Assessing the growth potential of organic foods

Date: 22/11/01

By Renée Cordes

Three years after converting to organic farming, Koos Van der Laan is just starting to break even.

Still, the Dutch dairy farmer has no plans to return to conventional production methods.

"It's a pity that the results in the first few years are worse but you continue because you believe in the market," said Van der Laan, who bought the 20-hectare farm in central Holland from his mother 17 years ago. Although Van der Laan can fetch a higher price for milk than peers who haven't gone organic, and saves money he used to spend on chemicals and other synthetic materials, his yield is lower. He receives around 750 euro a year in subsidies, but could probably do with a little more.

He had hoped to argue this point, and more importantly, to make a case for organic farming in general, as a representative to a committee set up by the European Commission a few years back. Two meetings in as many years didn't provide much of a forum.

Finally, it appears that someone is starting to listen. The Commission is drafting an organic farming action plan, to be unveiled early next year, which it hopes will provide new momentum for environmentally friendly agricultural production. Although it's still very much in its initial phase, the report is expected to champion organic farming as key to bolstering food safety and quality.

It will also probably analyse the barriers to and potential for the sector and propose a combination of regulatory and market-oriented measures for stimulating the sector.

It will also address the sticky question of labelling, and whether EU local rules should take precedence.

The move was prompted by a call from governments led by Germany, Austria and the UK, among the top players in Europe's 6 billion euro-a-year organic retail market. As these countries seek to boost organic farming at home, Germany is aiming for 20 of farmland to be organic by 2010 compared to its present 3.

This, the argument goes, will not only be good for the environment because of less intensive farming and doing away with chemicals, but it will ensure higher prices for farmers, a better balance between supply and demand, and will boost rural employment in a sector which has been losing jobs.

In a joint statement issued last May, agricultural ministers and interest groups representing farmers, consumers and environmental campaigners, declared: "Organic food and farming should be developed further in Europe."

The so-called Copenhagen declaration heralded a major turning-point in EU agricultural policy by thrusting organics back to the top of the agenda. As one expert put it: "It changed the map."

To its credit, the EU has gradually changed its Common Agriculture Policy (CAP) along these lines. Under Agenda 2000 it introduced a number of reforms designed to promote environmentally friendly farming, though it left it largely up to member states to decide the extent to which these should be applied. One provision allows countries to re-direct payments for large farms by up to 20 and use them instead for additional rural development measures.

What's more, the CAP provides aid to beef farmers who shy away from intensive methods, farmers in mountainous regions and other "less-favoured" areas and those who set aside a certain portion of their farms for environmental purposes.

Commission officials are quick to point that so far only the UK, France and Portugal have taken advantage of this aid process, known as modulation.

Some pro-organic campaigners would like to see modulation become mandatory. "The disparity between the conventional subsidies and environmental support is still massive and completely out of proportion to what's required," said Francis Blake, standards and technical director for the UK-based Soil Association, which has been campaigning for organic farming since 1946.

He said the entire system should be changed so that subsidies are used to reward environmental benefits rather than being based on output.

While setting targets is a good step, it isn't enough, he added.

Commission officials admit that the discussion about voluntary versus mandatory financing is still an open one, though for now they seem to prefer the status quo. There are two main arguments for doing so: too much financial support could lead to over-production and lower prices; and if farmers convert to organic methods just to receive more financial aid, then the market may lose its specialty niche status.

"We must be careful. If we supply more than we need then the market might end up collapsing," warned Risto Volanen, secretary-general of EU farm lobby COPA/COGEGA, cautioning against an over-hasty reform.

Through the years, agricultural policy has adapted to changing situations. Throughout the 1950s the main aim of farming was to boost productivity, satisfy immediate needs for food and make the EU become more self-sufficient; so the Union responded by heavily subsidising high-output farms.

By the end of the 1960s, organic farming came to the forefront in response to concerns about conservation.

But it didn't really take off until the 1980s, when new production methods were developed and consumer demand surged. This led to an increase in the number of producers, and new initiatives were launched for processing and marketing organic products.

Today, organic farms account for a little over 2 of total agricultural land in the EU, compared to less than 0.1 in 1985, according to a recent report by the Soil Association. Most organic farming involves grassland. If the growth continues at this rate, 10 of Western European agriculture could become organic by 2005 and 30 by 2010. The number of organic farms and conventional farms in conversion exceeded 100,000 in 1998 compared to 6,300 in 1985, an annual average growth rate of around 25.

The market in the EU is fragmented, as only a handful of member states have introduced policies for organic farming, including specific targets, subsidies

and government-sponsored promotions, leaving the rest far behind.

Six countries alone (Greece, Spain, Italy, Austria, Finland and Sweden) represent nearly 70 of all organic farms in the EU. The organic markets in Italy, France, Sweden and the Netherlands are all expected to jump by more than 20 over the next few years, while the Danish market is projected to grow by up to 40.

The EU officially recognised organic production in 1991, with legislation for minimum standards. It has modified the rules several times since then, most notably in 1999 when it introduced rules for the production of organic livestock products.

It also developed an EU logo for products which meet these standards, but it has been used rarely due to preferences for regional and national logos.

But even organic proponents concede that however policymakers encourage organic farming, it will all be for naught if there's no market for the goods. Because the products are more expensive than those which are produced conventially, they won't appeal to all consumers.

Belgian grocery chain Delhaize began selling organic products ten years ago, long before it became fashionable, amid expectations that some consumers would be willing to pay a higher price for them.

The head-start paid off, giving Delhaize one-third of the domestic market today.

Whether that market will become the norm is still an open question.

Article forms part of a special report on food safety and agriculture.