With demand for organic foods outstripping supply in the developed countries, there are good export prospects for such foods for the developing nations, says the International Trade Centre.

By Someshwar Singh

December 1999

Geneva: With retail sales of organic foods expected to reach $20 billion in 2000 in key developed markets, there are good export prospects for organic coffee, tea, spices, fruits and vegetables in many developing countries, according to a new study released by the International Trade Centre (ITC).

The study, 'Organic Food and Beverages: World Supply and Major European Markets', says trade in organic food and beverage products has become an important and global agribusiness.

A major purpose of this study is to help fill the information gap that exists in most developing countries which export or are planning to export organic products.

While production of organic foods is growing in the developed markets themselves, demand is expected to far outstrip supply. Moreover, a significant part of the organic food consumption basket can only be produced in the tropical developing-country regions.

There are also good prospects for several products that are produced in the main markets - not only for off-season fruits and vegetables, but also for in-season fruits like apples and pears and vegetables, cane sugar, grains, cereals, pulses and seeds - where local supply is not expected to be adequate in the short to medium term.

Much of the spurt in growth in organic food has happened in recent years in the major markets of Western Europe, the United States and Japan - with retail sales at $13 billion in 1998 and $11 billion in 1997.

Over the medium term, the study predicts annual sales growth at 5-40%. Though still not significant in terms of percentage of the total retail food sales, organic food sales could jump from 1% to 10% by the year 2005.

In recent years, the switch to organic foods has been accelerated by food scandals such as those which arose over bovine spongiform encephalopathy or BSE, porcine pest, dioxin contamination and controversies posed by the use of genetically modified organisms or GMOs. All these have motivated people's search for healthy foods.

However, in most markets, with the exception of Denmark and Switzerland, organic food remained a very small niche product in the total grocery trade until the mid-1990s, when a large segment of consumers - though less willing to pay high prices - became the dominant factor in the organic market.

The retail trade is ultimately the main outlet for organic food in all European markets, but within the sector the roles played by major multiple supermarkets and by specialist organic outlets vary considerably from country to country.

In all markets, especially since 1995, the mainstream grocery trade has been increasing its involvement in the sector, and most leading supermarket groups now carry a range of organic food and beverages.

Fair trade organisations have become an important distribution channel for organic products in Europe, particularly in Germany, Switzerland and the Netherlands, but also in a number of other markets.

The primary concern of the fair trade movement is the social and economic situation of farmers and producers in the South rather than organic agriculture as an ideal, but the two movements are tending to converge, says the ITC report.

Fair trade distribution is of great consequence for a number of product groups from developing countries, especially bananas, cocoa, coffee, honey and tea.

Certification, however, is a crucial element for market access. Products from third (non-EU) countries can be sold as organic only when it has been demonstrated that they are from a country whose organic farming rules are equivalent to those of the Union as laid down in the Regulation.

Certification must be carried out by a recognised inspection body, either a national authority in the country concerned whose equivalence has been approved according to Regulation 2092/91 or by an EU inspectorate which operates internationally, like Ecocert, SKAL, KRAV or BCS.

In Africa, organic farming takes place in a growing number of countries, but generally on a very small scale. The absence of an organised national market and local distribution system is a major hindrance. In many countries, certification, with its cost implications, does not yet make sense.

However, Egypt is already an important producer and exporter of organic products, as are Madagascar, some of the Maghreb countries, and South Africa. Exotic fruits, herbs and spices, nuts, essential oils, oil seeds, vegetables and cotton are some of the most important items produced organically.

Control and certification are mostly carried out by foreign entities although local structures are being set in a number of countries.

In Asia, too, organic production takes place on a small scale - to reach self-sufficiency in food, to improve soil fertility, or to engage in the export trade. It is organised by individual farmers, farmers' and women's organisations and a wide variety of NGOs.

Israel and Turkey are important producers of a variety of food products, but mainly dried and fresh fruits and vegetables, and nuts. Among the other significant producing countries are China, India, the Republic of Korea and Sri Lanka; their output includes cocoa, coffee, essential oils, herbs and spices, peanuts, rice, tea and vanilla.

The Asiatic areas of the Russian Federation have some pockets of improvised organic agriculture without a structured market. Israel and Japan have become organic importers as well as exporters.

China, India, Israel and Japan have well-established control and certification bodies, while others are establishing similar entities. Nevertheless, foreign control and certification bodies remain active in Asia too since only Israel has so far obtained equivalency with the standards of the European Union.

In the Americas (excluding NAFTA countries), the organic agricultural sector is at varying levels of development. Among the leading plant products are cane sugar, cocoa, coffee, cotton, fruits, grains, medicinal and culinary herbs, nuts, oilseeds, olives, pulses, spices, tea, wine and honey. Livestock products include dairy products, meat, honey and wool.

Argentina has a structured national distribution system as well as a control and distribution system that has obtained equivalency with EC Regulation. In other countries, foreign control and certification bodies continue to be active, either directly or through branch offices or subsidiaries.

The umbrella organisation Bio-Latina groups Bolivian, Colombian, Nicaraguan and Peruvian certifiers under its wing. The stringent EU rules on accreditation of control bodies in third countries put a great deal of pressure on control and certification bodies in these countries to organise themselves in such a way as to qualify.

Canada, Mexico and the United States, the three members of the North American Free Trade Agreement (NAFTA), are substantial producers of a wide range of organic products. Canada and the US have well-developed domestic organic markets. All three are large exporters, and Canada and the US are substantial importers.

The study adds that although European production has developed well, imports remain massive. While production and processing facilities are available in all food sectors, many mainstream food companies have not yet joined the organic bandwagon. Supplying countries can therefore realise much value added if they run their processing and manufacturing facilities according to stringent European quality and service criteria.

In organic farming, the aim is to support and strengthen biological processes without recourse to technical remedies such as synthetic fertilisers and pesticides and the genetic modification of organisms; hence, the approach to the control of weeds, pests and diseases is primarily preventive.

Organic farming is based on the enhancement of the structure and the fertility of the soil, a balanced choice of crops, and the implementation of diversified crop rotation systems. The number of animals kept on the farm and the available land area are correlated so that farm units can cover their need for feed and soil nutrients from within the system. - Third World Network Features

The above article first appeared in SUNS (South-North Development Monitor).