Marketing US Organic Foods - ERS

United States
Department of
Agriculture

Economic
Research
Service
Economic
Information
Bulletin
Number 58
September 2009

Marketing U.S.
Organic Foods
Recent Trends From Farms to Consumers
Carolyn Dimitri and Lydia Oberholtzer

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Cataloging Record:
Dimitri, Carolyn
Marketing U.S. organic foods : recent trends from farms to
consumer.
(Economic information bulletin ; no. 58)
1. Natural foods—Marketing—United States.
2. Natural foods industry—United States.
I. Oberholtzer, Lydia. II. United States. Dept. of Agriculture.
Economic Research Service.
III. Title.
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Photo credits: Field, BrandX; milk plant, ERS; shopper, PhotoDisc;
fruits and vegetables, ERS; dairy products, ERS; wheat, eggs, and
chicken, BrandX; soybeans, Shutterstock; corn, Eyewire; cow, Corbis.

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A Report from the Economic Research Service
United States
Department
of Agriculture

Economic
Information
Bulletin
Number 58
September 2009

www.ers.usda.gov

Marketing U.S. Organic Foods:
Recent Trends From Farms
to Consumers
Carolyn Dimitri, [email protected]
Lydia Oberholtzer
Abstract
Organic foods now occupy prominent shelf space in the produce and dairy aisles of most
mainstream U.S. food retailers. The marketing boom has pushed retail sales of organic foods
up to $21.1 billion in 2008 from $3.6 billion in 1997. U.S. organic-industry growth is evident
in an expanding number of retailers selling a wider variety of foods, the development of private-label product lines by many supermarkets, and the widespread introduction of new products. A broader range of consumers has been buying more varieties of organic food. Organic
handlers, who purchase products from farmers and often supply them to retailers, sell more
organic products to conventional retailers and club stores than ever before. Only one segment
has not kept pace—organic farms have struggled at times to produce sufficient supply to keep
up with the rapid growth in demand, leading to periodic shortages of organic products.
Keywords: Organic, organic food, marketing organic products, organic supply chain, producing organic products, handling organic products, organic price premiums, ERS, USDA

Acknowledgments
We thank Jacqueline Geoghegan, Clark University (MA); Rick Welsh, Clarkson University
(NY); and Travis Smith, Economic Research Service, USDA, for helpful comments and reviews.
We appreciate the design and editorial work of Susan DeGeorge and Priscilla Smith, ERS.

About the authors
Carolyn Dimitri is with Economic Research Service, USDA, and Lydia Oberholtzer is with
the Pennsylvania State University.

Contents
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consumers Fuel Market Growth but Defy Easy Categorization . . . . . . . . . . 3
Retailers Expand Organic Product Introductions and Private Labels . . . . . . 6
‘Handler’ Middlemen Move More Organic Products
as Shortages Are Reported. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Organic Acres More Than Doubled From 1997 to 2005,
but Supply Still Fell Short of Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fresh Produce Continues To Be the Top-Selling Category. . . . . . . . . . . . . 14
Dairy Products Sector Has Boomed Despite
Periodic Supply Shortages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Organic Meat and Eggs Have Relatively Low Total Sales
but Fast Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Essential to Other Sectors, Feed Grains and Oilseeds
Face Slow Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Recommended citation format for this publication:
Dimitri, Carolyn, and Lydia Oberholtzer. Marketing U.S. Organic Foods:
Recent Trends From Farms to Consumers. Economic Information Bulletin No.
58. U.S. Dept. of Agriculture, Economic Research Service. September 2009.

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Summary
Organic foods now occupy prominent shelf space in the produce and dairy aisles
of most mainstream U.S. food retailers, while offerings of organic meats, eggs,
breads, grains, and beverages have increased. The marketing boom has pushed
retail sales of organic foods up to $21.1 billion in 2008 from $3.6 billion in 1997.
Supermarkets, club stores, big-box stores, and other food retailers carry organic
products; many retailers have introduced lines of organic private-label products;
and manufacturers continue to introduce large numbers of new organic products.

What Is the Issue?
The rapid growth of the U.S. organic industry has caused a major shift in the types
and numbers of organic food retailers, manufacturers, and distributors and has
widened the retail customer base. In addition, organic farmland acreage more than
doubled from 1997 to 2005. With those changes has come an increased desire for
research and analysis of the U.S. organic marketing system. The 2008 Farm Act
allocated $5 million in initial spending for an expanded organic data collection
initiative, along with an additional $5 million per year of authorized funding for
researchers to:
s collect and distribute comprehensive reporting of prices relating to
organically produced agricultural products
s conduct surveys and analysis and publish reports relating to organic production, handling, distribution, retail, and trend studies (including consumer
purchasing patterns)
s develop surveys and report statistical analysis on organically produced
agricultural products
While new data are being collected and analyzed, policymakers and other interested groups have expressed particular interest in: what types of consumers purchase organic food; how structural change has affected the retailing, distribution,
and manufacturing of organic food; and why increases in the supply of organic
products at the farm level lag behind growth in demand at the retail level. This
study analyzes the most recent data available to examine each level of the organic
supply chain.

What Did the Study Find?
The number and variety of consumers of organic products has increased, but those
consumers are not easily categorized. The one factor that consistently influences
the likelihood of a consumer’s buying organic products is education. Consumers
of all ages, races, and ethic groups who have higher levels of education are more
likely to buy organic products than less-educated consumers. Other factors, such
as race, presence of children in the household, and income, do not have a consistent effect on the likelihood of buying organic products.
Retailing of organic products has evolved since 1997, when natural foods stores
were the main outlet. By 2008, nearly half of all organic foods were purchased
in conventional supermarkets, club stores, and big-box stores. Although produce
remained the top-selling organic category, sales of dairy products, beverages,

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packaged and prepared foods, and breads and grains grew to 63 percent of total
organic sales in 2008, from 54 percent in 1997.
On the wholesale level, by 2007, the share of organic handlers’ sales to conventional retailers and club stores had increased, while the share of sales to wholesalers and other distributors had declined. Organic handlers are firms that buy organic
products from farmers and other suppliers, process or repack the goods, and then
sell the value-added resulting products to retailers, institutions, and other handlers,
or directly to consumers or restaurants. Because of the competition for organic
ingredients, handlers in recent years have relied on contracts versus spot-market
sales to procure needed inputs.
While organic farmland increased from 1997 to 2005, growth was not swift
enough to prevent periodic shortages of some organic products. Certified organic
farmland designated for raising grains and soybeans grew slowly, placing pressure
on sectors such as dairy and meat that depend on these inputs. The 2002 USDA
National Organic Standards regulation in most cases requires farmland to be dedicated to organic farming for 3 years before that farm’s products can be labeled as
organic. This creates a lag between increases in retail demand and supply from
farms.

How Was the Study Conducted?
New ERS research was combined with existing ERS and academic research,
industry studies, and available public data and select private data sources to quantify trends in the organic sector from 1997 to 2007. ERS researchers examined
consumers, retailers, handlers, and farmers, and took a closer look into the production, marketing, and consumption of four major organic-product groups: produce,
dairy, meats and eggs, and feed grains.

