Sunday 25 April 2010

Putting the Organic Market into Perspective – Small and Likely to Remain So


The Soil Association’s market report for 2010 has been published and as expected shows a big drop in sales over the last year. Equally to be expected it is full of enthusiasm about the sector’s future, and points to a slowing in the sales decline.

But before anyone considering investment in organics plunders the piggy bank it is worth remembering that the organic market always was tiny, even in its heyday, and no amount of zeal will lead it to being anything but tiny.

It is important to remember this, for the whole thrust of the Soil Association report is that the 2009 decline was a blip, that organic farming is the only way to go to minimise carbon emissions, and that by wise allocation of the amount we eat organic farming will be able to satisfy food demand in the future. All that is required, says Peter Melchett, policy director, is money – money from the government both to research the sector and to increase support for farmers converting to organics, preferential treatment for organic produce in the public sector procurement, and money from the EU to bolster consumer demand.

As we know though, money is in short supply now. Whichever government wins the next election there will be swingeing cuts to budgets, with DEFRA being no exception. The little money that is available needs to be spent on projects that benefit the whole of agriculture, not just a particular, noisy sector.

Just how tiny is the organic market?

Sales in 2009 were £1.84bn, and are now below what they were in 2006. This is less than 2% of total expenditure on food and drink.

Performance by individual market varies but even in yoghurts, which, due to splendid branding efforts by Yeo Valley and Rachel’s, have the highest share of organic to standard sales, the organic share is just under 7%.

Organic milk sells 171,000 litres a year compared with a total market of 5 billion. Around 30,000 head of organic beef are killed each year compared with a total of 2.2 million. The figure for lamb is around 174,000 compared with a total kill of 15.8 million.

Producers in the organic market face a roller coaster ride. Farmer premiums for organic meat are rarely high, and often erratic. In 2009, the farmgate price of beef dropped by 3.5%, and the premium dropped from 22% to 9%. The premium for lamb dropped from 8% to 4%. The premium for milk also dropped back even though demand held up fairly well.

We cannot look to other countries and say that in time organics will account for a meaningful percentage of total sales. Even in affluent Denmark, the country with the highest percent of organic to standard sales, organics only account for 6% of the total market (Soil Association 2009 Market report). Not to be sniffed at, but not mainstream either.

All this is not to decry that there is a core of consumers completely devoted to buying organic, and farmers who deeply believe in organic principles. The point is that careful thought should be given to allocation of scarce funds to a small sector when the needs of agriculture in general are extremely pressing, and money is tight.




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