Organic foods are often mentioned by both U.S. and international news and information sources as they present information on food production and use in various contexts.. The following article is a first attempt to provide some information on organic dairy production in various countries. This article concentrates on Denmark, an important dairy producer and exporter in Europe and probably among the global leaders in developing an organic dairy sector. The article was written by Melissa Schmaedick, DLPs organic specialist, mainly drawing on material supplied by the U.S. Office of Agricultural Affairs in The Hague which is responsible for reporting on Denmark.
Danish Organic Dairy Production
The Danish Government began supporting organic farming through a system of producer subsidies in 1987. Since then, the number of organic farms has increased rapidly, reaching 1,486 farms covering 245,000 acres by the end of 1997. That number is estimated to have more than doubled again, reaching 3,300 farms and 371,000 acres by the end of 1999.
Current estimates place Danish organic production at just under 4 percent of total agricultural production, with much of it in dairy. An estimated 20 percent of Danish milk production is produced organically. For all organic products, the rapid growth is attributable to growing consumer demand, government conversion and production subsidies, and improving profitability in organic farming. The average organic farm size is 38.5 hectares (95 acres), which is roughly equivalent to the size of a conventional Danish farm.
Denmark has one of the highest per capita levels of consumption of organic foods in the world. At the retail level, annual sales of organic food and beverages are estimated to range from $300 to $380 million annually, or about 3 percent of the total retail food market in 1999. In certain product categories, such as milk, the organic market share is reported to be much higher. Some analysts expect that organic milk will account for half of total consumption within the next decade.
While press reports indicate that organic farming is 15-20 percent more profitable than conventional farming in Denmark, government support cannot be overlooked. In 1997, the Danish government paid out $10 million in organic subsidies. Dairy farmers have been the primary beneficiaries of the Danish organic subsidy program. Under the initial subsidy program, established in 1987, Danish organic farmers holding milk quotas received a basic subsidy of $30 per acre for a total of five years, along with a $12-per-acre conversion subsidy during the first two years. Farmers who farmed in areas designated as "sensitive" (usually wetlands) received an additional $30-per-acre subsidy for five years.
In order to expand organic production in other sectors, the Danish Government broadened the organic subsidy program in 1997 to include farms without milk quotas. Non-dairy producers producing only plant crops received a $120 per acre subsidy for the first two years, followed by a $72 subsidy in the third year. Pork producers received an additional $120 per acre subsidy for five years. Under combined Danish and EU subsidy systems, total subsidies paid to Danish producers, including the EU per hectare premium, the environmental protection subsidies, and the organic production subsidies, could amount to approximately $300 per acre.
In February 1999, Denmark's Minister of Food, Agriculture and Fisheries announced Action Plan II that will continue support for the Danish organic sector into the 21st century. Proposed funding of $338 million for 1999-2003 will continue to subsidize farmers at the levels outlined above, as well as fund marketing and research initiatives. The action plan also will focus on strengthening exports to neighboring countries, especially the UK, Germany, Sweden and the Netherlands, where supermarket sales of organic dairy products are growing rapidly.
This new plan is also designed to improve the quality of organic products and centralize distribution of organic products, especially for the hotel and restaurant sector. It calls for establishment of organic distribution centers around the country to facilitate the sale and delivery of a wide range of organic food products in commercial quantities. Projects such as market studies and new product development, which will initially be funded under Action Plan II, are expected to be self-financing in the future.
As a result of these support measures, the Danish Ministry of Agriculture anticipates that 10 percent of all Danish farmers will be using organic production methods by 2003, or a tripling of Danish organic production during the period.