The International Organic Movement and Marketplace:
Global Overview Opportunities and Challenges
By Denise Godinho
"These days, the word ‘crisis’ is everywhere. People talk of triple crises including the ecological, social, and economic crises. Ecological crises are resource challenges such as preserving clean water, fertile soils, biodiversity, and implementing climate change mitigation. The most pressing social crises are poverty and the one billion—disgracefully, more than ever—hungry people. The economic crises not only include the banking crisis and the recession in many countries, but also the fact that transformations in agricultural systems force smallholder farmers out of their existence. We, as members of the organic movement, realize that these global crises reflect the sustainability dimensions that the organic world has sought to improve for as long as it has existed. The organic movement is not just there to fulfill demand for a niche market—although the market is constantly growing and convincing more people. The organic movement offers the world its successful and proven ways to address the global challenges.
At no other time has there been such an opportunity to make organic principles and systems a beacon for sustainable development throughout the world. Agro-ecological agriculture, represented best by organic principles and systems, is a multifunctional solution to many global problems that are reaching crisis proportions, including environmental degradation, hunger, and economic and social injustice.”
—Markus Arbenz, Executive Director, International Federation of Organic Agriculture Movements (IFOAM)
Organic has come a long way.
What was once a grassroots movement is now a global industry. Today, there are almost 1.4 million organic farmers worldwide and more than 35 million hectares (86.5 million acres) dedicated to organic agriculture, according to The World of Organic Agriculture: Statistics and Emerging Trends 2010, a worldwide survey conducted by IFOAM and The Research Institute of Organic Agriculture (FiBL).
Consumer demand for organic products is concentrated in North America and Europe—these two regions alone account for an enormous 97 percent of global revenues. According to research from Organic Monitor, global sales reached 50.9 billion U.S. dollars in 2008, doubling in value from 25 billion U.S. dollars in 2003. Preliminary research finds that despite the worldwide financial crisis, the global market for organic products continued to grow in 2009.
But the positive effects of the growth of the organic movement reach throughout the world, from creating economic opportunities for small stakeholders in developing countries in Africa and Asia to encouraging the creation of domestic organic movements in Central America.
In fact, the importance of organic agriculture is supported by more and more global organizations including the United Nations Conference on Trade and Development (UNCTAD), the UN Environmental Program (UNEP) and the Food and Agriculture Organization (FAO). Recently, the International Assessment of Agriculture Science and Technology for Development (IAASTD), a UN-backed initiative involving 110 countries, called for a radical shift in agriculture to agro-ecological systems, including valuation of farmers as producers and managers of ecosystems. According to Markus Arbenz, executive director of IFOAM, only a few attendees at the 2009 FAO High Level Expert Forum and the 2009 Food Summit dared to advocate for a second green revolution or express the belief that technological fixes alone can eradicate hunger. “The organic message of ‘farmers first’ is increasingly being heard,” concluded Arbenz.
Dr. Sophia Twaorg, economic affairs officer for the Trade, Environment and Development branch of UNCTAD, remarks, “We are convinced that organic agriculture can provide great trade and sustainable development opportunities. It offers better incomes for farmers everywhere, from Africa and Asia to the U.S., as well as increased food security, especially for small farmers in developing areas. It improves the environment through carbon mitigation and there is less sickness due to pesticides. It also offers social benefits by helping keep traditional knowledge alive and communities vibrant by reducing migration to the cities. We would like to see a real paradigm shift from the agro-industrial model.”
Challenges and Opportunities
Despite the overall positive development of the sector globally, there are still a number of challenges ahead. Many of these challenges are particularly perceptible in developing countries, where one-third of the world’s organically managed agricultural land—12 million hectares—is located. At the 2010 BioFach trade show in Germany this past February, much of the talk among global organic leaders was centered around social justice, fair trade and creating better opportunities for farmers, as well as maintaining organic integrity and preventing fraud—concerns that often center around developing countries.
Export Markets and Developing Economies. In the effort to reduce poverty in developing countries, the pursuit of export opportunities is of major importance, bringing in much needed foreign exchange earnings and offering farmers an important market outlet. The total export value of organic produce from Uganda, for example, was estimated at 30.08 million U.S. dollars in 2008. In Latin America and the Caribbean, most of the certified organic products are destined for markets in the Northern Hemisphere.
This export focus has meant that some governments, lobbied by exporters, have established production and processing standards that reflect external requirements rather than local production conditions and the country’s state of development. Especially in countries where the organic sector is still embryonic, the rash adoption of externally imposed regulations can contribute to stifling rather than developing the sector. Producers may well end up adopting regulations that are simply not reflective of local realities. Countries applying for membership in the EU offer such examples. Kosovo, for instance, is in the process of setting up a compulsory national accreditation program for certification bodies, in spite of only having three certified operations—all of which are merely doing wild collection.