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Introduction
A growing appetite for organic food in the United States translated into an
increase in retail sales between 1997 and 2008. Over these years, the organic food
sector underwent a transformation; by the time retail sales reached $21.1 billion
in 2008, structural changes had revamped organic food marketing (Nutrition Business Journal, 2009). Retailing organic food changed as traditional purveyors of
organic food faced increased competition from companies new to the sector, with
organic food sold not only in natural-products stores, such as Whole Foods and
food cooperatives, but also in traditional supermarkets such as Safeway, big-box
stores such as Wal-Mart, and club stores such as Costco. Organic manufacturers
by 2008 were either competing directly with conventional food manufacturers or
had been subsumed by conventional firms. The effect of structural change at the
retail and manufacturing levels has been twofold: there are more firms participating in the sector and the average size of these firms is larger.
One byproduct of rapid market growth has been periodic shortages of organic
products due to the inability of organic farms to supply enough products to keep
pace with demand. Increases in acres of certified organic farmland (the best available measure of organic production—data on actual production are unavailable)
have lagged behind growth in demand and have been relatively volatile during
the decade (fig. 1). For reasons not completely understood, farmers have not converted farmland rapidly enough to meet existing market demand. Farmers who
convert to organic production must farm the land in accordance with a certifierapproved plan for 3 years before its yield can be sold as organic, unless they can
prove that no prohibited substances were used in or near the production area during the previous 3 years. Potential organic farmers may opt to continue using conventional production methods because of social pressures from other farmers nearby
who have negative views of organic farming, or because of an inability to weather
the effects of reduced yields and profits during the transition period (Seimon, 2006).

Figure 1

Organic farmland growth rates are more volatile than growth rates
of retail sales
Growth rate (percent)
25
Retail sales

20
15
10

Cropland

5
0
1998

99

2000

01

02

03

04

05

06

07

Note: Farmland data are unavailable for 1998, 1999, 2006, and 2007. The 1998 and 1999 values
shown on the chart are extrapolated from 1997 and 2000 data.
Source: USDA, Economic Research Service calculations of farm data (USDA, Economic Research
Service, 2006) and retail sales data from Nutrition Business Journal, 2009.

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Ramifications of the slow response of farm-level supply have rippled through the
supply chain, resulting in situations where manufacturers, distributors, and retailers have periodically been unable to locate organic producers or procure a sufficient quantity of organic products (Dimitri and Oberholtzer, 2008; Organic Trade
Association, 2006, 2004, 2001; Dimitri and Richman, 2000).
Policymakers and organic industry stakeholders have repeatedly called for additional economic research on organic agriculture in the United States, but such
research has been constrained by the paucity of public data about the organic market. Over the past few years, this trend has been reversing. While coverage of the
organic sector is still incomplete, there has been a large increase in the amount of
public data available, and new data sources are regularly being added. Higher levels of funding in the 2008 Farm Act ($5 million, a fivefold increase over the 2002
Farm Act) promise to further expand existing public data collection. Some of the
public data sources available are:
s Market News Reports, Agricultural Marketing Service, USDA. Fruit
and vegetable prices, organic poultry and eggs since 2004, and organic
feed and grains from 2006. HTTPwww.ams.usda.gov/marketnews.htm
s Industry Market and Promotion. Agricultural Marketing Service,
USDA. Sales of organic fluid milk from 2006. HTTPwww.ams.usda.gov/
dyfmos/mib/inareaslsbyprod.htm
s U.S. Census of Agriculture 2002, National Agricultural Statistics
Service, USDA. Organic sales and acreage. HTTPwww.nass.usda.gov/
Census_of_Agriculture/index.asp
s U.S. Census of Agriculture 2007, National Agricultural Statistics
Service, USDA. Data on acres of certified organic cropland, certified
organic pastureland, value of organic crops sold, value of organic livestock and poultry sold, value of organic livestock and poultry products
sold, and number of acres in transition. HTTPwww.nass.usda.gov/Census_
of_Agriculture/index.asp
s Organic acreage data set, Economic Research Service, USDA.
Certified organic acreage since 1992 and certified organic operations
since 2000. HTTPwww.ers.usda.gov/Data/Organic
s Organic handler data set, Economic Research Service and Risk
Management Agency, USDA. Database of procurement and contract
practices by U.S. organic handlers for 2004 and 2007. HTTPwww.ers.usda.
gov/Data/OrganicHandlers
s Organic prices data set, Economic Research Service. Database of retail
prices for select commodities (2004-2006), wholesale prices for select
commodities (1993-2008), and farmgate prices for select commodities
(1999-2007). http://ers.usda.gov/Data/OrganicPrices
s Agricultural Resource Management Survey, conducted jointly by
Economic Research Service and National Agricultural Statistics
Service, USDA. Cost of production data on organic dairy (2005),
soybeans (2006), apples (2007). HTTPwww.ers.usda.gov/Briefing/ARMS

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Consumers Fuel Market Growth but Defy
Easy Categorization
Through their food choices, consumers are primarily responsible for the dramatic
marketplace growth of organic products that occurred since 1997. Some of the
growth may be attributed to the USDA national standards, implemented in 2002,
which were meant to bring improved visibility and confidence about the integrity
of organic products to consumers in the marketplace (see box, “How Can Consumers Tell if a Product Is Organic?”).
Most evidence does point to a growth in the number of consumers of organic
products. The Hartman Group, which conducts the gold standard of industry
organic surveys, found that 69 percent of adults bought organic food at least occasionally in 2008 (Hartman Group, 2008). Nineteen percent of consumers bought
organic food weekly in 2008, up from 3 percent in the late 1990s (Hartman Group,
2000, 2008). The Food Marketing Institute found that 51 percent of shoppers
purchased organic food in 2006; in comparison, in 2001, 44 percent of shoppers
bought organic food over a 6-month period (Food Marketing Institute, 2006).
Nearly all studies find that consumers with higher levels of education were the
most willing or most likely to purchase organic products (Dettmann and Dimitri,
2010; Zepeda and Li, 2007; Krystallis et al., 2006; O’Donovan and McCarthy,
2002; Cicia et al., 2002; Fotopoulos and Krystallis, 2002; Magnusson et al., 2001).
The impact of different levels of education varies among studies: households with
graduate degrees were less likely to buy organic products (Durham, 2007; Thompson, 1998), while households with postgraduate education (these households
attended graduate school but might not have earned a degree) were more likely to
buy organic vegetables (Dettmann and Dimitri, 2010).
As shown by different studies reaching different conclusions about exactly which
education levels affect organic buying, there are no definitive answers about how
many consumers buy organic food, how much organic food the typical consumer
of organic products purchases, or the demographic profile of the “typical” consumer of organic products.
A portfolio of analytical research accompanies the industry’s exploration of consumers of organic products. Much of this research relies on “willingness-to-pay”
surveys or 1-day in-store consumer surveys that collect purchase and demographic
information from shoppers. These studies focus on specific demographic attributes, such as income, education, and presence of children, and those factors’
influence on the probability of a consumer’s willingness to pay for organic. Many
of the findings of these studies are inconsistent, likely because they focus on consumers in different parts of the world, consider different products, and include different explanatory variables.
Some studies of U.S. consumers say Asians and Hispanics are the most likely to
purchase organic products and that those most committed to an organic lifestyle
are Hispanic and Black (Baxter, 2006). Other sources say Black consumers in the
United States are the least likely to purchase organic vegetables (Dettmann and
Dimitri, 2010). Half of U.S. consumers who frequently buy organic food have
household incomes below $50,000, according to some sources (Howie, 2004).

