More markets needed for organic products

The rise of developing nations such as China, Brazil, Ethiopia, India and Thailand as organic supply sources has been a welcome addition to an organic industry struggling to meet booming demand in North America, Europe and Japan. But unless domestic organic markets are fostered in these developing nations, organic output may go unsold and eventually grind to a halt if the current Western boom cools off as many experts predict.

"Demand is booming in First World countries but production is not — in fact in parts of North America and Europe organic farmland has actually decreased," the director of UK-based consultancy Organic Monitor, Amarjit Sahota, told FF&N. "At the same time, production is booming in Third World countries for the export market with Latin America, Africa and Asia having established supply sources in many products and ingredients. What we are seeing is a disparity between production and demand. The consequences of that are risky for both suppliers and Western markets."

G7 countries account for more than 80 per cent of total organic sales but possess only 12 per cent of the globe's international organic farmland. "Producers in developing countries are advised to develop internal markets for organic products to spread business risk," Organic Monitor said in a report. Developments were occurring in Singapore, Malaysia and Taiwan, which have recorded 30-40 per cent annual sales growth, albeit from a very small base.

Sahota warned of the potentially disastrous effect implementation of protectionist policies by Western nations could have on new suppliers — further motivation to develop local organic demand.

"Protectionist policies are one of the big dangers that could leave developing world suppliers without markets," he said. "They then might have to sell product as non-organic without premiums and risk losing a lot of money."

Economic realities mean that as things stand there is little incentive to develop domestic markets. "Producers could do more to develop domestic markets but they don't really want to. They can earn 200-300 per cent premiums selling into the West as opposed to 20-30 per cent in their home market. That is why 90 per cent of production is being exported. Producers are converting not because they believe in organic practices but because they are looking at export and generating hard currency."

At 3.5 million hectares and more than 10 per cent of the world's organic production, China has more land devoted to organic production than any other country except Australia, according to the International Federation of Organic Agriculture Movements (IFOAM).

It is the classic example of the growth of a developing-world organic supplier, despite the existence of nascent end-product organic markets in increasingly wealthy cities like Shanghai and Beijing. "China has increased production — mainly primary ingredients like seeds and grains — almost entirely for the export market," Sahota said. "At the moment, it is just not cost-effective to produce finished goods and export them to places like Europe. It is easier to fill up bulk containers and sell them in bulk and get them packaged abroad."

Organic products such as biscuits and beverages being sold in major urban centres are being imported back into the country — mostly from Europe, and often incorporating organic ingredients of Chinese origin.

Sahota noted examples of domestic activity, such as a network in Brazil where organic farmers sell organic produce direct to consumers at knock-down prices. "It's working really well. It started off in one state and then it spread to a number of states across southern Brazil. It would be good to see more of that. But it may be a cooling off in demand from the West that will precipitate the rise of domestic organic markets in some of these developing countries."

The situation in many Western markets has been exacerbated by an excess in organic supply that occurred in Europe and other regions at the beginning of the new century. "A lot of farmers converted to organic but couldn't find a market and then they had no choice but to convert back to conventional farming," Sahota said. "Because of that there is some reluctance for farmers to convert to organic, but that is changing because demand is so strong."

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