Implications of U.S. and Global Organic Dairy, Livestock and Poultry Production
for International Trade
(Part III of IV)

II. Overview of Global Organic Agricultural Production

Industry sources indicate that global organic production has increased 20 percent annually over the past 10 years. In terms of total acreage of land dedicated to certified organic production, Australia, the EU and the United States are, respectively, the largest global organic producers. Australia has nearly 15 million acres of land under certified organic agricultural production. FAS post reports estimate total EU organic acreage at roughly 6.7 million acres. And, according to a USDA Economic Research Service study, certified organic production in the United States encompassed more than 1.3 million acres in 1997. In terms of total value of organic product produced, the United States and the EU surpass Australia as the largest producers.

Recent FAS overseas posts reports suggest that Canada and Mexico are gaining importance as mid-sized global organic producers. Canada’s organic industry is reportedly expanding at rates relative to growth in the U.S. and EU’s organic sectors, with Canada’s organic food industry at C$1.0 billion in 1997. Organic production in Canada reportedly increased 14 percent between 1997 and 1995. In Mexico, land dedicated to organic products has increased by more than 140 percent from 1996 to 1998, to a total of 136,000 acres. Although the production of organic products in Mexico is still relatively small, its economic impact is significant, having created $70 million in exports in 1999.

According to a recent study done by the International Trade Center, organic production is beginning to take hold in many developing countries. Most countries in Latin America and the Caribbean have an organic agricultural sector, though at varying levels of development. The largest and most advanced include Argentina and Brazil, and, to a lesser extent, Bolivia, the Dominican Republic and Guatemala. Africa, Egypt and Madagascar are currently the most prominent exporters, having established organic farming and trade associations with export trade to the EU. In addition, both the Republic of Korea and Sri Lanka are reportedly producers of organic products, while India, Israel, and Turkey appear to have substantial export potential. While China’s Green Food Project supports "contamination-free, safe, high quality and nutritious food certified by the China Green Food Development Center," these products are not considered to be strictly organic by most western standards.

Organic Dairy, Livestock, and Poultry Production

Among the global organic industry’s top producers, organic dairy and poultry production have shown stronger growth rates than organic beef and pork production. Some reasons for this trend may include varying national and private requirements for transitioning from conventional to organic livestock production, competition for organic grain between consumers and livestock, and a slower evolution of organic production standards for beef and pork than for organic crop production.

In addition, some studies have indicated that consumer demand for organic food product has been stronger among population groups favoring less animal protein dietary intake. Therefore, it is possible that stronger demand for crop products has stimulated production of these commodities over dairy, livestock, and poultry products. However, additional studies have shown that, in markets where demand for organic food has become more widely accepted, demand and production of organic livestock products has also grown. Markets reflecting this trend include the United States and the EU, and, to a lesser extent, Argentina and Brazil. In these markets, demand for organic dairy and eggs has been strongest, followed by poultry, beef, and pork, respectively.

In the United States, more than half of the states with organic agriculture have certified organic livestock production, with eggs and dairy representing by far the fastest growing sectors. Over the 1992-1997 period, production of organic laying hens increased to over half a million birds (1,123 percent), while the number of certified organic milk cows increased by nearly fivefold. United Stated production of organic meat and poultry production has not experienced the same growth rates as dairy and eggs and, in fact, declined over the 1992-1997 period. This is partly due to the industry’s inability to label meat and poultry as organic until February 1999, when a provisional label was approved by USDA/Food Safety and Inspection Service. Growth in organic meat production has also been slowed by a shortage of organic feed grains and growing demand for these grains in human consumption. While the annual growth rate of the U.S. organic agricultural production continues to out-pace most other domestic agricultural sectors, organic crop and livestock production together account for less than 1 percent of total U.S. production.