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Studies also have reached contradictory conclusions about how the presence of
children in the household affects the likelihood of buying organic food. Some
sources say households with children under age 18 are more likely to purchase
organic produce (Thompson and Kidwell, 1998) and organic apples (Loureiro
et al., 2001). Others say the presence of children under age 18 reduces the probability of buying organic food by 10 percent (Zepeda and Li, 2007). In other
seemingly contradictory behavior, compared with childless households, families
with children were less willing to pay a premium for organic potatoes (Loureiro
and Hine, 2001) but were more likely than other households to purchase organic
apples (Loureiro et al., 2001). The likelihood of buying organic produce increases
with the number of children in the household (Thompson and Kidwell, 1998),
while others found that the presence of children in the household had no impact
on the probability of buying organic (Durham, 2007).
For studies that include income as an explanatory variable, the findings are contradictory. Smaller, higher income households are the most likely purchasers of
organic produce (Govindasamy and Italia, 1990) and organic apples (Loureiro

How Can Consumers Tell if a Product Is Organic?
Since the implementation of the National Organic Standards in 2002, the USDA
organic logo has provided an easy way for consumers to recognize organic products
and to feel confident that they are buying a product that was raised, manufactured,
and distributed according to the consistent, uniform standard set forth by the National
Organic Program (USDA, Agricultural Marketing Service, 2000). The following organic
labels are permissible:
100 percent organic: Product contains 100 percent
organically produced ingredients, excluding added
water and salt. The label is allowed to include the USDA
organic seal and/or certifier’s seal(s).
Organic: Product contains at least 95 percent organic
ingredients, not counting added water or salt; does not
contain added sulfites; and may contain up to 5 percent
of nonorganic ingredients. The label may state “Organic”,
“X percent organic” or “X percent organic ingredients,”
and display the USDA organic seal and/or certifying
agent seal(s).
Made with organic ingredients: Product includes at
least 70 percent organic ingredients, not counting added water and salt; does not contain sulfites (except for wine which may contain added sulfur dioxide); and may contain
up to 30 percent of nonorganic ingredients, including yeast. The label may state “Made
with organic ____ (specified ingredients or food groups),” “X percent organic” or “X
percent organic ingredients” and display the certifying agent seal(s), but cannot show
the USDA organic seal.
Claim that product has some organic ingredients: The product contains less than
70 percent organic ingredients, not counting added water and salt. The label may
list which ingredients are organic in the ingredient statement and display “X percent
organic ingredients” when organically produced ingredients are identified in the ingredient statement. The label cannot display either the USDA organic seal or the certifying agent seal.
Source: USDA, Agricultural Marketing Service, National Organic Program.

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et al., 2001). One study found that income is unrelated to a household’s likelihood of buying organic food (Durham, 2007). A different study found that higher
income households are more likely to buy organic vegetables, but once the decision to buy organic has been made, they devote a smaller share of their vegetable
expenditures toward organic vegetables (Dettmann and Dimitri, 2010). And yet
another study found that income is negatively associated with being an occasional
consumer of organic products and has no impact on whether an individual is a frequent consumer of organic products (Zepeda and Li, 2007).
Organic foods are typically more expensive than conventional foods, costing at
least 10 to 30 percent more (Lohr, 2001). Surveys indicate mixed results about
consumer response to higher priced organic food. Seventy-three percent of consumers believe organic food is too expensive (Whole Foods Market, 2005), confirming earlier studies indicating that price was a barrier to purchasing organic
food (The Packer, 2000, 2002; Walnut Acres, 2002). Higher prices appear to be
less of a barrier for some organic products, such as fresh produce or baby food
(Barry, 2004). However, anecdotal evidence suggests that, in the second half of
2008, consumers began substituting cheaper conventional products and privatelabel organic products for branded organic products in response to weakening
macroeconomic conditions (Martin and Severson, 2008; Naughton, 2008; Progressive Grocer, 2008).

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Retailers Expand Organic Product
Introductions and Private Labels
The retailing of organic products in 2008 bears little resemblance to retailing
organic products in the late 1990s. In the late 1990s, the natural-products channel—
independent and small-chain natural product stores, food cooperatives, and large
natural-food-product retailers such as Whole Foods—was the primary sales outlet
for organic food (fig. 2). By 2006, approximately equal shares of organic food
were sold in the conventional channel, which includes stores such as Safeway and
Costco, as in the natural-products channel. The types of products purchased by consumers over the years also reveal a shift. Since 1997, organic fruits and vegetables
have continued to be the top-selling organic product (fig. 3). As the decade has
passed, however, consumers have started to purchase a wider range of other organic
products, with dairy, beverages, packaged and prepared foods, and bread and grains
rising to 63 percent of total organic sales in 2008, from 54 percent in 1997.
The wider reach of organic food is evident in the fact that organic food was available in 82 percent of retail food stores in 2007 (Food Marketing Institute, 2008).
Further, retailers have begun moving from selling only organic branded products
to developing lines of private-label organic products, as well as selling organic
variations of long-time brands, such as organic Heinz ketchup. The number of
new organic products introduced in one year increased from 290 in 1997 to 1,107
in 2007, with beverages, prepared foods, and snacks leading the organic product
introductions in 2007 (USDA, ERS, 2009). New organic private-label products
increased from 35 in 2003 to 540 in 2007 (Driftmier, 2009).
The distribution of sales between the natural-product and conventional channels
varies by category. Three (snack foods, dairy, and beverages) of eight organic categories had more sales through conventional channels than natural food channels
in 2005 (table 1). In comparison, in 2002, these three categories had more sales
in natural-products channels. A significant share of meat and poultry, condiments
and sauces, and breads and grains sales are made in natural channels; in fact, the
first two categories (meat and poultry; condiments and sauces) have experienced
increasing sales through natural products channels since 2002. Direct markets,
Figure 2

Share of organic sales by marketing channel, 1991, 1998, and 2006
Share
100
90
80

7%
25%

31%
46%

Conventional retailers

10%

Direct markets, export & other

70
6%

60
50
40
30

68%

63%

Natural products retailers
44%

20
10
0
1991

1998

2006

Source: Natural Foods Merchandiser, various issues; Nutrition Business Journal, 2004; and Organic
Trade Association, 2006.

