic plan, record-keeping, and annual on-site inspection

Organizations (State, private, and foreign) that provide organic certification services must be accredited by USDA

USDA Organic Production Standards

Crop standards (transition period, rotations, pest/nutrient inputs, seeds)

Livestock standards (organic feed, antibiotic prohibition, outdoor access)

Processors (inputs, product co-mingling)

USDA Organic National List: Allowed & Prohibited Substances

Evaluation Criteria (OFPA - Sec. 2119) Potential for detrimental chemical interactions Toxicity and mode of action Probability of contamination during manufacture, use,

misuse or disposal Effect on human health Effect on biological & chemical in agroecosystem Alternative practices and materials available Compatibility with sustainable agriculture

USDA Organic Labeling Requirements

Label requirements and USDA seal use varies depending on the percentage of organic ingredients in the product

Products containing 95 percent organically produced raw or processed agricultural products may display the “USDA Organic” seal

Use of additional eco-labels in conjunction with organic label is permitted

USDA Organic Certifier Accreditation & Import Equivalency

USDA accreditation to maintain certifier consistency and impartiality

Certifier requirements include record-keeping, confidentiality & annual performance appraisals of inspectors

Accreditation period is 5 years Import equivalency based on USDA

accreditation or equivalency agreement

U.S. Organic Food Retail Sales, 1997-2005

Year Organic Annual Organic/ Food Growth Total

($ Bil.) (%) (%)

1997 3.6 N/A .81

1999 5.0 17.6 1.06

2001 7.4 20.7 1.41

2003 10.4 20.2 1.94

2005 13.8 16.2 2.48

Source: Nutrition Business Journal and OTA’s 2006 Manufacturer Survey

US RUS RETAILETAIL S SALES OF ALES OF OORGANIC RGANIC FFOOD OOD $13.8 Billion$13.8 Billion in in 20052005

- 1,000 2,000 3,000 4,000 5,000 6,000

Fruit & Vegetables

Dairy

Beverages

Packaged?Prepared Foods

Bread & Grains

Snack Foods

Sauces/Condiments

Meat/Fish/Poultry

($ M

illio

n)

Source: Organic Trade Association’s 2006 Manufacturer SurveySource: Organic Trade Association’s 2006 Manufacturer Survey

US Retail Sales of Organic Food Percent Growth in 2005

Source: Organic Trade Association’s 2006 Manufacturer SurveySource: Organic Trade Association’s 2006 Manufacturer Survey

- 10.0 20.0 30.0 40.0 50.0 60.0

Percent

Fruit & Vegetables

Beverages

Snack Foods

Bread & Grains

Packaged?Prepared Foods

Dairy

Sauces/Condiments

Meat/Fish/Poultry

Organic Food Channel Distribution, 2005

ChannelPercent of

Organic Sales

Natural Foods Stores 47

Mass Market 46

Other * 7

* Includes farmers market, food service, and other non-retail store sales

Source: Organic Trade Association’s 2006 Manufacturer SurveySource: Organic Trade Association’s 2006 Manufacturer Survey

U.S. certified organic acreage and operations, 2005

Source: USDA, Economic Research Service, based on information from

USDA-accredited State and private organic certifiers.

U.S. Certified Organic Cropland and Pasture, 1992 - 2005

1/ Excluding AlaskaSources: 1992-94 ,Agr. Marketing Service Economic Research Service,USDA; 1995 (including revisions of 1992-94 farmland), Agrisystems International; 1997,2000-05, Economic Research Service, USDA.

-

500

1,000

1,500

2,000

2,500

3,000

1992

1993

1994

1995

1997

2000

2001

2002

2003

2004

2005

Year

1,00

0 ac

res

Pasture 1/

Cropland

Organic Adoption Rate Varies by Crop (2005)

Certified organic crop acreage accounts for:

Specialty Crops Field Crops_________

1.6% U.S. tomato acreage 0.2% U.S. corn acreage 2.4% U.S. grape acreage 0.2% U.S. soybean acreage

3.4% U.S. apple acreage 0.5% U.S. wheat acreage

3.7% U.S. lettuce acreage 0.8% U.S. rice acreage

5.8% U.S. carrots acreage 3.1% U.S. dry pea/lentil acreage

Source: USDA Economic Research Service

USDA agencies have expanded research and other activities to support the organic sector

Agencies with new programs since the late 1990s:

Agricultural Marketing Service (AMS) Agricultural Research Service (ARS) Cooperative State Research, Education, and

Extension Service (CSREES) Economic Research Service (ERS) Foreign Agricultural Service (FAS) National Agricultural Statistics Service (NASS) Natural Resources Conservation Service (NRCS) Risk Management Agency (RMA)

Source: USDA Economic Research Service

USDA Organic-Sector Statistics

USDA-Economic Research Service Certified organic acreage and livestock analysis Annual USDA producer surveys: Organic dairy farms in ‘05;

organic soybean operations in ’06; apple operations in ‘07 Nationwide organic handler survey

USDA-National Agricultural Statistics Service Census statistics (every 5 years) Administers USDA producer surveys

USDA-Agricultural Marketing Service Occasional Market News prices for organic produce Weekly Market News report organic poultry & eggs

USDA-Foreign Agricultural Service Trade estimates

Federal Organic Sector Activities

Market facilitation Implementing uniform national standards and certification Market research and analysis Promoting organic exports

Research and education Competitive grants program developed for organic systems research (mandatory funds allocated in the 2002 Farm Act)

Risk reduction Crop insurance products are being developed for organic producers

Certification cost share and conservation programs USDA certification cost-share program expanded to 50 states in 2002 States tapping EQIP and other conservation programs to support

organic producers

Organic activities now included in all ERS programs

Food Economics Division—modeling consumer demand for organic food

Market and Trade Economics Division—research on organic food markets and distribution

Resource and Rural Economics Division—examining the adoption of organic farming systems

ERS Organic Activities:Tracking adoption of organic farming

ERS has tracked the adoption of certified organic farming systems in the U.S since mid-1990s

ERS collaborates with over 50 state and private certifiers, other USDA agencies, and several state offices of USDA’s National Agricultural Statistics Service to make estimates

Estimates available by commodity and state, 1997, 2001-2005, see www.ers.usda.gov/Data/Organic

ERS Organic Activities:Research and analysis on specific markets

ERS conducts research and analysis of consumer demand and prices in specific markets

Historical farmgate and wholesale organic prices for selected fruits,vegetables, livestock and eggs, see www.ers.usda.gov/data/OrganicPrices

Recent articles include trends in organic egg an poultry markets, see www.ers.usda.gov/briefing/organic

Research modeling fresh organic produce consumption is underway

ERS Organic Activities:U.S. Organic Handler Survey

Nationwide survey of all certified organic food handlers in the U.S. was conducted in 2006

Research is underway and outreach tools are being developed

ERS Organic Activities:Expanding USDA’s producer survey

USDA’s Agricultural Resources and Management Survey (ARMS) expanded in 2005

ARMS is the major USDA producer survey for economics, www.ers.usda.gov/Briefing/ARMS/

ERS and NASS adding a targeted sample of organic producers: dairy in 2005 soybeans in 2006 apples in 2007

Research currently underway comparing the costs, revenues, yields, energy intensiveness, and structural characteristics of organic and conventional production.

For more information

ERS Organic Briefing Room,

www.ers.usda.gov/briefing/organic

—provides links to all ERS organic research reports, articles, and data