Organic DLP Trade - Introduction

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

Foreign Agricultural Service (FAS) and industry reports describe the U.S. and international organic agricultural sectors as nascent, yet vibrant and strengthening, as production and international trade of organic agricultural products becomes more prevalent in the global market. In an effort to be forward-looking and anticipate upcoming changes and possible implications for FAS analysis and marketing efforts, the Dairy, Livestock and Poultry Division of FAS has undertaken a comprehensive study on organic dairy, livestock, and poultry production. Although official data on organic agricultural production, consumption and trade is extremely limited, the analysis put forth by DLP represents a summary of the most up-to-date information available.

Recent U.S. organic market value data obtained from the Organic Trade Association and U.S. industry analysis group, Datamonitor, and presented in the tables below, indicate an overall growth rate of domestic organic food sales at 20 percent annually. Total organic food sales, valued at $5.4 billion in 1998, are expected to reach $7.7 billion by year-end 2000. Total sales for 2003 are forecast to reach just over $13 billion. Organic dairy sales are the fifth fastest growing commodity group, with sales increasing an average of 37 percent annually, and total sales are forecast to reach $2 billion by 2003. Organic meat and meat products, including poultry, are the sixth fastest growing commodity group, with total sales forecast to reach $617 million by 2003. Organic dairy and meat products are expected to capture 15 and 5 percent of total domestic organic food sales, respectively, by 2003.

Start-up costs, conversion requirements, insufficient organic grain supplies, and the U.S. organic livestock producer’s inability to label products as "organic" until 1999, have dampened growth in U.S. organic livestock production relative to organic crop production. As the U.S. organic sector’s infrastructure (organic technology, production, and distribution systems) formalizes, market inefficiencies are expected to come into equilibrium. Moreover, as organic foods become more widely accepted, it is expected that demand for livestock products will increase.

U.S. Organic Market Value Forecasts ($ million) 1998-2003
	1998	1999	2000	2001	2002	2003	Ave Growth 1998-2003
Produce	3,486	3,904	4,294	4,638	4,962	5,210	8.4%
Frozen Foods	400	565	813	1,179	1,603	2,101	39.3%
Dairy	424	598	832	1,148	1,538	2,015	36.6%
Bakery & Cereals	201	278	400	553	735	970	36.9%
Ready Meals	145	196	269	381	549	758	39.2%
Chilled Foods	274	329	401	501	572	635	18.3%
Meat & Meat Products	168	218	288	374	475	617	29.8%
Baby Foods	84	117	166	239	321	417	37.7%
Other	112	129	145	163	187	219	14.4%
Soft Drinks	60	75	91	110	130	153	20.4%
Beer & Wine	46	54	60	66	72	77	10.9%
Overall	5,401	6,463	7,760	9,352	11,146	13,172	19.5%

U.S. Organic Market Value Forecasts (% Value) 1998-2003
	1998	1999	2000	2001	2002	2003
Produce	64.5	60.4	55.3	49.6	44.5	39.6
Frozen Foods	7.4	8.7	10.5	12.6	14.4	15.9
Dairy	7.9	9.3	10.7	12.3	13.8	15.3
Bakery & Cereals	3.7	4.3	5.2	5.9	6.6	7.4
Ready Meals	2.7	3.0	3.5	4.1	4.9	5.8
Chilled Foods	5.1	5.1	5.2	5.4	5.1	4.8
Meat & Meat Products	3.1	3.4	3.7	4.0	4.3	4.7
Baby Foods	1.6	1.8	2.1	2.6	2.9	3.2
Other	2.1	2.0	1.9	1.7	1.7	1.7
Soft Drinks	1.1	1.2	1.2	1.2	1.2	1.2
Beer & Wine	0.9	0.8	0.8	0.7	0.6	0.6
Overall	100	100	100	100	100	100

The global organic market is estimated to have doubled between 1997 and 2000, with retail sales expected to reach well over $20 billion by the end of 2001 and demand for organic products growing at 10 to 30 percent per year in many markets. Industry analysts expect organic production and trade to escalate to as much as $100 billion in the coming decade, owing the increase to growing public awareness of health and environmental conservation and the public’s association of the organic production process with these issues.

Organic agricultural trade is a growing, although relatively undeveloped, sector of the international market. More rapid trade growth has been hindered by the inconsistent establishment of national organic standards, certification and accreditation programs, and inefficient market infrastructures for organic products in many countries. It is expected that once national standards are more widely established, bi-lateral equivalency agreements will lead to increased trade opportunities. National standards and trading patterns are expected to formalize over the next 1 to 3 years.

Regions having the strongest demand for organic livestock products, namely the United States and the European Union (EU), currently show little third country imports. Some reasons for this are: 1) there is currently little world surplus production of organic livestock products for export, and 2) international trade is hampered by a lack of established trading systems and guidelines. There is some evidence of U.S. exports of organic beef, and some larger U.S. producers of organic dairy have established foreign production facilities, but these activities account for a small part of international trade.

Organic livestock production, as part of an organic agroecosystem, aims to fully integrate animal and crop production, bringing forth a symbiotic relationship of recyclable and renewable resources within the farm system. As such, organic producers must take into consideration many factors affecting the overall balance of the system, in addition to the process by which livestock is produced and raised.

Certification of organic products is basically the certification of a production system, as opposed to the certification of a product. For a product to be certified organic, all operators in the product chain, including farmers, processors, manufacturers, and importers, wholesalers, and retailers must be certified organic. It is possible that different certifiers certify different operators in the production chain.

Organic agriculture is often described as a "holistic production management system" which emphasizes the use of cultural, biological, and mechanical management practices over off-farm, synthetic inputs to optimize the health and productivity of ecologically sustainable agroecosystems (interdependent components of soil life, plants, animals, and people). Similarly, organic livestock production aims to fully integrate animal and crop production, bringing forth a symbiotic relationship of recyclable and renewable resources within the organic farm system.

It should be noted that certification of organic products is the certification of a production system, as opposed to the certification of a product. For a product to be certified organic, all operators in the product chain, including farmers, processors, manufacturers, exporters, importers, wholesalers, and retailers must be certified organic.