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Figure 3

U.S. retail sales of organic food products increase from 1997 to 2008
Billions of dollars
25
Meat, fish, poultry
Condiments
20
Snack foods
Breads and grains
Packaged/prepared foods
15
Beverages
Dairy
Fruit and vegetables
10

5
0
1997

98

99

2000

01

02

03

04

05

06

07

08

Source: Nutrition Business Journal, 2009.

such as sales made directly to consumers at farmers markets or directly to restaurants, remain an important outlet in the organic sector.
As organic sales in the conventional channels increased, marketers began using
some traditional marketing strategies for organic foods, such as developing
organic versions of conventional brands (such as organic Heinz ketchup) and creating lines of organic private-label products. In 2000, few organic private labels
existed—one exception was Whole Foods’ 365 Organic, which has been available
since at least the mid-1990s. Now, nearly every large conventional supermarket
has a private label for organic products, and many of these lines were introduced
after the organic standards were promulgated in 2002. In 2003, approximately 8
percent of organic foods were sold under a private label (Nutrition Business Journal, 2004), in comparison to 16 percent for U.S. food products in general (Nielsen,
2005). In 2008, the share of private organic label products sales was an estimated
17.4 percent in the United States (Nielsen, 2008). ERS data indicate that, in 2007,
approximately 43 percent of certified organic handlers manufactured private-label
products, and private-label products make up approximately 19 percent of handlers’ organic sales.
Table 1

Organic food sales by market type, 2002 and 2005
Type of channel
Natural products
Organic categories
Meat and poultry
Condiments and sauces
Breads and grains
Packaged/prepared foods
Fruits and vegetables
Snack foods
Dairy
Beverages

2002
64
63
66
61
42
60
56
65

2005
71
69
65
56
48
44
37
29

Conventional

Direct markets
and other

2002

2002

2005

1
2
4
2
10
1
2
3

1
9
3
3
14
4
2
7

2005

Percent
35
28
34
22
30
32
37
42
49
38
38
51
43
62
33
64

Source: Nutrition Business Journal, 2003; Organic Trade Association, 2006.

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‘Handler’ Middlemen Move More Organic
Products as Shortages Are Reported

1

Tracing the handling sector from
1997 to 2007 is not possible; the only
available information pertains to
2004 and 2007, and is the result of a
nationwide survey of certified organic
firms.

Organic “handlers” move nearly all organic products from the farm to the retailer.
These firms procure organic products from farmers and other suppliers, add value
by processing or repacking, and then sell the value-added products to other handlers, retailers, and institutions, as well as directly to consumers or restaurants
(see box, “Organic Handlers Move Products Through the Supply Chain”). These
companies follow strict procedures to maintain organic integrity as organic food
products move along the supply chain. Many of the trends in retailing are mirrored in the handling sector. The available data indicate that the sectorwide growth
occurred at the intermediary handler level as well, with the number of certified
organic facilities increasing to 3,225 in 2007 from 2,790 in 2004.1 The presence
of conventional firms now active in the organic industry extends to the handling
sector. Survey results indicate that the majority of organic handlers are “mixed”
operations that deal with both organic and nonorganic products. Many of the firms
began as conventional facilities and later added an organic component to their
businesses. In 2004, about 70 percent of handlers had converted part or all of their
business to organic from conventional handling. In 2007, 63 percent reported converting to organic.
The overall value of organic products that moved through the intermediary “handling” stage increased 17 percent between 2004 and 2007, while the distribution
of sales to the different outlets has shifted, reflecting the growing importance
of the conventional channel. The most significant change in marketing outlets
between 2004 and 2007 is the decline in the percent of sales going to wholesalers,
brokers, distributors and repackers (fig. 4). In 2007, conventional supermarkets
were the third most important outlet; natural-product chains held this position in
2004. The percent of sales that handlers made directly to consumers remained
relatively constant between 2004 and 2007, while club stores captured 7 percent
of the market in 2007, up from 2 percent in 2004.

Figure 4

Organic handler sales shift away from wholesalers, 2004-07
2004
Institutions 2%
Direct sales 3%
Other 2%
Club store 2%
Independent natural
product store 7%
Natural product
chain 14%

2007
Growers 1%
2%
4%

Wholesalers,
brokers,
distributors,
and repackers
45%

6%
7%

Conventional
supermarket 10%
Manufacturers and processors 15%
Note: Charts present percent of sales made in each market outlet.
Source: USDA, Economic Research Service.

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32%

9%
10%

16%
13%

Procurement has been a longstanding problem for organic handlers, and ingredients often have been difficult to locate (Dimitri and Oberholtzer, 2008). Sourcing
organic ingredients has become even more challenging as demand for organic
products has increased. In 2007, 57 percent of handlers reported finding limited
supply of needed ingredients, which was up from 46 percent in 2004. These procurement shortages translated to handlers’ being unable to meet market demand for
their output, with a greater percentage of handlers struggling to supply the market
in 2007 than in 2004. Thirteen percent of handlers reported experiencing critical
shortages of at least one of their organic products at some time during 2004, while
another 16 percent of organic handlers experienced minor shortages. In 2007, 20
percent reported critical shortages, and 16 percent reported minor shortages.
Similar to their conventional counterparts, organic handlers procure ingredients
and products from their suppliers in the spot market or through sales arranged
in advance with their suppliers. Spot-market sales are anonymous transactions
between buyers and sellers that might take place in a wholesale market, for
example, or through a broker. For conventional agricultural products, spot-market
purchases are common, making up 60 percent of all purchases (MacDonald et
al., 2004). However, in markets with limited competition, because of increased
demand for a distinctive process or short supply, spot markets often fail to produce enough products with the attributes consumers desire (MacDonald et al.,
2004). In such cases, market needs can be more effectively met though vertically
coordinated transactions, such as through contracts or closely aligned transactions
between buyers and sellers. The research indicates that contracts are used at a
higher rate in the organic sector than in the conventional sector. In 2007, approximately 65 percent of the volume of organic products bought by organic handlers
was obtained through written or verbal contract and 29 percent acquired through
spot markets.

Organic Handlers Move Products Through the Supply Chain
Direct to consumer
Direct to retailer
Direct to restaurants

Retail
Restaurant
Institution

Packer
Manufacturer
Farm

Processor
Broker
Distributor
Wholesaler

Ingredient manufacturer

Broker
Distributor
Wholesaler
Shipper

Ingredient processor
Broker
Distributor
Wholesaler
Manufacturer
Processor

Retail
Restaurant
Institution

Note: The transactions along the supply chain are indicated by arrows. These transactions may be done by written
contract, verbal contract, or anonymously. Handlers are all firms between the farm and the retailer, restaurant, or
institution. A handler’s supplier, as the chart shows, may be a farmer or another handler.
Source: Dimitri and Oberholtzer, 2008.

