I recently asked a dairy farmer why he had converted to organic production. He said, “Dr. Levins, I’m tired of trying to make my living on volume. I want to make it on price.” What a great answer. All of us, including me, need the occasional reminder that there is more to farm economics than trying to live with low prices. Organic farm products have always sold for relatively high prices. I suspect that many think organic products are essentially more valuable, and that alone will protect their prices. Econ-omics tells us otherwise. High prices don’t always stay high, and profits don’t always stay with farmers. The same market forces that have kept prices low for many conventional farm products could just as easily play havoc with organics. The growth in demand for organic products looks very promising. A study published by the USDA documented growth of at least 20 percent per year since 1990 in organic retail food sales. That growth was projected to become even stronger as a result of USDA organic standards implemented in October 2002. Furthermore, the USDA’s Economic Research Service found acreage certified for organic production of corn and soybeans to have doubled between 1992-1997. It doubled again between 1997-2001. Growing demand is always a good sign that prices will stay up. But with organics, growing demand is attracting more farmers. It’s also getting the attention of some of the large food corporations. More farmers competing with each other, coupled with growing market power as buyers merge and consolidate, is the last thing you would expect to be good for farm prices. The farmer I spoke with knew this all too well. He had just heard that dairy giant Dean Foods was buying Horizon Organic Holding Corporation. Horizon is the leading brand of certified organic milk in both the United States and the United Kingdom. The “small is beautiful” bloom is definitely off the organic rose. There are almost always more farmers growing a product than there are processors and retailers to buy that product. Organics are no exception. Unless a farmer is selling directly to consumers at a farmer’s market or roadside stand, he or she is facing a buyer much larger than most farms can ever be. This puts the buyers in a strong position – they can play one farmer against another in a never-ending search for lower and lower prices. Is there anything that can be done to keep profits in the hands of farmers instead of passed along to buyers? I don’t know of anything farmers acting alone can do to stop this process. Acting together, however, is a different story. Organic Farmers Agency for Relationship Marketing also known as (OFARM) is a good example. Several cooperatives in the midwest and Canada joined together so that their farmers/members could market organic grains as if they were one large seller. Through periodic conference calls, the cooperatives discuss prices being offered and make sure the best price is received by everyone. Competition among themselves is therefore kept at a minimum in a perfectly legal way. This, in turn, helps keep profits in farmer pockets. This much, organic and conventional farmers have in common. For more information visit the OFARM Web site at www.ofarm.org.
