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2008: The state of Organics


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This year's Mystery Creek Fieldays has highlighted particularly strong interest in organics from sheep, beef and dairy farmers, says Organics Aotearoa New Zealand executive officer Gavin Middleton.

Faced with rising costs of fuel and fertiliser, the threat of tightening environmental restrictions and rising demand from international trading partners, "many are considering their options", he said in a speech to the Fonterra Organics Conference (June 2008). 

"Their interest in organics continues to convert into solid growth for the sector," he says.

For OANZ the 2008 Fieldays was one of the most successful yet, with the Organic Advisory Programme, certifiers and producer groups all recording new interest.

Growth in organics, however, is not new, he says, going on to highlight some of the reasons that producers, consumers, markets and systems have made organics the fastest growing segment in world food and beverage.

Growth of the organic market
Internationally, the trade in organic products is valued at more than US$40 billion a year, with the largest market - Europe - spending US$17 billion each year and Americans contributing over US$15 billion.

Sales of organic coffee - something which is always relevant for the first conference session of the day - passed US$1 billion in the United States this year.

Organic products are available everywhere. In Britain, McDonalds coffee is served with organic milk. The largest organic retailer in the US is Wal-Mart, while supermarket chains increasingly have their own "home brand" certified organic range, he says.

"The incredible thing is that - even with sales in the billions - organic products typically represent one or two percent of total food and beverage markets. Even the leading countries in Europe are around 3.5% organic."

Some sectors are leading the way. More than 5% of all fresh produce sold in the UK, Germany and Finland is certified either organic or "fair trade". In Switzerland, the market share is over 10%.

10% of NZ apple exports organic
In New Zealand, around 10% of apple exports, by value, are organic, as is almost 4% of Zespri kiwifruit.

OANZ is helping the Central Otago Winegrowers Association - representing more than 5% of national wine production - promote organic conversion to its members.

In dairy, Fonterra contracts 20,000 certified or 'in conversion' organic cows. Last year more than 40 million litres of fully certified organic milk was processed.

Global organic market to double by 2011
The global market for "green" food is forecast to almost double over the next three years, he says.

"Even if the world's economies continue to decline, that's not difficult to believe."

Moving from 40% to 45% market share would be tough - but moving from 2% to 5% would mean we were still only shifting the loose topsoil.

Mr Middleton says three causes are usually cited for the growth: that consumers are becoming more educated, that technology is bringing progress, and that up and coming leaders are driving change.

Three reasons for change
"The first suggests that today's consumers are looking for companies to speak to them in a personal way - they are concerned about what their choice of milk means for themselves, the animals and the environment."

The second reflects that creating waste is expensive. Energy, rubbish disposal and landfills cost money - and businesses are always looking for smart ways to cut costs.

The third proposes that modern business leaders are typically making their workplaces more environmentally and people-friendly.


New Zealand organic market
New Zealand's contribution to the world market is small, but growing. In 2002 our domestic market was valued at $70 million. In 2007, research conducted by the University of Otago assessed it at $210 million.

Exports of organic products also grew - from $71 million in 2002 to $120 million in 2007.

Dairy products are playing an important role, he says. From nearly nothing five years ago, exports of organic cheese, yoghurt, milk powder, butter and milk powder concentrate - generated $6.9 million last year.

"As Fonterra moves closer to its goal of contracting 100,000 organic cows, that value will continue to increase."

Half NZ organic milk to US
Almost half - 46% - of New Zealand's organic dairy exports go to the US. Product after product in American supermarkets contains NZ milk.

Twenty per cent of New Zealand's organic dairy exports are sent to Korea, and 24% to other Asian markets. Asia's search for safe, healthy protein sources will continue to benefit New Zealand - and provides a market which is much closer to home for those worried about the distance that food travels, he says.

Organic land up 450% in 10 years
Meanwhile, the returns are coming back to family farmers and Kiwi communities. Last year, 860 organic farmers were producing on more than 60,000 hectares - a 450% increase in organically managed land over ten years.

"Growth in organic sales both in New Zealand and around the world shows that the momentum of history is on our side."

US export opportunity
A recent lunch with officials from the US Department of Agriculture, hosted by New Zealand's Ambassador to the United States, opened the door to New Zealand and the US discussing standards equivalence.

New Zealand is one of several countries which currently exports organic products to the United States under a recognition agreement.

"We have an opportunity to be the first country in the world to achieve full equivalence,"

That would mean New Zealand benefiting from better communication around changes to US standards, and could lead to easier market access in countries which base their standards on the US rules, Mr Middleton says.

Investment in NZ organics
The Organic Advisory Programme, set up with Government funding, will have invested more than $290,000 into dairy and pastoral extension programmes before the end of the next financial year.

