Wednesday, December 10, 2014

Increasing Demand for Organic Food Challenges Certifying Inspector Capacity

USDA estimates that the double digit growth in organic food will reach $35 Billion in sales this year.

According to a report in the WSJ,  this has created challenges for the inspectors who certify those farms as organic.  There are 81 accredited agencies who certify farms and according to the report:

40% of these 81 certifiers have been flagged by the USDA for conducting incomplete inspections; 16% of certifiers failed to cite organic farms’ potential use of banned pesticides and antibiotics; and 5% failed to prevent potential commingling of organic and nonorganic products

It is  not an easy task....farms must keep accurate records in order to show compliance with numerous restrictions.  And these records must be maintained over a number of years to demonstrate that the food can be called organic.

But for the consumer, they are willing to pay more than double for organic foods.

Wall Street Journal - Business

Organic-Farming Boom Stretches Certification System
USDA Farms Out Inspections, but Thoroughness Is Questioned
Caelainn Barr Dec. 9, 2014 12:53 p.m. ET

The $35 billion organic-food industry has nearly tripled in size in the past decade, challenging the Agriculture Department’s ability to monitor the more than 25,000 farms and other organizations that sell organic crops and livestock.

There are currently 81 accredited “certifying agents,” or groups that stamp food as organic in the U.S. But of the 37 that had a complete review this year, 23 were cited for failing to correctly enforce certification requirements on farms in audits, according to an internal Agriculture Department report. The 23 firms didn’t properly conduct onsite inspections or correctly review applications for organic certification, among other things, the report said.

A separate Wall Street Journal investigation of USDA inspection records since 2005 found that 38 of the 81 certifying agents failed on at least one occasion to uphold basic Agriculture Department standards.

In that time, 40% of these 81 certifiers have been flagged by the USDA for conducting incomplete inspections; 16% of certifiers failed to cite organic farms’ potential use of banned pesticides and antibiotics; and 5% failed to prevent potential commingling of organic and nonorganic products, according to the Journal investigation.

Certifying agents—entities empowered by the USDA to inspect and certify organic farms and suppliers—include small nonprofit groups, state-run agencies and large multinationals. Each is paid by the farms or firms they certify.

The USDA said it requires certifiers to comply with numerous requirements, and the problems found by the Journal and the agency’s internal report reflected “a very rigorous accreditation process that requires full compliance and correction of identified issues.” Those that fall out of compliance, like the 23 cited this year, get the opportunity to correct the problem, but are at risk of being removed from the certification program if the problem isn’t fixed.

The USDA added that its certifiers were in compliance with 97% of its regulations.

Organic goods can cost as much as double that of conventional produce, but other than labels, consumers have no way to gauge what is really organic. The public must rely on guarantees from companies and nonprofit groups that the food was grown within federal guidelines.

“The whole setup of the system needs to be revamped,” said Chenglin Liu, a professor of law at St. Mary’s University in San Antonio, who has studied the organic-certification system and has raised concerns about the thoroughness of certifying agents and the lack of frequent checks by the USDA of these certifiers. “That leaves a lot of room for mistakes.”

Three agents have been removed from the certifying business by the USDA out of the 100 that have been accredited to operate since the start of the program in 2002, according to a USDA spokesman.

“We use the full set of enforcement tools that we have available to us, while also working with the legal parameters of the administrative law system,” a USDA spokesman said. “Any issues of noncompliance, however minor, are corrected.”

Whole Foods Market Inc., a leading organic supermarket chain, believes the organic stamp increases the level of “integrity” for retailers and consumers, says Joe Dickson, senior global quality-standards coordinator at the company. Mr. Dickson, who also is a member of the USDA’s national organic standards board, says the system will be improved when the agency adopts a real-time database of organic certified operations.

The USDA doesn’t currently maintain a centralized database of farms that have been suspended.

The USDA said it’s working to “increase the timeliness and accuracy of our list of certified operations” by developing a new system that will “serve as a modernized list of certified operations.” This system, the agency said, will “close any current loopholes created by the constraints of the current database.”

Some farms found to have been in violation of USDA regulations have been allowed to reapply to the program with reduced penalties.

In 2008, Ryan Fehr was suspended by his certifier for failing to keep adequate records at his produce farm in Iowa, according to USDA appeal documents. He was reinstated in 2012, but suspended again in 2013 after he was discovered to have sold products as organic in 2010, a period when he hadn’t been reinstated, the documents show. The USDA reached a settlement with the farm in 2013, allowing it to reapply to the program after paying a $500 fine.

Mr. Fehr didn’t return calls seeking comment.

The agency has turned to such settlements with increasing frequency. In the nine-month period ending February 2014, it has settled cases at a rate five times higher than the average nine-month period since 2005, according to an analysis of USDA documents by the Journal. The USDA spokesman said such settlements allow agencies “to resolve compliance issues in a way that brings businesses into compliance without costly and extended administrative proceedings.”

Mr. Fehr’s case followed “the standard process required for suspended operations to be considered for recertification,” the USDA spokesman said.

Some certifiers have kept violations from government agencies. In 2012, the USDA said in an audit that California-based Quality Assurance International Inc.—the nation’s fourth-largest certifying agent by number of operations certified—failed to provide the results of a pesticide test to the state’s agriculture department.