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Organic Acres More Than Doubled
From 1997 to 2005, But Supply Still
Fell Short of Demand
Growing enough of the right organic products on the farm is essential to meet consumer demand for fresh and manufactured organic foods. At one point in time, the
organic sector was supply-driven and organic products were introduced by farmers. Today’s market is different in that consumer demand is driving growth in the
organic market. While the “pioneer” organic farmers struggled to find a market for
their products, today’s farmers face the opposite problem: they are struggling to
produce a sufficient supply of organic products (Dimitri and Oberholtzer, 2008).
Both the quantity of farmland and the number of farms under organic management
expanded in the United States from the late 1990s to the late 2000s, albeit more
slowly than in many other parts of the world. U.S. organic farmland increased
from 1.3 million acres in 1997 to a little over 4 million acres in 2005, or 0.5 percent of all agricultural lands (table 2). Growth rates for organic farmland in the
United States were relatively slow in the 1990s (with annual average increases of
9 percent from 1992 to 1997) but started to increase in the late 1990s and, except
for 2002, the year in which the national organic standards were implemented, continued to increase with an average annual growth rate of 19 percent from 2000 to
2005. At the same time, the number of U.S. organic farms expanded from 5,021 to
8,493. The average farm size of certified organic farms increased from 268 acres
in 1997 to 477 acres in 2005. A large part of the increase in average farm size was
due to dramatic growth in the number of certified acres of pastureland.
Although certified organic acreage is increasing in the United States, growth of
organic farmland by specific commodity is not uniform. The largest increases
between 1997 and 2005 were in pastureland and rangeland (USDA, Economic
Research Service, 2006). The quantity of land planted to vegetables and fruit, long
the top-selling organic category, has grown steadily since 1997, and the percent
of vegetable and fruit farmland that was certified organic by 2008 reached almost
5 and 3 percent, respectively. The two sectors that have garnered the most attention in recent years are organic grains and soybeans, which provide crucial inputs
for organic dairy and meat production. The amount of land devoted to organic
grain production has increased, and between 2000 and 2005, farmland devoted to
organic corn, wheat, and oats increased between 10 and 12 percent annually. The
amount of farmland allocated to organic soybean production declined slightly.
The amount of certified organic farmland used for production in 2007, from the
Census of Agriculture, totaled 2.6 million acres, with 1.3 million used for growing
certified organic crops and 1.0 million acres of certified organic pastureland. The
Census, an agriculturally based census conducted by USDA’s National Agricultural Statistics Service, reports that in 2007, 20,437 farms had organic acreage,
with an average of 126 organic acres per farm (fig. 5). Most of the organic farms
are small (fewer than 9 acres), while more than half the organic farmland counted
by the census is accounted for by the largest farms. Including organic farms in the
agricultural census is a relatively new effort for USDA.
Comparing these data with the acreage numbers and number of organic farms collected by ERS is difficult because the two entities used different methodologies
when collecting data. ERS contacted organic certifiers to ascertain the quantity
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of organic farmland certified in each year, while NASS collected information
directly from farmers via the Census of Agriculture. Some differences are readily apparent: the ERS data include fallow land, while the Census excludes this
acreage. Also, for confidentiality and disclosure reasons, responses from large,
isolated farms were not reported in the Census. The advantage of the census data
relative to the ERS data is that census data provide an estimate of the distribution
of organic farms by size.
Despite the growing demand for organic food products, many U.S. farmers are
reluctant to switch to organic production methods. Understanding the factors that
Figure 5

866 farms make up 60 percent of certified organic farmland, 2007

1 to 9 acres
10 to 49 acres

9,251 farms
4,994 farms

50 to 79 acres

3,498
farms
866 farms
1,808
farms

180 to 499 acres

500 acres or more

Source: USDA, National Agricultural Statistical Service, 2007 Census of Agriculture, table 48.

Table 2

U.S. certified organic farmland, 1997 to 2005
Farmland

1997

2000

2001

2002

2003

2004

2005

Grains

291,013

415,977

454,598

495,503

547,729

490,561

607,907

Beans

96,183

166,320

211,405

145,071

152,757

143,839

155,853

Oilseeds

31,433

54,521

43,722

33,418

28,117

53,503

45,674

Acres

Hay and silage

126,797

231,481

253,641

267,827

327,538

356,590

411,342

Vegetables

48,227

62,342

71,667

69,887

78,895

79,522

98,525

Fruits

49,414

43,481

55,675

60,693

77,989

80,707

97,277

Herbs, nursery, and greenhouse

90,784

41,282

14,716

29,287

25,074

8,254

9,119

116,333

203,645

197,085

197,999

213,531

239,375

297,575

Other cropland
Total pasture/rangeland

496,385

557,167

789,505

625,902

745,273

1,592,756

2,331,158

Total cropland

850,173

1,218,905

1,302,392

1,299,632

1,451,601

1,452,353

1,723,271

1,346,558

1,776,073

2,094,272

1,925,534

2,196,874

3,045,109

4,054,429

5,021

6,592

6,949

7,323

8,035

8,021

8,493

268

269

301

263

273

380

477

U.S. total
Number of operations
Average farm size, acres

Note: Data are not available for 1998 and 1999.
Source: USDA, Economic Research Service, 2006.

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encourage or discourage farmers to convert from conventional to organic farming systems is currently constrained by the fact that few (if any) researchers have
systematically examined this issue. We do know that those converting may face a
large financial risk as they learn a new way of doing business. During the transition years they face lower yields for crops, which are sold at the lower conventional prices until conversion is complete (Wolf, 2006), and, practically speaking,
farmers do not reach their top organic production level for approximately 5 years
of farming organically (Siemon, 2006). Although U.S. farmers do not experience
a post-transition yield reduction (Liebhardt, 2001), overall yields for major crops
may be lower over time because of organic crop rotation. Social pressures also
influence the decision to convert, in that farmers converting to organic may be
criticized by their neighbors or their families (Duram, 2000; Siemon, 2006; Wolf,
2006). Organic farmers often have little contact with their neighbors who use
conventional farming practices; these neighbors may warn the organic farmer that
their farming systems may fail (Duram, 2000).
Surveys of farmers also provide some insight into motivations for turning to
organic production. In 2001, slightly more than half (51 percent) of organic farmers who took part in a nationwide survey of organic farmers said they transitioned
from conventional farming systems, while 49 percent began as organic farmers
(Walz, 2004). The surveyed farmers chose to farm their land organically because
they have feelings of stewardship for the land, desire to avoid using chemicals for
family and farmworker health, and prefer to avoid chemical use for environmental
health (Walz, 2004). Ecological factors are crucial motivators to those who farm
organically (Walz, 2004; Duram, 2000). Slightly less than half of organic soybean
producers are farming organically to increase their income. Many of the other
soybean farmers report using organic methods to protect environmental health and
community health (McBride and Greene, 2008).

2

Unlike U.S. farmers, European
farmers often continue to have yields
below conventional producers after
the 3-year conversion period. For
example, organic grain yields in
the early 2000s were about 60-70
percent of conventional grain yields
(Offermann and Nieberg, 2000). One
possible explanation for this difference
is that European conventional farming
systems are more intensive than U.S.
conventional farming systems.

