New data show that 2008 organic food sales will reach $32.9 billion
As people from Haiti to Ethiopia are tragically struggling to cope with rising food prices, many are piecing together the reasons behind our recent price spikes. The culprits lie in everything from the switch to growing crops for biofuels to market speculation. The situation is complex and involves multiple factors. But as economists tally up the numbers and politicians scramble for solutions, others are beginning to wonder if this is the end for organic food as we know it. For years, the organic industry has seen sales growth in the double digits, far outpacing any other sector of food products. Articles have been popping up to question the feasibility of anyone of moderate means buying organic. It seems like the unfortunate and untrue “elitist” stamp might be making a comeback.
These assumptions miss one of the most important points of rising food prices — oil. Whether the food crisis is the result of biofuels pushing out agricultural land or investment speculation, it has proven one thing to be clear — as oil prices rise, food prices rise. We may not think about it very much, but our conventional food system is unfortunately based on fossil fuels, and we must face the reality that oil is not a renewable resource. With increasing fuel prices come increasing food prices, unless we change the way we farm.
On the organic front, fortunately the naysayers were wrong. Organic food growth has not taken the nose dive that some thought it would; in fact, it’s still thriving. A report out yesterday estimates that 2008 sales of natural and organic food and beverages will continue at a double-digit growth rate to reach $32.9 billion. For the period of 2005 to 2008, organic and natural food products grew 67.6 percent with a compounded annual growth rate of 18.8 percent. While these 2008 figures may not be as high as some of the amazing spikes in organic growth from a few years ago (often in the 20 percent range), they are clearly still higher than any other food sector. What does this demonstrate? That increasingly, despite economic costs or difficulties, consumers are willing to pay more for products grown without synthetic fertilizers, pesticides, GMOs, growth hormones, or sewage sludge.
While it may seem trivial, it is a true testament to the way in which Americans want their food grown, processed, and handled. And it looks like the times are changing as the “price gap” between organic and conventional foods continues to close with the rising cost of oil. The USDA estimates that egg prices will increase an average of 14 percent in 2008. Further research from the USDA notes that in the month of September from 2004-2007, wholesale egg prices rose from 54 cents to $1.22 for a dozen conventional eggs; yet, a dozen organic eggs only rose three cents — from $2.34 to $2.37. The price per pound of high-fructose corn-syrup went up $3.00 between 2006 and 2007, and the price of corn per bushel more than doubled in many cases during the same period. It seems likely that the areas closing the price gap the fastest will be the animal products and other items like corn-syrup that typically rely on grains for feed or production. As conventional corn, soy, and other commodity prices rise — due in part to the significant increase in the cost of fossil-fuel based fertilizers and pesticides — organic foods will likely look even more attractive for our pocketbooks.
While rising food prices are not welcome news for anyone, they are helping to flush out many of the externalities of our industrialized conventional food system. No longer can we afford to push aside the negative environmental, health and social issues that often unintentionally accompany industrial food production. For a long time Americans have enjoyed “cheap food,” thinking that we could really pay $0.99 for a box of Ho-Ho’s and not face any consequences. Increasing health care costs, rising obesity rates, and polluted communities have demonstrated otherwise. While organic isn’t perfect, it does aim to incorporate many of those costs, which is why, until recently, it has been more expensive up front. While organic may still be more expensive, trends are clearly showing that compared to conventional, it is much more price stable. Aligned with consumer demand, organic is getting more abundant, cheaper, and certainly more mainstream. As people continue to vote for a new food future with their wallets this will be increasingly true, and we can expect to see the price differences in conventional and organic foods close even more.