Organic Farming in the United States

Organic farming was once hailed as the savior of the small farm, as it allowed farmers to operate on a small scale by utilizing on-farm and self labor and eliminated the need to utilize high-cost chemicals. However, Federal regulations and the cost of conversion have become barriers for small-scale producers. On the other hand, large premiums and potential profits have attracted large retailers such as Walmart to enter the organic market. The entry of large retailers in the organic markets has turned the organic market that was once a small niche market into large scale or mainstream.

Despite the growth in the U.S. organic markets, when compared to markets like the EU, organic farmland in the United States is still relatively modest. The EU member states have more organic farmland and more organic operations than the United States; although the United States has three times as much total agricultural land. In 2003, organic farmland in the EU was 5.1 million hectares; while in the United States, it was 0.88 million hectares. Policies also differ significantly across the two countries with the EU promoting organic farming by supporting government intervention. The impact of government support is more evident when we look at the percentage of organic farmland in the United States. Though sales of specific organic products have been increasing in the United States by 20% every year, only 0.5% (1.6 million hectares) of U.S. farmland was under organic production. Average size of the certified organic cropland was 82.1 hectares in 2005.

The global market for organic products is also growing mainly in the United States, Europe, Canada, and Japan. According to the USDA, there are 31 million hectares of organic farmland worldwide. Australia has the largest area under organic management in the world, followed by China, Argentina, the EU, and the United States. As organic production is mainly labor intensive, developing countries have a competitive advantage over the United States due to lower labor costs. The largest increase in organic production has occurred in developing countries. Latin America, Asia, and Africa report triple-digit growth in organic farms since 2000. The fastest growth in organic production has occurred in China, Bolivia, Chile, Uruguay, and Ukraine, which witnessed over a 1000% increase in organic farmland between 2002 and 2006.

Despite the demand for organic products, trade is hindered by lack of trade policy on the existing trade standards in various countries. Phytosanitary requirements for imports of organic produce are similar to those of conventional produce. Lack of equivalent standards and the use of unscientific phytosanitary measures often impede trade. As new countries enter the international organic market, they establish their own national standards, which further compound the problem. While negotiations to establish some universally recognized standards have been ongoing for some time, there is no consensus to overcome this barrier.

The organic food industry is a booming business both in the United States and globally, presenting many opportunities and challenges. With rising income and changes in consumer tastes, demand for organic products is expected to increase in the future. The organic market has reached a critical mass with the entry of larger firms having greater efficiency and better quality control compared to small-scale producers. In the United States, organic food is a $14-billion industry accounting for over 2% of the total retail food sales. According to food industry analysts, it is expected to reach $23.8 billion in 2010, accounting for 3.5% of the U.S. food market. Despite the immense potential in the organic market, the federal government spends less than $20 million on organic farming research. With the entry of large retailers in the organic sector, acreage of land farmed organically is expected to increase. The significantly lower price for organic products offered by retailers like Walmart implies that organic produce will be affordable and available to a much larger segment of the population. Today, most stores offer some organic foods, even if it is somewhat narrow in scope. Consumers unable to previously afford organic produce due to higher prices, may now be able. Large-scale organic farming has also raised concerns about the quality standards, organic farming practices, and lack of incentives for small producers. Stringent quality control and labeling inspections, reducing certification costs, and providing special incentive to small farmers are some measures that need to be undertaken by the government. In addition, in order to eliminate barriers in international organic trade, efforts need to be made to establish some national standards that will be universally recognized by all WTO member countries.