In Europe, government policies encourage farmers to adopt organic farming techniques through a variety of schemes, including “green payment” subsidies. The
economic rationale for green payments is that organic production provides benefits that accrue to society and that individual farmers do not consider these social
benefits when making production decisions. Subsidies alter production practices
by more closely aligning each farmer’s private costs and benefits with social costs
and benefits. The green payments for organic production target new and existing organic farmers, partly to compensate new or “transitioning” farmers for the
decline in yields when moving from conventional to organic production.2 The
results of these policies can be seen in one example: Austrian farmers who converted before 1995 farmed organically for philosophical reasons, while those who
converted after subsidies were available (1995) perceived that organic farming was
a good way to make money (Darnhofer et al., 2005). In contrast to EU countries,
the United States has adopted a free-market approach and so policies are aimed
toward facilitating market development. In one small deviation from this general
approach, Federal legislation provides funding for crop and livestock producers to
help defray certification costs.
Another factor in the decision of whether to farm organically is a farmer’s alternative opportunities; for example, a farmer weighs the expected profits from continuing under his or her current production technology relative to the expected profits
from converting to managing farmland organically. As the prices farmers received
for conventional food rose in late 2007 and the first half of 2008, fewer farmers
made the switch to organic production methods (Fromartz, 2008). But prices paid

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to farmers are historically cyclical, and by the end of 2008, had already significantly declined. In addition to considering the relative prices of organic to conventional foods, farmers likely consider other factors important in the decision to
convert to organic farming methods, and as of the time of this writing, the decision
to convert or not has been largely unexplored.

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Fresh Produce Continues To Be Top-Selling Category

Historically, fresh produce has been
the most popular organic category and
continues to be; growth in retail sales
of fresh produce averaged 15 percent
a year between 1997 and 2007. Fresh
fruits and vegetables move from the
farm to the consumer through certified organic handlers, who distribute,
ship, broker, or wholesale transactions
between the firms along the supply chain. As produce moves along
the supply chain, these firms follow
strict procedures to maintain product
quality and organic integrity. These
include maintaining fresh produce
at proper temperatures, and keeping
organic and conventional produce
separate during shipping.
Consumers purchase fresh organic
produce in conventional supermarkets, natural products supermarkets,
and club stores. Fresh organic produce is also available directly to consumers through venues such as farmers markets and community-supported
agriculture arrangements.
In 2005, the top organic vegetables
in cropland were lettuce (12 percent
of all vegetable acreage), tomatoes (7
percent), and carrots (6 percent). The
top fruits were grapes (23 percent of
all fruit acreage), tree nuts (16 percent), apples (13 percent), and citrus
(10 percent). (See table 3 for certified
organic acreage, 1997-2005.)

Figure 6

Handlers distribute most organic fruits and vegetables
to national market, 2004-07
2004

2007

International, 14%
11%
Local, 15%
(within 1-hour drive)

18%
41%

National
46%
30%

Regional, 25%
(within State or
surrounding States)

Note: Charts represent percent of sales made in each geographic region.
Source: USDA, Economic Research Service.

Table 3

U.S. certified organic acreage for fruits and vegetables, 1997-2005

Total fruit
Total vegetables

1997

2000

2001

49,414
48,227

43,481
62,342

55,675
71,667

2002
Acres
60,693
69,887

2003

2004

2005

77,989
78,895

80,707
79,522

97,277
98,525

Note: Data for 1998-1999 are not available.
Source: USDA, Economic Research Service, 2006.

What Are Organic Fruits and Vegetables?
Organic fruit and vegetable production relies on ecologically based practices, such
as biological pest management and composting, and crops are produced on land
that has had no prohibited substances applied to it for at least 3 years prior to
harvest. Soil fertility and crop nutrients are managed through tillage and cultivation practices, crop rotations, and cover crops, supplemented with manure and
crop waste material and allowed synthetic substances. Crop pests, weeds, and
diseases are controlled through physical, mechanical, and biological control management methods.
Organic fruits and vegetables must be stored and shipped separate from conventionally grown produce. Organic produce is shipped or packed in containers free
from synthetic fungicide, preservative, or fumigant.

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Figure 7

Figure 9

Most fresh-cut organic produce is sold in
conventional food stores

Organic carrots’ highest price premium comes
at wholesale level, 2004-06

Millions of dollars
90

Percent
160

80

140

Conventional channel

70

120

Natural-product channel

60

100

50

80

40

60

30

40

20

20

10

0

2004

05

06

Farmgate

0

2002

03

04

05

06

Wholesale

Retail

07
Note: Premiums are in percents. Organic price premiums are
calculated by subtracting the conventional price (whether computed
monthly, quarterly, or yearly) from the organic price and dividing the
difference by the conventional price. For additional price premiums,
see www.ers.usda.gov/data/organicprices.
Source: USDA, Economic Research Service, 2009 calculations (see
HTTPwww.ers.usda.gov/data/organicprices).

Source: Natural Foods Merchandiser, various issues.
Data not available for 2005.

Figure 8

Retail sales of organic fruits and vegetables increased over
fourfold, 1997-2008

Characteristics of Organic
Packaged-Vegetable Consumers

Millions of dollars
8,000

More likely to buy organic vegetables:

6,000

s Consumers with higher income

4,000

Less likely to buy organic
vegetables:

s Consumers with higher levels
of education

s Consumers over 50 years old
2,000

s Black consumers
Source: Dettmann and Dimitri, 2010.

0
1997

98

99

2000

01

02

03

04

05

06

07

08

Source: Nutrition Business Journal, 2009.

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Dairy Products Sector Has Boomed Despite
Periodic Supply Shortages

The dairy sector has been one of
the fastest growing segments of the
organic industry, with annual growth
rates of retail sales ranging from 16 to
34 percent between 1997 and 2007.
Growth in the milk sector, however,
has been periodically hampered by
supply shortages, such as those experienced by supermarkets during 2005
and 2006 (Oliver, 2006; Weinraub and
Nicholls, 2005).

What Are Organic Dairy Products?
As defined by the USDA national organic standards, organic dairy products are made
from the milk of animals raised under organic management. The cows are raised in
a herd separate from conventional dairy cows and are not given growth hormones
or antibiotics. The animals do receive preventive medical care, such as vaccines,
and dietary supplements of vitamins and minerals. All organically raised dairy cows
must have access to pasture, the outdoors, shade, shelter, exercise areas, fresh
air, and direct sunlight suitable to their stages of production, the climate, and the
environment. There is currently a proposed rule that would change the requirements
for access to outdoors. The proposed rule requires that ruminants be provided with
continuous management on pasture for access to the outdoors throughout the year,
including during the non-growing season; this rule would apply to lactating cows as
well (Federal Register, 2008).

Figure 10

Handlers’ regional sales of
organic milk increase, 2004-07

Organic dairy products must make use of milk from animals raised organically for at
least 1 year prior to producing the milk. The process used to bottle milk and to make
and pack cheese, ice cream, yogurt, and other dairy products also must be certified
as organic. The processor is required to keep organic and conventional products separated, and must prevent organic products from contact with prohibited substances.

2004
International, 1%
Local, 5%
(within 1-hour drive)

National, 77%

Regional, 17%

Figure 11

(within State or
surrounding States)

Organic fluid milk production increases, 2006-09
Millions of pounds
160

2007

140
1%

120

9%

100
80

61%
29%

60

Note: Charts represent percent of sales
made in each geographic region.
Source: USDA, Economic Research Service.

40
Jan
06

July
06

Jan
07

July
07

Jan
08

July
08

Jan
09

Source: USDA, Agricultural Marketing Service, Fluid Milk Sales Data—Monthly and YTD, 2009.