Producers driven by export opportunities can find themselves entangled with multiple certifications and technical regulations. Currently, there are already 73 countries with organic regulations in the world. Many organic products such as fruits, vegetables, cereals, beans, herbs and spices, usually have dual if not triple certification.
Seals and Standards. Similarly, the proliferation of socio-environmental standards that compete with organic standards adds yet another layer of difficulty (and expense) to the provision of competitive products. In the case of coffee, the growing popularity of certifications such as Rainforest Alliance, Smithsonian MBC, Utz Certified, Starbucks C.A.F.E. and Nespresso AAA, means that producers must often learn new processes, adapt their practices and improve record-keeping and traceability. The trend toward such alternative certifications can also mean that conventional farmers, rather than converting to organic, may choose to engage in alternative production practices, some of which allow the use of chemical inputs, which in practical terms translates to less of a departure from conventional production. Adding to this, organic premium prices are not always higher than those of these alternative products, thus even organic producers may be tempted to abandon organic agriculture in favor of these alternatives.
In order to work together more effectively, IFOAM, Fairtrade and the Marine Stewardship Council created ISEAL, an alliance of well-respected social and environmental standard organizations. The purpose of ISEAL is to coordinate the peer review of member organizations and represent their common interests in governmental and inter- governmental forums.
Another trend is for organic certifiers to offer certifications that include social and environmental standards. The Institute for Marketecology’s (IMO) Fair for Life certification and the Instituto Biodinâmico for Rural Development’s (IBD) EcoSocial certification are examples of this.
Export versus Domestic Markets. Often where export is a clear priority, the sustainable
development of robust domestic markets tends to be neglected. In most Asian countries (except Japan, South Korea and Taiwan), the majority of production and exports are primary products with low value-added processing, such as dry and processed raw ingredients. Selina Gan, managing director of Country Farm Organics, Malaysia, confirms that Malaysia greatly lacks vegetables, a sufficiently broad variety of products—especially processed products—and enough certified organic farmers and processors (there are only three certified organic processors in Malaysia). As a result, the Malaysian organic market relies heavily on imports, with 85 percent of organic products being imported, chiefly from the U.S., Australia and New Zealand. Intra-regional trade of organic foods is limited since mostly primary crops are grown in Asia, but processing mainly occurs in other regions. Thus, Asia is unique in that it is both a large exporter and a large importer of organic foods.
According to Gan, lacking economies of scale, high customs duties and unfavorable currency exchange rates can drive the price differential for organic products to 100 to 500 percent above conventional product prices, depending on market location, quality and type of product.
Making Global Trade Less Complicated
The Global Organic Market Access (GOMA) project was developed to simplify the process of trade flow of organic products among various regulatory and private organic guarantee systems, focusing on harmonization and equivalence of organic standards and certification performance requirements as mechanisms for clearing trade pathways. GOMA is overseen by a steering committee comprised of representatives from IFOAM, FAO and UNCTAD. The group is currently helping develop the Central American Organic Standard with the goals of facilitating regional growth, expanding the export market, and working toward creating equivalencies and harmonization. GOMA has also commissioned a study to look at whether it would be better to create a unified Asian Organic Standard, or to develop multilateral equivalencies between the Asian counties that already have organic standards. Opportunities arising from this study will be presented at a GOMA workshop in Shanghai in May. GOMA also provides tools that can help any country understand international requirements for organic certification bodies and assess the equivalency of other nations’ standards with their own.
Despite the importance of projects like GOMA, the recent conclusion of the world’s first fully reciprocal agreement between regulated organic systems in Canada and the U.S., and the new EU regulation introducing procedures for approving certification bodies from outside the EU, much still remains to be done. While bilateral agreements are a good start, they need to become more widespread in order to be truly effective. Currently, however, no system for multilateral equivalence agreements between government regulations has even been discussed.
Growing the Movement in Developing Countries
Through the standardization of the organic sector, accompanied by increased international trade, third-party certification has become the norm in most developed organic markets. However, particularly where organic markets are still in their infancy, Participatory Guarantee Systems (PGSs) can be a powerful instrument to develop the sector and empower smallholders who would otherwise struggle to cope with the cost and heavy documentation associated with third-party (ISO-type) certification.
PGSs are locally focused quality assurance systems that certify producers based on the active participation of stakeholders including local consumers, and are built on a foundation of trust, social networks and knowledge exchange. These organic farmers make a public declaration to uphold the principles of organic agriculture and consumers are able to interact with farmers to build trust. An example is Community Supported Agriculture (CSA)—where the stakeholders (community) are able to get to know their farmers, discuss growing methods with them, and become a “member” of the farm.