In the EU, Austria and Denmark are large producers of organic dairy and livestock products. While most Austrian organic farmers are vegetable and grain producers, organic livestock and dairy production is an integral component of that country’s organic sector. Nearly one third of Austrian organic production is exported, particularly to Germany, the United Kingdom and Sweden, with the main products for export being cheese and meat. While most organic milk is processed in conventional Austrian dairies (separated from conventional milk lots), one exclusively organic milk dairy is in operation in Upper Austria. Reportedly, in November 1999, a meat processing plant designed to receive only organically raised cattle was also established. There is some indication that organic hog production has begun in Austria and that many of these farmers produce under contract at set prices.

Current estimates place Danish organic production at just under 4 percent of total agricultural production, with an estimated 20 percent of Danish milk production produced organically. Austria's major organic products are beef and milk; in fact, there is an oversupply of the latter-- only 40 percent of organic milk is sold as organic, and the rest is marketed as conventional. Danish demand for organic pork and chicken reportedly exceeds supply.

French sales of organic dairy and meat and poultry products are expected to reach $133 million and $42 million, respectively (wholesale prices), by 2003. Dairy is one of the fastest growing segments of the French organic food industry, with many of the leading conventional dairies investing in organic milk production. The French Organic Federation (FNAB) estimates that this market segment will have an annual growth rate of 23 percent within 4 years. Rising organic milk production has increased the range of processed value-added organic milk and dairy products. An increasing variety of organic cheeses, butter, yogurts, and fromages frais is widely available in most retail outlets, with some supermarkets selling their own label dairy products. French production of organic meat and poultry is also growing rapidly. According to Bio Convergence, the French Professional Association for Organic Foods, demand is out-stripping supply, and retailers are often out of stock. In 1998, organic dairy production represented 8 percent of total French organic production, while meat and poultry accounted for 3 percent. France reportedly exports 17 percent of its organic agricultural production, with most exports of dairy, meat, and poultry destined for neighboring EU countries; no imports of these commodities are reported.

In Argentina, 512,770 acres are dedicated to organic livestock production, the majority of which is organic beef cattle. Of the total 268 tons of organic beef produced in 1998, roughly 80 percent was exported (the majority of which was shipped to the EU). According to FAS Argentina, demand for dairy and poultry products is also strong, with 1998 consumption of milk, cheese, poultry, and eggs amounting to 1.5 million ltrs, 4,000 kg, 120,000 kg, and 7,000 dz, respectively. These amounts represent an increase of between 40 and 60 percent over 1997 levels for milk and poultry.

Organic production in Brazil is estimated to be increasing at roughly 10 percent per year. While little organic beef or pork production has been identified, organic poultry, egg, and milk production are growing industries. Organic production of chicken, eggs and milk is reported to have reached 550,000 hd, 17,000 dz, and 1,650 ltrs, respectively, by the end of 1999. None of these products are exported.

Global Consumption of Organic Food

The table below summarizes approximate consumption for individual countries. As domestic consumption figures for all countries are not available, annual retail sales are used to capture total domestic demand for organic food products. Industry analysts forecast that demand in many markets will continue to grow at 10 to 30 percent per year, with the international organic market expected to grow to a volume of $100 billion in the next 10 years.

The Center for European Agricultural Studies (CEAS) Consultants estimates that the size of the global organic market doubled between 1997 and 2000, with retail sales expected to reach well over $20 billion by the end of 2001. In absolute terms, the United States is the largest consumer of organic products, closely followed by the EU. In 1997, retail sales of organic products in the United States amounted to roughly $4.5 billion and slightly less in the EU. Retail sales of organic products in the United States and the EU are expected to reach $47 and $58 billion, respectively, by 2006. On average, consumption of organic food products represents between 1 and 2 percent of total domestic consumption in both the United States and the EU.

Germany, the largest consumer of organic products among the EU member states, is expected to have retails sales of $2.5 billion by the end of 2000, increasing the percentage of organic retail sales of all food sales from 1.2 in 1997 to 1.75 percent. In Austria and Denmark, organic products account for 2-3 percent of the domestic food market, slightly higher than the EU average of 1.8 percent. In Denmark, annual retail 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 predict that organic milk will account for half of total Danish milk consumption within the next few years.