After the USDA reprimanded the certifying agent, it handed over the results, which showed organic cumin handled by an operation certified by QAI was contaminated with several pesticides, including Carbofuran, an insecticide that the Environmental Protection Agency prohibited for all food uses in 2009.

QAI said the incident was a single “exception,” that the certifier had notified the Food and Drug Administration and the National Organic Program of the results, and that the operation’s sale of cumin was stopped “until corrective measures were in place.”

USDA said the firm “received a notice of noncompliance and implemented corrective actions to resolve the issue.”

—Rachel Graf contributed to this article. .

USDA - Economic Research Service
April 7, 2014

Organic Market Overview

Consumer demand for organically produced goods continues to show double-digit growth, providing market incentives for U.S. farmers across a broad range of products. Organic products are now available in nearly 20,000 natural food stores and nearly 3 out of 4 conventional grocery stores. Organic sales account for over 4 percent of total U.S. food sales, according to recent industry statistics.
Organic food is sold to consumers through three main venues in the United States—conventional grocery stores, natural food stores, and direct-to-consumer markets.
A typical organic consumer is difficult to pinpoint, but new research continues to shed light on consumer attitudes and purchasing behavior.
Organic price premiums continue to remain high in many markets as the demand for organic products expands.
Organic Sales Widen in All Food Categories

USDA does not have official statistics on U.S. organic retail sales, but information is available from industry sources. U.S. sales of organic products were an estimated $28.4 billion in 2012—over 4 percent of total food sales—and will reach an estimated $35 billion in 2014, according to the Nutrition Business Journal.

Fresh fruits and vegetables have been the top selling category of organically grown food since the organic food industry started retailing products over 3 decades ago, and they are still outselling other food categories, according to the Nutrition Business Journal. Produce accounted for 43 percent of U.S. organic food sales in 2012, followed by dairy (15 percent), packaged/prepared foods (11 percent), beverages (11 percent), bread/grains (9 percent), snack foods (5 percent), meat/fish/poultry (3 percent), and condiments (3 percent).

Most organic sales (93 percent) take place through conventional and natural food supermarkets and chains, according to the Organic Trade Association (OTA). OTA estimates the remaining 7 percent of U.S. organic food sales occur through farmers' markets, foodservice, and marketing channels other than retail stores. One of the most striking differences between conventional and organic food marketing is the use of direct markets—Cornell University estimates that only about 1.6 percent of U.S. fresh produce sales are through direct sales. The number of farmers' markets in the United States has grown steadily from 1,755 markets in 1994, when USDA began to track them, to over 8,144 in 2013. Participating farmers are responding to heightened demand for locally grown organic product. A USDA survey of market managers (see Organic Produce, Price Premiums, and Eco-Labeling in U.S. Farmers' Markets, April 2004) found that demand for organic products was strong or moderate in most of the farmers' markets surveyed around the country, and that managers felt more organic farmers were needed to meet consumer demand in many States.


Organic Price Premiums Remain High

Over the last decade, USDA's Agricultural Marketing Service (AMS) has expanded wholesale price reporting for organic fruits and vegetables, and added new price reports on organic grains, poultry and eggs, and sales volume for milk. Prices for organic products continue to be higher than for their conventional counterparts.
AMS Market News publishes organic prices for fruit and vegetable crops in a number of terminal markets where prices are collected, including Atlanta and San Francisco. See ERS data on organic farmgate and wholesale prices for a comparison of organic and conventional prices from 1999 to 2013.
Market News began reporting organic poultry prices in the weekly Organic Poultry and Egg report in January 2004. The report tracks prices paid to poultry or egg companies by the first receiver (such as a retailer, distributor, or manufacturer). See ERS data on monthly organic wholesale price averages for broilers and eggs, 2004-13.
In January 2006, AMS began reporting sales (in volume) of organic fluid milk products in monthly milk marketing order reports. See ERS data comparing monthly sales of organic and conventional milk products.
In January 2007, AMS began biweekly regional price reporting on organic grains, and now publishes single national grain and feedstuffs report available through the Market News website. ERS historical tables show national monthly grain and feedstuffs prices for 2011-13, and prior regional prices.

At the retail level, organic produce and milk, the two top organic food sales categories, receive significant price premiums over conventionally grown products.

ERS analyzed organic prices for 18 fruits and 19 vegetables using 2005 data on produce purchases (see Emerging Issues in the U.S. Organic Industry, June 2009), and found that the organic premium as a share of the corresponding conventional price was less than 30 percent for over two-thirds of the items. The premium for only one item—blueberries—exceeded 100 percent. In contrast, in 2006, organic price premiums for a half-gallon container of milk ranged from 60 percent for private-label organic milk above branded conventional milk to 109 percent for branded organic milk above private-label conventional milk.
Organic Consumers Are Increasingly Mainstream

Numerous studies have been conducted on the buying habits and demographics of consumers of organic foods. Results have varied depending on the type of survey, sample size, and geographic coverage. However, a few general themes have emerged.

Consumers prefer organically produced food because of their concerns regarding health, the environment, and animal welfare, and they show a willingness to pay the price premiums established in the marketplace.

Organic products have shifted from being a lifestyle choice for a small share of consumers to being consumed at least occasionally by a majority of Americans. National surveys conducted by the Hartman Group and Food Marketing Institute during the early 2000s found that two-thirds of surveyed shoppers bought organically grown foods (see Recent Growth Patterns in the U.S. Organic Foods Market for a literature review of organic consumer studies).

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