PGSs have an important role in serving organic producers and consumers eager to maintain local economies and direct, transparent relationships. This concept has gained recognition in the past few years and is now viewed by many as one of the most promising tools to develop local organic markets.
It is estimated that around 10,000 small operators are involved in PGSs worldwide. In the U.S., more than 800 farmers are engaged in PGSs. The number in France is close to 500, while Brazil and India each have over 3,600 farmers involved in PGSs and the trend is clearly toward growth. According to IFOAM representatives, in the Philippines discussions are under way with government officials to amend organic regulations to recognize PGS as a legitimate local market claim.
While Katherine DiMatteo, president of IFOAM, says that PGSs may not directly lead to increased supply for processors, she points out that if a farmer is successful in a PGS, he might decide to expand his market by undergoing certification. Since PGSs are already familiar with organic principles, the farmer would have a head start. Processors may also choose to work with PGS farmers and help them achieve certification as a way to develop supply.
Either way, PGSs represent a growing trend, and are an important step in building awareness of organic principles and providing opportunities for small stakeholders. “IFOAM believes that the umbrella of organic is large and it’s not just about certification,” says DiMatteo. “Although we spent 20 years or more working on the certification piece of the organic movement, PGSs are not about going backward. They’re about reconnecting with the grassroots movement of organic and the relationship between the farmer and consumer.”
Building Strong Supply Chains Throughout the World
Perhaps the most significant hurdle to be overcome by the organic sector is that of developing reliable sources of supply, capable of leveling out national imbalances between supply and demand while maintaining the authenticity and credibility of organic supply chains.
Prior to 2008, demand for organic foods was outpacing supply, with many farmers not converting to organic farming because of the inflation of food crop prices and interest in lucrative fuel crops. The conversion period of two years in the EU and three years in the U.S. limits how rapidly domestic producers can respond to a sudden growth in demand. The global economic slowdown has put an end to food inflation, but if production levels of organic foods do not increase significantly and demand takes a major upturn in 2010, another bout of undersupply could ensue. To ensure sufficient supply, North American importers are investing in organic farming projects throughout the world, or opening subsidiaries in countries such as Argentina, China or the Philippines.
Gerhard Latka, founder of Crofter’s Organic jams, invests in farms in Yugoslavia by pre-paying 50 to 60 percent of the contract before even seeing a piece of fruit. “If you don’t invest in some of these rural farms, then they cannot finance the operation in order grow anything in the first place,” he observes. While some larger producers in more developed countries don’t need this kind of investment, Latka says that working with global producers allows him to source specialty crops—like his Morella cherries or Senga Sengana strawberries—which were left behind when monoculture farming took over in more developed nations.
Ensuring Food Safety and Quality Control
Emerging markets in Asia and Latin America have long been eyed with interest and China particularly continues to be seen as a supply source of great potential. Yet, news of health scares and import violations—even if unrelated to organic products—have raised questions regarding the reliability and integrity of products sourced from the country.
The regional impact on organic product consumption after these health scares has been positive as people, concerned about the quality of the food they eat, increasingly favor organic products. The melamine contamination incident, for example, led to a surge in demand for organic food in Hong Kong and neighboring countries in 2008. The avian flu and Severe Acute Respiratory Syndrome (SARS) were also significant health scares, as were the food safety issues related to cola drinks (India) and tofu (Indonesia).
While in 1997 China ranked 45th in organic production with a total of 4,000 hectares, today it has the third largest organic production area—1.9 million hectares. That is a significant increase in overall terms, but one should bear in mind that approximately 60 percent of China’s 1.3 billion population is rural, yet in 2008 China did not even make it into the top 10 countries with the highest shares of organic agricultural land. This means that China has a huge potential to convert a higher percentage of its total arable agricultural land to organic. While some companies may shy away from China due to its poor reputation for food safety, IFOAM’s DiMatteo says, “If we don’t work with countries such as China to help them improve food safety and quality, then they will never develop better systems and practices.”
Chinese authorities are already working to improve food export safety by certifying exporters and the farms that supply them (not only for organic). Also, China will soon be issuing a new revision of its National Organic Product Standard, which is said to include stricter requirements.
In a 2009 report from the USDA’s Economic Research Service, Imports from China and Food Safety Issues, the authors say that “[c]onsultations and exchanges between Chinese and U.S. officials on food safety are an important step toward improving the effectiveness and efficiency of monitoring and enforcing U.S. food safety standards in food shipments from China to the United States.” They further indicate that “[b]oth overseas and domestic consumers might have greater confidence in Chinese food products if a wider range of certifiers and labs were given greater latitude to operate in China. Overseas consumers might have more confidence in government-sponsored tests and certifications if their results could be verified by private-sector third parties.”
But the report points out that increased monitoring and verification procedures come at a price: “Safety-related measures, such as facilities upgrades, careful record-keeping, closer control over suppliers, testing, certifications, and audits, are likely to raise costs for Chinese food exporters.”