Approximately 54 percent of Austrian consumers buy organic foods at least occasionally. The most popular organic products are fruits and vegetables, milk and dairy products, and meat and sausages. Approximately 80 percent of organic purchases are made through supermarkets, but often fruits and vegetables and meat and sausages are purchased directly from the farm. Currently, about two-thirds of Austria's organic output is sold domestically, with the remaining third exported, mainly to Germany, Great Britain, and Sweden. Major exports consist of meat and dairy products, particularly cheese.

Although organic food accounts for only 1 to 1.5 percent of the market, Swedish demand for organic food is growing at the rate of 25 to 30 percent per year. Product categories with the highest share sold as organic include vegetables, grain products, milk, and baby food, but growth is reported in all areas. Such is the demand for organic products in Sweden that reportedly 27 percent of the municipalities have begun to serve organic foods in schools and hospitals, and another 33 percent plan to do so. In Sweden, McDonald's restaurants have begun to serve organic milk and coffee. The chain also buys some organic meat, but the supply is insufficient to meet demand.

International Trade and Organic Certification and Accreditation

Increased consumption of organic foods has resulted in a budding international organic market. However, lack of established trade guidelines and global organic standards has, to a certain extent, thwarted rapid growth in trade. It is expected that, as these guidelines formalize and global demand for organic product increases, international trade will grow.

Organic certification and accreditation are increasingly important aspects in international production and trade of organic products. There is, at present, no regulation on organic standards applicable worldwide. However, the World Trade Organization and the global trading community are increasingly relying on the Codex Alimentarius (Codex) and the International Organization of Standardization (ISO) to provide the basis for international organic production principles, as well as verification of production systems (i.e., certification and accreditation). Together, the guidelines outlined by these organizations provide a venue for international dialogue, and a basis for a common understanding, on what the term "organic" implies. The International Organization for Standardization (ISO), established in 1947, is a worldwide federation of national standards for nearly 130 countries.

The most important guide for organic certification is ISO Guide 65:1996, General Requirements for Bodies Operating Product Certification Systems, which establishes basic operating principles for certification bodies. There is no guide which specifically addresses certification of production methods. Certification ensures that organic products are produced, processed, and packaged according to organic production regulations or guidelines which usually include an assessment of the product process as to minimize environmental impacts (specifically, soil and water quality). Certification also ensures consumers, producers, and traders against fraudulent or misleading labeling of non-organic products by providing transparency as information on certified producing organizations and their products is normally made public.

The accreditation process, conducted by an independent accreditation body, evaluates a certifier’s inspection and certification procedures, as well as that organization’s ability to remain free from vested interests. There is no international regulation on who may or may not carry out accreditation. However, several countries have designed official accreditation and certification bodies in addition to the many independent organizations worldwide. As in the case of ISO Guide 65:1996 and certification principles, ISO Guide 61:1996, General Requirements for Assessment and Accreditation of Certification/Registration Bodies, defines guidelines for accreditation bodies.

The most recent Codex Alimentarius meeting on organics was held in Ottawa, Canada, on May 9-12, 2000. One of the items discussed was Codex guidelines for organic livestock and livestock products, as crop guidelines have more or less been established. Given that the United States and the EU are the most influential Codex members and the largest producers of organic agriculture, the session revolved around ironing out differences between the United States and the EU organic livestock draft proposals. A key provision in the livestock standard was to allow countries to derogate from key provisions when health or safety reasons dictate (e.g., in Japan, Newcastle vaccine would be allowed even though it is the product of genetic engineering because it is necessary to protect human health), and to have higher standards than agreed to in Codex only where absolutely necessary, with time frames for achieving compliance with national standards established by local competent authorities.

Links to other Parts:

Introduction I. Overview of U.S. Organic Industry & Organic Livestock Production III. Organics in FAS

Last modified: Tuesday, December 16, 2003