OANZ funding also supports organic focus farms in Taranaki and Waikato, which give working examples for people thinking about organics, in the conversion process or already operating a fully certified organic dairy farms.

"Organic farming is especially knowledge intensive - as organic producers need to ensure that new technologies fit with consumer expectations."

In addition to OANZ funding, MAF's Sustainable Farming Fund have allowed an OANZ backed bid from organic dairy farmers into the second stage of their latest funding round.

Greenhouse gas research: the soil carbon sink
Mr Middleton says Kiwi research funders are investing millions of dollars into trying to find ways of reducing, denying or offsetting the greenhouse gas costs of agriculture - and of farming ruminant animals in particular.

"As researchers focus on what happens inside the cow and behind the cow, the greatest benefit could come from looking at what's happening beneath the cow - in the soil itself."

Accurately measuring carbon levels in soil is difficult - but that's no reason to ignore it, he says.
Trees, plants and vegetation account for only 18% of the land's carbon sinks. The other 82% of terrestrial carbon is held in soil - meaning that farmers manage the biggest carbon sink the earth has.

Higher carbon stored in organic systems
The way land is farmed determines how much soil carbon is sequestered. Organic systems - which focus on returning organic matter to the soil and encourage active humus - are especially good at storing carbon.

"Some people talk about dairy farming as actually being grass farming - reflecting the impact that the quality of your pasture has on the herd and its milk. In that vein, organic producers are actually carbon farming, with a richer soil meaning better pasture."

Carbon in the soil can mean cash in the hand, he says. The Chicago Climate Exchange and Australian Soil Carbon Accreditation Scheme both allow for trade in carbon credits generated by soil.

Organic soil more drought resistant
Better quality soil also means better quality water. Active humus can store up to 20 times its own weight in water - meaning better drought resistance, and reduced erosion from wind and rain. Retaining water also means retaining nutrients.

The runoff of nitrogen and phosphorous, which contributes to the poisoning of New Zealand waterways, was identified by this year's "State of the Environment" report, along with greenhouse gas emissions, as being New Zealand's greatest environmental challenge.

"With many local and regional councils looking to get tough on nutrient runoff, organic dairying should again be recognized at the leading edge."

Clean-up costs
Mr Middleton says the cost of allowing pollutants to leach into New Zealand waterways was shown earlier this year, with the Government announcing it would spend more than $72 million to clean up Rotorua's polluted lakes.

Although this pollution was by no means all the fault of farmers, mitigation - through adopting systems which rely less on fertilizer and hold onto soil nutrients more effectively - would be preferable to future expensive rehabilitation efforts, he says.

Healthier water and healthier soil lead to healthier ecosystems. Organic farms record higher levels of biodiversity - both above the ground, in terms of bird life, and beneath it, by encouraging active microorganisms.

Healthy food
One of the key concerns driving organic sector growth is the consumer perception that organic products are healthier.

Data from the United States shows that cabbages can be sprayed with herbicides, insecticides and fungicides up to 26 times. Squash could have been treated up to 27 times.

Coffee is the third most heavily sprayed crop in the world, after cotton and tobacco.

"It seems reasonable to say that, like choosing the right kind of petrol for our car, what we use to fuel our bodies has an impact on how we perform."

Mr Middleton says environmental arguments have traditionally driven consumer demand for organic products, but health concerns are increasingly playing a role - with food allergies, cancer, uncertainty over genetic modification, and the decreasing nutritional content of many staple foods
all pushing people to consider alternatives.

Organic Premium for Farmers
Fonterra's organic premium of $1.05 per kilogram of milk solids - or 45 cents per kilogram during conversion - is one way of recognising the value that herds provide.

While conventional apple orchards have been struggling for the past three years, price premiums mean organic orchards have generally been able to keep a positive cashflow.

He says many sheep farmers are considering their options, with organic lamb returning a hundred percent premium last year, while conventional farmers were struggling with rock bottom prices.

High value add and capture
Dr Andrew West, CEO of AgResearch said recently New Zealand needs to be in "high value add and high value capture". He said it was not enough for New Zealand to rely long term on being the cheapest producer.

New Zealand's international trading relationships increasingly rely on being able to show action on sustainability.

"To reposition New Zealand from being a commodity supplier to a provider of high value food and beverage products will take leadership - on the farm, in the boardroom and in our marketing - and organic farmers are natural leaders."

Winning recognition as a producer of premier foods will also mean actively promoting premium production methods.

"While people around the world already think about New Zealand as "clean, green and pure", a premium brand needs to be recognized as such by consumers if it's to appeal to them on a deeper level than dollars and cents."

Organic has consumer confidence
"Organic production is the only eco-verification system which is instantly recognized, and retains its value internationally."

In a market swamped by the multitude of environmental claims and counter-claims, organics has a distinctive brand, backed up by independent certification and international standards, he says.

