Economics of Organic Production, Page 3
|Organic plums grown in Portland,Ore., draw a premium at area farmers markets. |
– Photo by Jerry DeWitt
The methods that organic farmers use to market their products are as diverse as the types of organic farming systems proliferating across the country. According to the OFRF survey, about 80 percent of organic farmers market through wholesalers, 13 percent sell directly to the consumer at farm stands, farmers markets and local restaurants, and the remainder market direct to retail outlets or stores.
One of the hardest challenges for farmers converting to organic is learning how to market products before growing them. Yet, many organic farmers become very successful marketers, particularly those farmers who direct market. They work hard to build relationships with their customers, and rely upon creativity, education and development of alternative outlets, such as alliances, cooperatives and other resource-pooling ventures.
"Many of the most successful growers are the best marketers," said extension agent Brad Brummond. "Long-term growers have good relationships and are top-notch marketers. They spend time figuring out what the market wants and they negotiate prices, because in organic systems farmers can really affect the final price by the relationships they develop with buyers."
Farmers markets are an excellent direct market venue for organic farmers. Between 1994 and 2002, the number of U.S. farmers markets grew 79 percent, reflecting the expanding market base. "You may not see a big premium at a farmers market, but you get more customers, people get to know you, and most markets welcome organic farmers," said Dan Nagengast, executive director of the Kansas Rural Center and an organic farmer.
Grower Alliances. Pooling resources can be invaluable. Organic growers in North Dakota lacked lucrative markets for their fresh produce, meat, grain and value-added products. Ben Larson, a researcher and organic farmer, contacted the Organic Alliance in St. Paul to develop a marketing strategy, consumer education information, and a media plan. Larson also went directly to large grocery stores to introduce available product. He then coordinated all the interested local growers so the stores would only need to make one call a week for their order.
As part of the plan to help educate consumers, Larson provided stores with "point of sale" materials and advertised on public radio and in newspapers to promote organic foods. He also started a new farmers market to focus on locally grown foods. As a result, sales increased at the farmers market and the grocery stores - and their success selling organic potatoes encouraged the grocers to try other products.
"We were trying to reach the larger segment of the population who will choose organics if they're available in the grocery store," said Larson.
Restaurants. Many organic farmers direct market to high-end restaurants and farmers markets. A New York chef, quoted in a cover story on organic agriculture in a fall 2002 Newsweek said, "When people taste asparagus or string beans grown in richly composted soil, they can't get over the depth and vibrancy of the flavor."
The farm-restaurant relationship has worked well for Urban Oaks Farm in New Britain, Conn. "Even if you grow the best tomato in the world, if you can't sell it, it isn't going to work," said Urban Oaks co-manager Tony Norris, who grows greens, herbs, tomatoes and eggplant, among other vegetables. Norris sells much of his organic produce to Hartford restaurant chefs based on relationships he built with care.
He advises farmers to arrange an appointment with a sympathetic chef, and bring a sample of products, a price list and clear billing and delivery system. "You have to think it through," he said. Norris considers himself a "consultant" to the chefs he supplies, but "if you're not comfortable doing that, maybe a partner or spouse can do it."
Marketing Companies. Organic farmers Richard and Peggy Sechrist of Fredericksburg, Texas, who have a 50-head herd of beef cattle and raise 750-1000 pastured chickens per month, formed a company specifically for marketing purposes. When they found it too difficult to reach the volume they needed to turn a profit in direct sales, they developed a label to differentiate their products and fetch a premium. Under this label, they now sell their own products and those of neighboring ranchers raising organic meat. Sales go to an initial customer base of about 750 built through mail order, farmers markets, booths at fairs, and small health food stores, but new purchasers also find them.
Their financial success comes from the strong market for chicken and relationships with food distributors. But they also work constantly to educate consumers about their product, how their meat was raised and the issues around organic farming.
Asked whether their changes in production practices and organic certification have increased the profitability of their ranch, Peggy Sechrist responded positively. "Definitely," she said. "Our distributors understood 'organic' and now understand 'grass-fed,' " a distinction that translates to higher returns.
Challenges for Organic Farmers
INFORMATION. Extension agents and farm advisers are increasingly knowledgeable about organic farming, although you still may find it difficult to gain information through typical channels. Many extension agents can recommend someone who specializes in organic production. A nationwide survey conducted by the Organic Farming Research Foundation found that organic farmers find other farmers, suppliers, grower's associations, books, conferences, seminars and periodicals the most useful sources of information. The Appropriate Technology Transfer for Rural Areas (ATTRA) program, a national sustainable agriculture information service, provides free technical assistance to farmers, ranchers, educators and others, including numerous publications on organic production and a well-respected "Organic Matters" series (See "Attra Resources" for more information about ATTRA and "Resources" for more information about the print series.)
PRICING. According to USDA's Economic Research Service, organic farmers face challenges in finding markets and negotiating prices. Organic farmers say they would like to see more information on organic prices and lists of buyers. Many small to mid-size organic farmers form cooperatives or alliances with other organic farmers to strengthen their negotiating power (see "Marketing Strategies" on p. 18). A new website from the Rodale Institute provides a weekly comparison of conventional and organic prices for 40 products, from grains to vegetables. (www.newfarm.org). USDA's daily Market News Report for Boston, Mass., and occasionally other terminal markets, reports organic vegetable premiums www.ams.usda.gov/fv/mncs/termveg.htm). Also, a private firm based in Florida, Organic Food Business News FAX Bulletin (OFBN), has been selling a weekly organic price report containing farm gate prices for grains and produce since the 1990's (407-628-1377).
RESEARCH. Research on organic farming practices has lagged significantly behind conventional research due to a lack of institutional interest in organic farming, the complex nature of organic farming systems, and the fact that most agricultural researchers are trained to focus on disciplinary rather than integrated systems research. Now, more organic research is occurring at state and federal institutions, much of it funded by SARE, and while results are not yet widely disseminated, research summaries and links to other reports are available at www.organicaginfo.org. ATTRA and OFRF also summarize organic research. (See "Resources,")
TIME MANAGEMENT. Recordkeeping associated with certified organic production is time consuming. You must keep accurate post-certification records on the production, harvesting and handling of agricultural products sold as organic. Don't underestimate the additional time needed to gain new skills, such as managing crop species, controlling weeds mechanically and undertaking new marketing strategies. Organic farming requires preventative rather than prescriptive strategies and a considerable amount of planning ahead.
GMO CONTAMINATION. In some regions of the country, contamination of organic crops with genetically modified crops has become a problem. In particular,organic corn and soybean loads grown in the Midwest have been rejected by purchasers after the crop was found to be contaminated. "For North Dakota organic growers it's the number one issue," said Brad Brummond, a Walsh County, N.D., extension agent who specializes in organic production. "We've already given up on canola because we can't keep it clean." Brummond recommends that organic growers communicate with their neighbors who are growing transgenic crops to try and get as much distance as possible. He also points out that contamination can result from shared equipment such as elevators and trucks.