Green Cotton

Photosource: Linda Coan for the NY Times

The NY Times reported last week on the ‘sticker shock’ associated with organic products. While the organic market has seen unprecedented booms in the last few years, the recent economic downturn coupled with rising fuel and grain costs, have begun penetrate the organic market too. Consumers and farmers alike are feeling the hit.

Facing the front line pain of the increases are the organic farmers themselves, who are being forced to move back into conventional farming and/or pass along the increases onto consumers. Because the price differential between conventional and organic on certain products is so great, some consumers are now opting out of buying organic for the first time.

Two comparisons:

• Eggs: regular eggs now average $1.34 – $3.59 for a dozen, whereas organic ranges from $3.99 – $6.39. For a large egg-eating household that is a 3-fold difference.
• Milk: regular milk ranges from $1.99 – $2.99 and organic ranging form $3.29 – $4.99.

Overall, the consumer price index for groceries has increased 5% in the last year; however, some staples like eggs have jumped as much as 30% and milk as much as 13%. On average, organic products cost between 20 and 100% more than its conventional counterparts.

Some farmers have decided to switch back to conventional due to the high costs in grains and other products. In the last six months, 25 farmers in the Northeast have either retired early or stopping organic farming.

Americans spent $16.7 billion on organic food and beverages in 2006, representing a 126% increase in five years. While there is still room for growth, as organic sales only reach 2.8% of total food and beverage sales, with the rising prices, we may see a plateau in sales for some time to come.

In addition, in 2005, the United States had 14.1 million acres of organic farmland, which is 3x’s the amount in 1997. Yet, it appears that this growth may also be beginning to taper. Prices for organic soybeans, corn, and wheat are at or near record highs. When these staples rise, so does the rest of the food chain and products derived from these grains. In general, making the switch from conventional to organic farming requires a 3-year process, plus tons of paperwork and investment of resources. Farmers are increasingly thinking hard about making that transition.

All this points to the important conclusion that as much as we all want to be green and organic, (as poll after poll suggests that we do), there are limits to this greenness in our wallets. Prices matter, especially in an increasingly challenging marketplace. One question I have: do organic farms receive the same federal subsidies that conventional farming does? Depending on the answer, this could make a big difference in making the grains more affordable…food for thought.

For more information on this story, please see NYTimes.

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