Non monetary benefits to the organic farmer
Organic farming has non-financial benefits outside of the boardroom, he says. Organic farms are a living system, providing a lifestyle, as well as an income.

"Without the conventional biocides, it's a healthier lifestyle for your families, your animals and your communities."

Organic farmers also love the challenge of forming a relationship with their land - learning how to understand what their herd needs by the way it acts, the health of the pasture and the presence or absence of different birds, organisms and plants.

"That's the art of organic farming - managing the system as a whole to prevent rogue elements, and working with nature, rather than struggling against it."

It's that system, as well as the product, which consumers are prepared to pay for when they put organic milk, vegetables or eggs on their shopping list.

Who buys Organic?
Since consumer demand is what ultimately drives the organic market, it's useful to look at who is taking organic products off the shelf - and why, he says.

"Simply put, it's a decision that people make for their health, the environment and the taste."

Many of the ethical, high-value consumers who are choosing organics are known as "LOHAS" - or "Lifestyles of Health and Sustainability", he says.

"This is a market segment focused on health and fitness, the environment, personal development, sustainable living and social justice."

Ethical consumers cross traditional lifestyle groups - many earn above-average incomes, while for many others pure food is something they prioritise even though it means sacrificing elsewhere.

Some are urban singles, others rural families.

"They cross the political, age and ethnic spectrum - but share a belief that the way food is produced is as important as how it is cooked, or how good it tastes."

New Zealand LOHAS one in three
Internationally, around one in four people fit this profile, making purchasing decisions at least in part on environmental criteria, he says. In New Zealand, LOHAS consumers are thought to be one in three.

That means more than 1.2 million Kiwis measuring the impact of what they buy on the planet, as well as on their pocket.

"Making the choice to buy organic is one of the easiest "green" decisions that people can make. It is simple, affordable and 'mainstream'."

Organic food is available in supermarkets and cafes, as well as organic specialty stores and farmers markets. Last year, 71% of Kiwis who bought organic milk did so from a supermarket, along with the rest of their regular shopping.

For a clever consumer, organics will not break the bank. And it is worth remembering that while people are looking for ways to help the environment, they do not want it to cost the earth, says Mr Middleton.

"That's why we recycle. Buy Energy Star appliances. Switch off the lights when we leave the room.

"There's little cost. But premium products at premium prices mean that organic options are often more expensive."

The research suggests that, while 68% of Kiwis are concerned that organic products are sometimes overpriced, those consumers buying organic see the value of what they're paying for - and what they are not.

According to Roy Morgan research, more than 105,000 New Zealanders read "Healthy Food Guide".

"So we want to know what is in our food, where it's produced - and how it was made."

Marketing opportunity
If one in three people in New Zealand are ethical consumers, open to the health and environmental advantages which organic products provide, it could be easy to ask why organics are still seen as a niche, rather than a substantial potential market.

The key is promotion - recognizing that organic is a special added value which enhances, rather than detracts from, a main product line.

The organic label to our primary production sector is like the logo on the front of a Mercedes. The vehicle would still have merit without it, but the total value is only recognisable when the badge is prominently displayed.


The future: GE or organic?
As a small country of family farmers, with standards and certifiers which are internationally recognized and respected, it is important to ensure that these standards keep pace with the expectations of New Zealand's markets, he says.

There are substantial challenges ahead, he says. The High Court and Environmental Risk Management Authority have both signalled their willingness to push ahead with genetic engineering field trials.

"It's not a question of being "for" or "against" science. To me, it's not even a question of science - it's a question of nature, and human nature. Genetic modification will keep New Zealand competing against the rest of the world to produce more, for less, and satisfy consumers who have loyalty to nothing but the lowest price."

'Brand New Zealand' is at a crossroads, he says.

"We can pursue GM, along with everyone else, but that will not produce a premium food, or sit consistently with New Zealand's environmental reputation.

"New Zealand has a great story to tell. We are nuclear free. Champions of renewable energy, and have nearly 30% of our land mass covered in forest - largely indigenous species."

As well as our land, and potentially our health, genetic modification puts our reputation at risk, he says.

Organic production supports and enhances Tourism New Zealand's "100% Pure" label. As many as 13% of Americans and 8% of Brits want their next holiday to be an ecotourism experience.

Understanding
"Perhaps the biggest challenge we face is understanding," he says.

Markets need to understand the value of organics, promoters to understand that organics provide an opportunity, and farmers to understand that - like it or not - New Zealand's traditional export markets will soon demand to see government and businesses taking action to support environmental sustainability, he says.

"And those of us in the organic sector need to understand that the world is not divided into a small group of "us" and a large group of "them".

"We are many, and we are working together - across the organic and conventional sectors - to improve the position of New Zealand for the benefit of everyone."





The following advertisements are not placed by Organic Pathways and are not necessarily organic


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