Organic agriculture has been featured in two articles in New York Times in the past week, and both discuss the impact of growth in consumer demand on the market. The first article discusses organic milk. Unlike most other organic products, which have fairly stable markets, the organic milk market has faced swings in supply over the past 8 years or so (page 16). There have been times when organic milk is just not available, leaving supermarkets with gaps on the shelf where the organic milk should be. Generally speaking, demand for organic milk has increased at a relatively constant rate, with the exception of late 2008/early 2009 (result of the recession). The supply side has been more volatile, for several reasons: (1) changes in the regulation encouraged many farmers to convert to organic milk production in 2008/2009, although this was a one time, short term effect; (2) organic feed is very expensive and often difficult to procure; (3) when conventional milk prices are high, organic farmers may decide to not produce organically, and (4) the organic dairy processors strive to maintain high prices by controlling supply through the use of contracts. As an example, in 2008, the big processors reduced quotas and did not renew contracts with some dairy farmers, in order to keep prices high during the recession. (As an aside, I think this is rational behavior on the part of the organic milk processors.) Of the four factors, organic feed supply probably has the greatest impact on the supply of organic milk.
The second article states that organic agriculture “might be outgrowing its ideals.” While this article is mostly accurate, the statement that organic food is “….grown locally on small farms in a way that protects the environment…” is outright incorrect. Organic does not imply local, and organic does not imply small farms. Many people make that error, but I expect more from the NY Times (after all, it is my favorite newspaper). The other points are related to scale: how can the sector meet the demand for organic products as it increases? Many of these problems are pervasive through our food system, and are not unique to organic: we insist upon eating out of season food, thus we are forced to import (and I am not saying this is automatically bad). Meeting the enormous quantity needs for large food stores plus a low price requirement provides incentives for farms to give up on crop rotation or place demands on the water supply (mind you, agriculture stresses our water supply anyway). Again, the industrial model has figured out how to supply food at a low dollar cost, and our food stores operate within this industrial model.
One important point alluded to in the first article is that agricultural markets are subject to both supply and demand uncertainty. This means that prices and quantities fluctuate — which in turn means that farmer income varies from year to year. I think the ideal of small farming really means we want farmers with small operations to be able to earn a living. A key point in the second article is that the regulation defining organic is responsible for ensuring that the organic standard accurately reflects ecosystem balance and sustainability. So maybe it is time to revisit the organic standard, so that firms following the rules are producing sustainably?
Together, the two articles indicate that first, the organic markets are subject to the same forces as the conventional food markets. Second, firms are going to meet the regulation and not the ideal, so that the regulation needs to reflect a reasonable ideal. This struggle faced by the organic industry is not going to disappear.