Table 4

U.S. certified organic milk cows and pasture acreage, 1997-2005
1997
Milk cows

2000

2001

12,897

38,196

48,677

Pasture and rangeland 496,385

557,167

789,505

2002
Number
67,207
Acres
625,902

2003

2004

2005

74,435

74,840

87,082

745,273

1,592,756

2,331,158

Note: The pasture and rangeland data are greatly influenced by four large pastureland farms in Alaska that entered the sector starting in 2004.
Data are not available for 1998-1999.
Source: USDA, Economic Research Service, 2006.

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Figure 12

Figure 13

Market share of private label milk
at retail stores more than doubles,
2004-06

Retail sales of organic dairy products steadily increase
between 1997 and 2008

2004
Horizon 42%

Millions of dollars
3,500
3,000

Other brands 10%

2,500
Private label 12%

2,000
1,500

Organic Valley 36%

1,000
500

2007

0
1997
21%

33%

98

99

2000

01

02

03

04

05

06

07

08

Source: Nutrition Business Journal, 2009.
Figure 14

27%

19%

Source: USDA, Economic Research Service
calculations of Nielsen data.

Characteristics of Organic-Milk
Consumers in the United States
s As education increases, the likelihood of buying organic milk dramatically increases.

Organic milk retail prices are roughly double conventional prices, 2004-06
Dollars
5.00
Organic price
4.00
3.00
79

83

89

93

116

110

113

119

120
113

100

60
40

Conventional price

s Asian households are more likely to
purchase organic milk occasionally.

0

100
80

Premium (right scale)

2.00
1.00

Source: Dimitri and Venezia, 2007.

110
100

s Hispanic households are more likely
to frequently purchase organic milk

s Upper income households are more
likely to buy organic milk.

Percent
140

20
Q1

Q2

Q3

Q4

Q1

2004

Q2

Q3

Q4

2005

Q1

Q2

Q3

Q4

0

2006

Note: Prices are per half gallon of milk. Price premiums are shown as percentages. Organic price
premiums are calculated by subtracting the conventional price (whether computed monthly,
quarterly (Q1-Q4 above), or yearly) from the organic price and dividing the difference by the
conventional price. For additional price premiums, see www.ers.usda.gov/data/organicprices.
Source: USDA, Economic Research Service calculations of Nielsen data.

Organic and Conventional Milk Cost of Production
a dairy would be organic. Overall, production costs for organic
dairies ran about $4 to $6 higher per hundredweight (cwt) of milk
than those for conventional dairies (excluding the initial cost of
changing management methods from conventional to organic),
but organic dairy producers received an average milk premium
of $6.69 per cwt.

A 2005 survey of dairy producers across the United States
showed that size and location of the operation and milk production costs were primary factors for determining whether a
dairy producer would choose to use organic production methods. Small dairy farms were more likely than their larger counterparts to view organic as an alternative approach for reorganizing farm resources to improve farm income. Location in the
Northeast and Upper Midwest also increased the likelihood that

Source: McBride and Green, 2007.

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Organic Meat and Eggs Have Relatively Low
Total Sales But Fast Growth

The organic meat sector is still in
early stages of development, and
has relatively low total sales. Yet the
sector is currently one of the fastest
growing in the organic industry, with
total retail sales having increased by a
factor of 46 between 1997 and 2007.
Poultry accounted for 59 percent and
beef made up 24 percent of the 2007
sales of $476 million. Egg sales have
grown at a slower rate between 1997
and 2007, although the average annual
growth rate was 19 percent over these
years.

Figure 15

Wholesale organic price premiums for eggs vary widely, 2004-08
Dollars
3.00

414

400

2.50

Organic price
301

2.00
1.50

350

325 323

318
286

300

278

264

250

Conventional price

239

214

200

Premium (right scale)

183

160

148

1.00

124

116

113

200
145 150

100

82

0.50

57

0

Organic livestock increased dramatically between 2000 and 2005, with
both beef and milk cows experiencing
close to 20 percent average annual
increases each year (table 5). The
number of hogs and pigs increased
58 percent between 2000 and 2005.
Organic poultry, which is the meat
product with the greatest demand
by consumers, has undergone even
greater growth. Organic poultry numbers experienced 39 percent average
annual increases from 2000 through
2005. The number of organic broilers,
which makes up a substantial part of
overall poultry growth, increased an
average of 53 percent per annum during this period. Layer hen numbers
have also expanded at an average
annual rate of 22 percent.

Percent
450

50

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2004

2005

2006

2007

0

2008

Note: Prices are dollars per dozen. Price premiums are shown as percentages. Organic price
premiums are calculated by subtracting the conventional price (whether computed monthly,
quarterly (Q1-Q4 above), or yearly) from the organic price and dividing the difference by the
conventional price. For more price premiums, see HTTPwww.ers.usda.gov/data/organicprices.
Source: USDA, Economic Research Service, 2009.

Figure 16

Retail organic egg price premiums are high, 2004-06
Dollars
5.00

Percent
300
Organic price
250

4.00
209

224

226

243

214

205

210
193

3.00

203

200
176

169

Premium (right scale)

131

150

2.00
100
1.00
0

Conventional price

Q1

Q2

Q3

Q4

Q1

2004

Q2

Q3

Q4

2005

50

Q1

Q2

Q3

Q4

0

2006

Note: Prices are in dollars per dozen. Price premiums are shown as percentages. Organic
price premiums are calculated by subtracting the conventional price (whether computed
monthly, quarterly (Q1-Q4 above), or yearly) from the organic price and dividing the difference
by the conventional price. For more price premiums, see www.ers.usda.gov/data/organicprices.
Source: USDA, Economic Research Service calculations of Nielsen data.

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Table 5

Organic livestock herds, poultry flocks expand dramatically between 1997 and 2005
1997
Total livestock
Beef cows
Other cows1
Hogs and pigs
Total poultry
Layer hens
Broilers

2000

2001

2002

18,513
4,429
482

56,028
13,829
1,724

72,209
15,197
993
3,135

798,250
537,826
38,285

3,159,050
1,113,746
1,924,807

5,014,015
1,611,662
3,286,456

Number of animals
108,362
23,384
10,103
2,753
6,270,181
1,052,272
3,032,189

2003

2004

2005

124,346
27,285
11,501
6,564

157,253
36,662
36,598
4,883

196,506
36,113
58,822
10,018

8,780,152
1,591,181
6,301,014

7,304,566
1,787,901
4,769,104

13,757,270
2,415,056
10,405,879

1Includes unclassified cows and some young stock and excludes milk cows.
Source: USDA, Economic Research Service, 2006.

What Are Organic Meat, Poultry,
and Eggs?
Organic meat, poultry, and eggs, as defined
by USDA’s national organic standards, are
made from animals raised under organic
management. All organically raised herds
and flocks must be raised separate from
their conventional counterparts. The animals
are not given growth-producing hormones or
antibiotics. The animals receive preventive
medical care, such as vaccines, and dietary
supplements of vitamins and minerals. They
consume 100 percent organically produced
feed, free of animal byproducts. Producers
must provide living conditions that accommodate the health and natural behavior of
the animals. The animals should have access
to the outdoors, shade, exercise areas, fresh
air, and direct sunlight suitable to their species and stage of production. All organically
raised cows must have access to pasture.
Their bedding must be clean and dry. Producers may not withhold medical treatment
from a sick animal in order to preserve its
organic status. The producer must manage
manure in a way that does not contribute to
soil, water, or crop contamination. In certain
cases, the producer may temporarily confine
animals because of weather, stage of development, if the animal’s well-being would
be compromised from being outdoors, or if
there is a risk to soil or water quality.

