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Organic Markets
Offer U.S. Agriculture Current and Future
Sales Opportunities
by Janise Zygmont
Demand for organic products around the world is at an all-time high. According to the International Trade Centre, a joint effort of the United Nations Conference on Trade and Development and the World Trade Organization, retail sales of organic food by major consumers (the United States, Europe and Japan) totaled $10.5 billion in 1997. Based on expected annual growth rates of 10-30 percent in these countries, retail sales this year are forecast to reach $21.5 billion.
With demand outpacing supply in many categories, the world organic market is in a unique stage of development. U.S. suppliers may find it advantageous to begin now making connections overseas and establishing a presence as part of their long-term marketing strategy.
Global Demand for
Organics Grows
Major markets for U.S. organic food currently are the European Union (EU), Japan and Canada. The strongest export categories are grains, beans and ingredients, but demand is growing for fresh and dried fruits, frozen vegetables, nuts, wine, juice, snacks and prepared foods.
Elsewhere in this issue, the retail market potential for organic products in the United Kingdom, France, Germany, Hong Kong and Taiwan are featured. But the typical consumer of organic products is affluent, educated and health-conscious, traits shared by a segment of nearly every country’s population. In many cases, lack of awareness and low availability are limiting factors in the expansion of organic consumption. In time, demand for organic products in these markets will grow.
Looking Beyond the Retail Market
Retailing is not the only marketing channel for organic food. We can expect to see more organic products channeled through food service, airline, hotel and restaurant establishments, especially given the nearly worldwide trends of increased travel and eating out.
For example, in 1997, Swiss Air began serving organic food on all flights leaving Switzerland, and has since expanded the service to London. British Airways provides first-class passengers with organic snacks. A restaurant chain in Japan offers organic meals for children, and in Sweden, McDonalds serves organic milk.
Organic food ingredients are quite important to the manufacturing and processing sectors in many countries. This outlet is expected to continue to expand as consumers seek a range of processed products comparable to conventional lines.
Finally, demand for organic animal feed is growing. Organic animal production has not developed as quickly or extensively as organic crop production, but that is changing. The EU recently implemented organic animal production standards. Codex Alimentarius will continue discussions on international standards.
Competition Heats Up
Spin a globe and stop it with your finger. Chances are there is organic production happening wherever you land, reflecting the sharp upward trend in world production. What is fueling the boost in production? Foremost is the strong consumer demand already discussed. Concerns about the environment, personal health, animal welfare and use of genetic engineering, among others, have created a niche market for organic products that is growing faster than just about any other sector of agriculture and food retailing.
Producers are turning to organics because of concerns about
the environment and their own long-term viability. Generous price
premiums create an incentive for conventional producers to
convert to organic production methods. 
Another contributing factor is the movement of international certifiers and consultants from the United States and Europe into Latin America, Asia and Africa. This is stimulating production of many tropical commodities, such as coffee, cocoa, fruits and spices, that are in demand in Europe and North America but that cannot be grown there.
Finally, government policies, particularly in Europe, aim to stimulate the organic sector through subsidies, production goals, consumer education and support in the form of research, education and marketing.
Examples of Production Growth
Following are just a few examples of how some countries are actively pursuing organics in their export strategy.
Argentina: About 85 percent of the output from Argentina’s active organic production sector is exported, mainly to Europe, with smaller amounts going to the United States and Japan. Organic production has been expanding by 25 percent annually for the last few years and is currently at $20 million. Rich in natural resources, Argentina grows a wide range of organic commodities such as grains, oilseeds, vegetables, pulses, fruits, livestock and more on land that traditionally has been farmed with minimal use of agro-chemicals.
Israel: The majority of Israel’s organic horticultural production is exported to Europe. The focus is on fresh produce including cherry and other tomatoes, potatoes, peppers, carrots, cucumbers, avocados, and white and red grapefruit. To avoid competing with European production directly, Israel has created a niche in Europe’s specialty and off-season markets.
Mexico: Organic production in Mexico is on the upswing. From 1996 to 1998, area devoted to organics increased 140 percent from 23,000 hectares (56,800 acres) to 55,000 hectares (135,900 acres). Mexico produces a diversity of crops: coffee, tomatoes, hot peppers, cucumbers, onions, garlic, peas, melons, squash, eggplant, apples, sesame, beans, chickpeas, blue corn, peanuts, vanilla, pineapples, herbs, avocados and more. Most of Mexico’s organic output is destined for the export market, primarily the United States.
Future Outlook
Industry observers expect demand for organic products and commodities around the world to grow for several reasons. First, core support for organics is strongest among affluent, educated, health-conscious consumers. The motivations that first drew them to organics, such as concern for the environment and their personal health, are likely to endure.
Second, today’s time-pressed organic product consumers want convenience and variety. Mainstream retailers who want to meet consumers’ preference for one-stop shopping will require a steady and reliable supply of organic products.
Finally, no country can become entirely self-sufficient from an organic viewpoint. Organics encompasses the entire spectrum of agricultural products, so trade will continue to flourish.
U.S. Suppliers–Reasons for Optimism
A recent study by USDA’s Economic Research Service reveals a vibrant, diverse and growing organic production sector in the United States today. The study indicates that certified organic crop land more than doubled during the 1990s and that some organic livestock sectors–eggs and dairy–grew at an even faster rate. The United States has a reputation as a reliable supplier of quality conventional products, and there is no reason to expect that the organic sector cannot do the same.
The United States is a recognized leader in creating new, innovative organic processed products, many of which have found success with customers overseas.
Finally, with the release in March of the new proposed organic standards, the United States is poised to offer consumers organic food, fiber and feed that has been grown and handled under the most rigorous standards in the world.
The author is an agricultural economist with FAS’ Horticultural and Tropical Products Division. Tel.: (202) 720-1176; Fax: (202) 720-3799. E-mail: zygmont@fas.usda.gov
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