Organic Demand Surge Widens U.S. Supply Gap

June 9, 2017 10:14 AM
 
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According to the latest analysis from CoBank, produce processors and retailers find it more and more difficult to sufficiently stock up organic produce because U.S. demand continues to outstrip supply.

Currently, 15% of all U.S. produce sales are organic – a number that has doubled since 2011 to $5.5 billion in annual sales. Even though organic acres have almost doubled in the past decade, that supply-side growth is still sluggish relative to demand, according to Christine Lensing, CoBank senior economist of specialty crops.

“Sales of organic fruit, vegetables and nuts have increased dramatically in recent years, and this growth trend will continue,” she says. “More than half of U.S. households are now purchasing some organic produce. But for a variety of reasons, production has not been keeping up with demand, and the supply gap is widening.”

Lensing recognizes some of the challenges. For example, transitioning acres to organic carries costs and risks. Domestic growth will depend on consistent, wide premiums that reward producers for assuming these risks, she says.

Premiums of 30% to 50% for organic produce sound lucrative, Lensing notes, but producers can’t capture that during the lengthy three-year period to organic production, she says. Other challenges can include possible additional labor requirements and the lack of support systems such as subsidies or grants.

But as Lensing also points out, the organic industry has been taking steps to help alleviate some of the transition pressures. For example, the Organic Trade Association and USDA have formed a partnership to guide producers who transition acreage to organic production.

“[This initiative] and the formation of additional strategic partnerships should serve to encourage more organic production and help address the marketing challenges created by supply shortfalls,” she says.

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