Organic Growers Muscled Out
With organic farming on the rise and a growing number of major food processors entering the market and influencing prices, Farmers’ Legal Action Group (FLAG), a St. Paul-based legal information and advocacy organization, published a guide to help organic producers compete on their terms.
The article below is FLAG's introduction to the guide (which is at Flaginc.org).
According to the latest Census data available, there are more than 14,000 certified organic farm operations in the United States—accounting for over 14 million acres of land. [While not in the top 5, Minnesota is among a small list of states with at least 500 organic farms.]
In only 15 years, organic retail sales in the United States have grown from less than $3 billion to over $31 billion. Sales of organic products have often increased faster than supply, resulting in shortages of some products.* This red-hot growth is projected to continue; at least one forecast predicts the U.S. organic market could be worth almost $37 billion by 2015.
This strong growth comes at some cost, however. As the organic market grows, it is increasingly vulnerable to corporate control and “conventionalization.” As shown in the “Who Owns Organic?” graphic, over the last 15 years giant agribusiness companies like Kraft, Kellogg, and General Mills have been steadily absorbing smaller organic companies.
From a market perspective, the “conventionalization of organics” refers to large corporations gaining market power by purchasing smaller buyers in the organic market. Having acquired control of a large share of the market and eliminated much of their price competition, these large corporations can lower prices paid to farmers and use contracts to decrease farmer control over production.
This “conventionalization” has already occurred in the conventional agricultural market, causing serious financial harm to small-scale farmers, particularly in the poultry and livestock sectors. The growing concentration of the organic marketplace and the resulting imbalance in bargaining power have already begun to affect at least one group of farmers—organic dairy producers. The organic milk market is largely controlled by a few large corporate dairy processors. As a result, organic dairy producers often report feeling pressured to accept unfavorable contracts with pay prices that do not cover their costs of production. This happens largely because the lack of competition in the organic dairy market means the large dairy processors have the ability to push down the prices farmers receive.
The organic community has an opportunity to set a different course from the conventional industrial agricultural contract model by resisting conventionalization of the organic market and the power imbalances built into that system. One way farmers can gain market power is to join together in farm associations or cooperatives to share information and other resources.
The Organic Farmers’ Agency for Relationship Marketing (OFARM) (see page 28 of Flag report .pdf) is one example of organic farmers increasing their market power through collaboration and information sharing. In the European Union, where organic farming has been a regulated practice for longer than in the United States, countries with strong agricultural cooperatives and other forms of farmer associations have been more successful in resisting conventionalization pressures than countries without such farmer groups.
The strong farmer organization networks have empowered smaller farmers in these countries, helping them access credit, bargain for lower input costs, and access the economic and technical support necessary to compete effectively. At the same time, these forms of organization may have also allowed for higher standards in the treatment of farm labor, as well as more ecologically sustainable methods of production.
...As the OFARM example shows, U.S. farmers have the opportunity to copy the success of European organic farmers in resisting the conventionalization of the organic marketplace by joining together to form strong farmer association networks. Farmers may also wish to consider political strategies for resisting conventionalization.**
*Carolyn Dimitri, Lydia Oberholtzer, and Michelle Wittenberger, The Role of Contracts in the Organic Supply Chain: 2004 and 2007, at 1, EIB-69, U.S. Department of Agriculture, Economic Research Service (December 2010)
**Political strategies are a potential tool for resisting conventionalization in the organic marketplace. However, it is important to recognize the limitations of political strategies at the current time. These strategies have so far made little impact on the conventional agricultural market where political strategies (and litigation) have largely failed to prevent predatory practices by giant agribusiness companies. Most recently, once-promising attempts to strengthen regulation of the poultry and livestock markets to decrease corporate power and protect producers have stalled due to opposition in the U.S. Congress.