I am not here to debate whether conventional or organic farming better. That is like debating whether a Ford F-150 or a Mercedes E Class is better. What makes one car better than another? Most units sold, price, resell, fuel mileage, reliability, size, safety, its intended use. All of them? None of them? Because it makes you feel good. Or do you decide what is best for you based on a lot of intangibles?
In fact, that is how most consumer decisions are made, People decide they like something then rationalize it. And a lot of people have decided they like organic food, with sales increasing 200% since 2003. Gallup reports that in 2014, 45% of Americans actively tried to include organic foods in their diets.
Organic is just another sector of the food market, a profitable growing sector. There are premium markets in every sector, be it cars or clothes, why not food? The people have decided they want organic food and they are willing to pay a premium for it. So why would you not want to take advantage of that?
You can find organic foods in every major U.S. retail chain, including Walmart and Costco, who eclipsed Whole Foods in the sale of organic foods last year. The world’s largest consumer packaged food companies, General Mills, Kellogg’s, Danone, Coca-Cola, and Pepsi are all players in the organic market with billions spent on acquiring organic brands.
There is a problem though
Organic food sales grew over 200% since 2003, yet the amount of land used for organic production has only grown by about 0.10% since 2008. Domestic suppliers of organic crops cannot meet current demands.
Imports of organic food sources have grown at over 35% per year since 2012, to almost $2 billion. Imports of organic soybeans have grown at an average rate of 29.1% per year while imports of feed corn have grown 63.6% per year. This is a crazy amount considering that the U.S in the largest producer of these two grains.
The primary driver for this demand has been double-digit growth in organic poultry production as well as a need for other organic livestock feed. With companies such as Perdue Farms, Tyson Foods and Pilgrim’s Pride committed to meeting consumer demand. They have a big need for organic soybeans and corn for feed and this market is expected to grow sharply.
This problem means opportunity for agriculture
Organic food sales make up almost 5% of food sales, yet acres certified for organics is the less than 1%.
These organic acres account for only 0.75% of total acres while organic farm sales were 2% of total farm sales. Mercedes Benz has about 2% market share of cars in the US. I doubt anyone would say that Mercedes Benz is not a real car company or just expensive cars for millennials.
It’s never been a better time than now to get into organic farming or the business of supporting organic farmers. There are tons of great management products for organic crop production out there. Many manufacturers of organic products have years of documented product performance. This makes growing organic less risky than just a few years ago.
If an ag retailer is looking for opportunity in the next 10 years, supporting the organic farmers would be a great place to start. When done right organic crops can meet or exceed conventional yields. With those yields, organic farming can be very profitable and the numbers show it’s a growing sector of agriculture. Conventional crop receipts dropped in 2015 by 11% while organic receipts grew 13%.
With no end in sight to this down Ag Economy, you have two choices. Continue to fight for scraps with the rest of the sharks or evolve your thinking and adopt a Blue Ocean Strategy. Organic farming is here to stay and a segment ripe for big growth.