Although China gets the most negative media coverage, it is not the only country with issues. “We live in glass houses, as the U.S. and most every other developed country has had our own share food safety issues,” comments Joseph Stern, president of SunOpta Global Organic Ingredients. “There are quality, trustworthy producers in China just like there are anywhere else in the world. It comes down to managing your supply chain and how much you drill down to ensure integrity.”
Stern says his company does regular pesticide residue testing for products coming from China and other “higher risk” countries. The company also commissions third-party environmental and social audits and has inspectors based in China who do routine visits to its farms and manufacturing facilities.
Food safety is a big concern and proactive steps should be taken no matter where you source from, says Dave Lanstein, founder of Multiple Organics. “Trading food the same way that you would trade commodities like oil—without regard for the fact that it can cause outbreaks of food poisoning—is irresponsible, yet many companies still operate this way,” he explains. To ensure food safety, Lanstein says his company sends in a microbiologist food safety consultant to thoroughly inspect every facility it works with.
When it comes to safety and integrity, dialogue, collaboration and an efficient communication of efforts taken will be essential to restoring consumer trust in products from countries like China, whose reputation has been tarnished by highly publicized health scandals.
Creating a Better Situation for Farmers and Buyers
With regard to the needs of China’s organic market, Zeijang Zhou, IFOAM Representative in China, stresses that organic agriculture in the country needs to invest in technology and create an effective marketing and information platform. Whether it is the introduction of compost technologies to counteract the shortage of organic fertilizers, access to market data (where demand is located and for what crops/products there is demand) or training to acquire a more in-depth knowledge of crop rotation, organic farmers are aware of the need for constant improvement to ensure productivity and quality—hence, their income as well.
The creation of more direct linkages is, according to Zeijang, equally crucial. Local producers, few of whom speak English, may depend on various levels of middlemen to sell their produce, subsequently reducing growers’ profit margins. If linkages can be improved, small-scale organic farmers can increase the profitability of their crops.
Linkages result not only in better profitability for farmers, but also in better quality control for buyers. In many developing economies throughout Asia, except for China, the majority of organic production is organized through grower groups under contract with export companies. It is likely that, as companies seek to gain greater oversight over all processes from field to plate, the tendency for vertical integration will become greater. A clear advantage of this would be precisely that local producers would have direct contact with their clients and would be better equipped to satisfy industry requirements. Such a scenario would allow production to be optimized quantitatively and qualitatively, while eliminating unnecessary intermediates, allowing companies to offer producers better compensation for superior quality produce.
Edouard Rollet, co-founder of Alter Eco, a fair trade organic company that works directly with producers in 40 different countries, says that creating linkages is about much more than just buying directly from the farmers. “It is about building a system of empowerment through investing in their infrastructure,” he explains. “It could mean buying washing stations for coffee farmers or a mill for rice producers. It also means educating producers on everything from organic principles to business management and providing technical assistance.” Rollet adds that fair trade premiums can be used to help build infrastructure, and the company has field teams with university-educated agronomists who work with farmers to teach them organic techniques.
Leading the World to Global Sustainability
After many years of negligence, investments in agriculture are recognized worldwide as being important to poverty reduction and sustainable economies. “This is, however, just the first step in the right direction,” says IFOAM’s Arbenz in The World of Organic Agriculture: Statistics and Emerging Trends 2010. “Investments are still wasted on satisfying the interests of agro-industry or conventional research, when they could be used to engage poor stakeholders and make their reality a priority.” He suggests that such waste would not happen if organic were recognized as a guiding policy for governments at all levels, for NGOs and for the corporate stakeholders in the agriculture sector.
“Comparative studies of the level of ecological, economic and social sustainability of organic (be it certified or not) and conventional systems show impressive evidence in support of organic,” he says. “It is also no surprise that we often find organic principles behind development success stories. Rural development projects aligned with organic have healthier soils, livestock and people after just a few years, as well as more biodiversity.”
Arbenz notes that food security is only one of the areas in which the global organic movement can make an impact. “Fighting climate change, with the message: ‘organic = high-sequestration, low-emission, food-secure farming,’ is a real priority.” Working together, we can continue to spread these messages, grow the organic movement and improve the environment and quality of life throughout the world.
Denise Godinho is the membership and communications manager for IFOAM. You can reach her at firstname.lastname@example.org. IFOAM is the worldwide umbrella organization for the organic movement, uniting more than 750 member organizations in 116 countries. For more information on organic agriculture worldwide, visit www.IFOAM.org.
More data from “The World of Organic Agriculture: Statistics and Emerging Trends 2010” is available at http://www.organic-world.net/yearbook-2010.html. The entire report can be purchased at www.ifoam.org/bookstore.