BUYING FOR ORGANIC: CONSIDERING THE REAL COSTS By Barbara Hauman
Here is a seemingly simple question: Is it true that organic products cost more than their conventional counterparts?
The answer, however, is less simple. If the question addresses retail price, the answer is generally “Yes,” although it could be “No.” If it is in terms of real costs, the answer is “No.” And, value? That is another, more important, question.
Price Generally, organic produce is often priced 20-25 percent higher at retail than conventional produce. But the differential may be twice as much, or only a few pennies.
“There are a lot of exceptions,” according to Bu Nygrens of Veritable Vegetable based in San Francisco, CA. For instance, because there has been an oversupply of certified organic apples in the Northwest, the price of organic Red and Golden Delicious apples has been very close to that for conventional, Nygrens said. Organic broccoli, meanwhile, has been abundant in California, leading to prices closer to that of conventionally grown.
In the Northeast, consumers find specific organically grown fruits and vegetables may be priced the same, or even lower, than their conventional counterparts during the peak of the local growing season.
Pricing is dependent on many factors. With produce, perishability is key, and distribution costs also must be considered. Availability is another factor, as is demand. Prices vary according to region, and season.
In addition, consumers often are willing to pay a premium for specific organic fruits and vegetables, such as Heirloom varieties, because they are seeking specific taste or other characteristics.
Real costs Prices for organic foods and fiber reflect many of the same cost factors as conventional items in terms of growing, harvesting, transportation and storage. However, all of these factors are generally higher for organically produced goods.
There are numerous reasons why. Organic farmers must meet stricter regulations governing all of these steps, so the process is often more labor- and management-intensive. Because organic farmers do not use persistent or toxic pesticides, more labor is needed to deal with weeds in the field. Organic farming tends to be on a smaller scale, and thus farmers pay more per acre to produce, according to Dave DeCou of Organically Grown Company.
Because of their size, organic producers also face added distribution costs.
“It is more expensive if a truck has to make eight stops with a load, versus one stop. There may be many more pickups and deliveries with organic,” said DeCou.
For manufactured products, there often are not the economies of scale.
“The shelf life of many organic ingredients is different than for conventionally grown ingredients because preservatives aren’t added. This means a manufacturer handling organic products may have to run smaller batches because less is available at a time,” said Phil Margolis of Neshaminy Valley Natural Foods Distributor, Ltd.
Historically, organic farmers have not received federal subsidies or price supports for producing—or not growing—crops. Nor has there been much research backing from the U.S. Department of Agriculture (USDA) for organic production.
In the report “The Future Role of Pesticides in U.S. Agriculture,” a panel of experts from the National Research Council of the National Academy of Sciences noted that organic foods grew from a $178-million market in 1980 to more than $5.4 billion in 1998. However, the amount of USDA’s research budget dedicated to assisting organic farmers was no more than 0.1 percent.
The biggest factor, however, according to DeCou, “is that conventional production is priced too cheaply. Conventional producers are going out of business. That’s just not viable. If we’re going to be compared to a system that is going bankrupt, there’s something wrong. We have to have a fair price to survive.”
He added, “When prices drop too much, organic farmers might have to cut out some of steps needed to nurture the soil. If that happens, their operations are not going to be sustainable in the long run. Organic farmers need to price their products so that they can make this investment. Otherwise, organic will no longer be able to continue to provide the quality on which the industry was built.”
A question of value Since 1984, the price value of food purchased in a typical grocery cart has increased 2.8 percent, yet the farmer’s share decreased by 37 percent, according to Mark Mulcahy of Organic Options. In 1956, Americans spent about 18.6 percent of their income on food, versus about 9 percent today.
According to USDA’s Economic Research Service (ERS), “The farmer’s share of each food dollar has dropped steadily, from 41 cents in 1950 to only 20 cents in 1998.” Conventional dairy farmers receive only 34 cents for each dollar a consumer spends on milk, according to Farm Aid.
“Consumers have been kept in the dark as to the real cost of growing food conventionally, and how harmful this system is to farmers, both environmentally and financially,” said Mulcahy.
There is mounting evidence that if all the indirect costs of conventional food production—cleanup of polluted water, replacement of eroded soils, costs of health care for farmers and their workers—were factored in to the price of food, organic foods would cost the same or, more likely, be cheaper.
The Institute for Market Transformation to Sustainability (MTS) is encouraging companies to consider life cycle assessments—looking at the environmental impact, from raw material production and extraction, through transportation, manufacturing, final use, reuse and disposal—of the products they use. MTS is encouraging Cargill Dow to consider developing an organic corn supply for corn-based plastic, versus petroleum-based plastic.
“Plastic from conventionally grown corn environmentally is not better than petroleum-based plastic because of the pesticide and fertilizer use in growing the corn,” said Mike Italiano, an officer in MTS. A life cycle analysis shows pesticide and herbicide manufacturing and use “require a great deal of energy, and generate much hazardous waste, which can result in ground and surface water contamination.”
Benefits of organic products, meanwhile, include improving environmental health, from building the soil and lessening or eliminating chemical inputs, to fostering natural habitats and promoting biodiversity.
“It is important to convey to consumers that they strengthen that market through their pocketbooks. People in America are taught they can get everything they want, and at the cheapest price possible. We are not taught the cost of our decisions. We need to consider the value of the food we eat,” said Italiano.
Mulcahy offers the following advice: “Be willing to pay a fair price for organic food, a price that reflects the real cost of growing nutritious food in a sustainable way.”
Source: What’s News in Organic, Nov/Dec 2000, The Organic Trade Association, PO Box 547, Greenfield, MA 01302.