Figure 17

Retail sales of organic meat products rapidly increase after 2003
Millions of dollars
600
500
400
300
200
100
0

1997

98

99

2000

01

02

03

04

Source: Nutrition Business Journal, 2009.

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Marketing U.S. Organic Foods: Recent Trends From Farms to Consumers / EIB-58
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05

06

07

08

Essential to Other Sectors, Feed Grains and
Oilseeds Face Slow Growth

Organic feed grain and soybean
production are critical inputs into
organic dairy and livestock production. Scarcity of organic feed grains
and oilseeds, especially corn and soybeans used in the production of milk
and meat (Clarkson, 2007; Brasher,
2005) has contributed to shortages
of organic milk and meat at the retail
level (Oliver, 2006; Organic Monitor,
2005). High conventional feed and
grain prices during 2008 exacerbated
this problem, as producers in the Mid-

west responded to high organic feed
prices by shifting their organic beef
and dairy into conventional production (USDA, Agricultural Marketing
Service, 2008).
Slow growth in this sector can be
traced back to the farm level, where
organic grain acreage has increased
relatively slowly, at about 7 percent
each year from 2000 to 2005. Growth
by specific product varies. While
corn, wheat, and oats have increased

What Are Organic Grains, Oilseeds, and Legumes?
Organic grain, oilseed, and legume production relies on ecologically based
practices, such as biological pest management and composting, and crops
are produced on land that has had no prohibited substances applied to it for
at least 3 years prior to harvest. Soil fertility and crop nutrients are managed
through tillage and cultivation practices, crop rotations, and cover crops,
supplemented with manure and crop waste material and allowed synthetic
substances. Crop pests, weeds, and diseases are controlled through physical, mechanical, and biological control management methods.

by more than 7 percent, organic beans
have grown less than 1 percent a year
since 2000, and organic soybeans
have experienced negative growth.
Future growth in the sector is dampened by high prices for conventional
corn and soybeans, which, since 2005
have dissuaded potentially interested
farmers from converting to organic
production (Brasher, 2008).

Organic Feed and Grain Handlers
Had Shortages in 2004 and 2007
2004

2007

Percent of organic handlers

Products for sale
Supplies of ingredients
for procurement

22

28

46

58

Source: USDA, Economic Research Service.

When storing and shipping organic grains, oilseeds, and legumes, producers
and handlers must not allow them to commingle with conventionally grown
grain. These organic products cannot be shipped or packed in containers
containing synthetic fungicide, preservative, or fumigant.

Table 6

U.S. organic acreage for grains and oilseeds, 1997-2005
Crop
Total grains
Corn
Wheat
Oats
Total beans
Soybeans
Total oilseeds

1997

2000

291,013
42,703
125,687
29,748
96,183
82,143
31,433

415,977
77,912
181,262
29,771
166,320
136,071
54,521

2001

2002
Acres
495,503
96,270
217,611
53,459
145,071
126,540
33,418

454,598
93,551
194,640
33,254
211,405
174,467
43,722

2003

2004

2005

547,729
105,574
234,221
46,074
152,757
122,403
28,117

490,561
99,111
214,244
42,616
143,839
114,239
53,503

607,907
130,672
277,487
46,465
155,853
122,217
45,674

Source: USDA, Economic Research Service, 2006.

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Figure 18

Table 7

Yearly price premiums for grains and feedstuffs, 1996-2006

Contract use by handlers of organic
oilseeds, grains, legumes, and feed
in 2007

Percent
250

Type of
arrangement

Soybeans

200

Oats

Formal contracts
Informal contracts
Spot market
Other

150
Corn

100

Percent of
volume
44
23
30
2

Source: USDA, Economic Research Service.

50

Spring wheat
Figure 20

0
1996

97

98

99

2000

01

02

03

04

05

06

Note: Price premiums are shown as percentages. Organic price premiums are calculated by
subtracting the conventional price (whether computed monthly, quarterly, or yearly) from the
organic price and dividing the difference by the conventional price. For additional price premiums,
see www.ers.usda.gov/data/organicprices.
Source: Streff and Dobbs, 2004; and USDA, Economic Research Service, 2009, for 2004-06 data.

Where organic handlers buy
oilseeds, grains, legumes and
feed changed very little, 2004-07
2004
International
12%

Local, 19%
(within 1-hour drive)

Figure 19

Monthly market prices for organic grain and feedstuffs,
upper Midwest, 2007-08
Dollars per bushel
35

National
37%
Regional, 32%

Food grade soybeans

30

(within State or
surrounding States)

25

2007
Feed grade soybeans

20

16% 16%
15
Feed grade corn
10

38%

Feed grade barley
5

30%

Feed grade oats

0
Jan
2007

July
2007

Jan
2008

July
2008

Note: Charts present percent of sales made in
each geographic market.
Source: USDA, Economic Research Service.

Source: USDA, Economic Research Service calculations of USDA, Agricultural Marketing
Service, Market News Report data.

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Additional Reading
For more information on the organic sector in the United States, see the following
USDA publications and websites:
U.S. Department of Agriculture, Agricultural Marketing Service, National Organic
Program. www.ams.usda.gov/nop
U.S. Department of Agriculture, Agricultural Research Service, Organic Agriculture Production Research. www.ars.usda.gov/research/programs/programs.
htm?np_code=216&docid=15009
U.S. Department of Agriculture, Cooperative State Research, Education, and
Extension Service, Organic Agriculture. www.csrees.usda.gov/organicagriculture.
cfm
U.S. Department of Agriculture, Economic Research Service, Organic Briefing
Room. www.ers.usda.gov/briefing/organic
U.S. Department of Agriculture, Foreign Agricultural Service, Organic Products.
www.fas.usda.gov/agx/organics/organics.asp
U.S. Department of Agriculture, National Agricultural Library, Organic Agricultural Products: Marketing and Trade Resources, Special Reference Brief SRB
2003-01, January 2008. www.nal.usda.gov/afsic/pubs/OAP/OAP.shtml
U.S. Department of Agriculture, National Agricultural Library, Organically Produced Foods: Nutritive Content, Special Reference Brief SRB 2008-02, August
2008. www.nal.usda.gov/afsic/pubs/srb0802.shtml
U.S. Department of Agriculture, National Agricultural Library, Organically Produced Foods: Food Safety Issues, Special Reference Brief SRB 2008-03, August
2008. www.nal.usda.gov/afsic/pubs/srb0803.shtml/.
U.S. Department of Agriculture, National Agricultural Library, Tracing the Evolution of Organic/Sustainable Agriculture: A Selected and Annotated Bibliography,
updated and expanded, May 2007. www.nal.usda.gov/afsic/pubs/tracing/tracing.
shtml

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