Supply and Market Analysis for Organic Producers in the Four Corners States

Final Report for SW05-085

Project Type: Research and Education
Funds awarded in 2005: $144,511.00
Projected End Date: 12/31/2008
Region: Western
State: Colorado
Principal Investigator:
Dennis Lamm
Colorado State University
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Project Information

Abstract:

Certified organic producers in the Four Corners States of Arizona, Colorado, New Mexico, and Utah want to be part of healthy food enterprises that benefit local (within the respective state) and regional (including neighboring states) economies. But connecting the links in the organic marketing chain across the wide-open spaces that separate producers and consumers in this region has not been easy.
This project grew from a desire on the part of organic industry members, educational
and governmental institutions, and non-profit organizations to foster the development of a strong market for organic products in the Four Corners States and provides a better understanding of the opportunities for and barriers to a larger, more vibrant organic food market in the Four Corners States. Understanding the organic market, including the demand for and supply of organic products in the Four Corners States, was accomplished through a four-stage research program consisting of: a comprehensive
literature search; a survey of the certified organic producers for 2005 from the Four Corners States; a series of interviews with experts in the four states; and three carefully-selected case studies of notable businesses.

Project Objectives:

The project had the following three objectives:

Objective 1: To better understand current and potential future regional organic markets through a comprehensive market supply analysis.

Objective 2: To identify specific market opportunities for organic and “organic-interested” producers in the Four Corners States and develop solutions to overcome barriers that exist in their markets.

Objective 3: To communicate findings to organic and organic-interested producers, and to extension agents, industry members, and non-profit organizations.

Introduction:

Internationally, certified organic farming is practiced in approximately 100 countries,
with more than 59 million acres now under certified organic management. Of this total, North America has almost 3.7 million acres (Willer and Yussefi, 2004). According to the Organic Monitor, the global market for organic food and drinks reached $23 billion in 2002, reflecting a more than 10 percent increase over 2001. This increase in the global organic food industry was primarily fueled by an increase in consumption of organics in the North American marketplace. Continued growth for the global organic food industry has been predicted for the future (Organic Monitor, 2003).

Nationally, trends in organic production have increased dramatically in recent years. According to the USDA Economic Research Service, total certified organic cropland and pasture for 2000 was less than 2 million acres; it increased to 4 million acres by 2005, an impressive 125 percent jump. Total certified organic livestock and poultry production was 3.2 million head (for all species combined) in 2000, but increased to 14.2 million by 2005, equating to an increase of 344 percent(http://www.ers.usda.gov/Data/Organic/).

Demand for organic agricultural products has spurred an increase in the production
of organic products. Sales of organic products rose throughout the 1990s by 20 percent or more annually, and continued increases are predicted. As of 2006, organic products were available in nearly 20,000 natural food stores and 73 percent of conventional grocery stores in the United States. Organic products have gone from representing 1.2 percent of total food sales in 2000 to 2.5 percent in 2005, and they are projected to grow to between 5 and 10 percent of total food sales by 2010.

Cooperators

Click linked name(s) to expand
  • Jim Dyer
  • Lydia Oberholtzer
  • Katy Pepinski
  • Nessa Richman
  • Russ Tronstad

Research

Materials and methods:

This project was conducted during 2006 as the result of a team effort consisting of individuals from Arizona to Washington, DC. There were three primary aspects to the project.

1. An anonymous mail survey of certified organic producers in the Four Corners States in 2006 based on those certified in 2005 was conducted. The survey questionnaire was divided into three main sections:
1. Demographics,
2. Marketing, and
3. Information resources.

2. In-depth telephone interviews were conducted with 32 of the region’s top organic agriculture experts, and included producers, manufacturers, distributors and retailers, as well as individuals from the governmental, educational and non-profit sectors.

3. A final aspect of the project was to present three case studies of a member-owned cooperative grocery store (La Montanita), a consumer owned regional distributor (ShopNatural), and an organic meat processing facility (Sunnyside Meats).

Finally, a full report (45 pages) of the study results and recommendations including the survey instrument was prepared in addition to a summary brochure (8 pages) with highlighted results.

Research results and discussion:

The project revealed valuable information pertaining to the organic agriculture industry in the Four Corners States. The key findings from this study can be summarized
as follows:
• Organic production is growing and demand for local, organic products is expected to continue for the immediate future.
• Most of the certified organic producers surveyed continue to be committed to their investment in organics.
• The majority of organic producers are planning on either maintaining or expanding their certified organic acreage in the next five years.
• Over 60 percent of the surveyed certified organic producers sell all of their products
within the region.
• Many of those producers who do not sell much locally are interested in overcoming barriers that have hindered them from selling their products locally.
• Processing and distribution sectors are weak within the region, and producers are interested in playing a part in strengthening these sectors. Innovative approaches, including small-scale meat processing plants and regional food distribution networks, have been identified as promising opportunities.
• Almost 75 percent of the certified organic producers surveyed are interested in either entering the natural food store market outlet or increasing their sales in this market outlet over the next five years.
• Currently about 25 percent of the certified organic producers are selling through the natural food store market outlet.
• Most producers are interested in taking part in new market initiatives, including producer-involved marketing efforts, producer-involved value-added processing facilities, and producer-involved transportation networks.

Research conclusions:

Through the survey and interviews with experts in the region, the project has outlined
several needs of the organic agriculture industry in the Four Corners Region. In order for the organic agriculture industry to thrive in the region, the SWMN recommends the following:

Plan a Regional Organic Summit
• Organize a summit on regional marketing and distribution of organic products bringing together a coalition of organic and “organic interested” retailers and distributors, as well as producers and manufacturers, to develop a comprehensive Four Corners States organic product marketing plan. This plan should address
educational, financial, and direct-marketing needs, as well as other topics to be decided upon.

Enhance Producer Education
• Create an educational program that brings together both certified organic and non-organic producers to learn about the opportunities and challenges that the regional organic market presents, and provide additional resources on organic certification procedures that target non-organic producers.

Enhance Producer Financial Assistance
• Improve regional efforts to assist producers with the expenses related to organic certification.
Enhance Local Direct-Marketing Assistance
• Develop a comprehensive program of local direct-marketing assistance designed to assist entry into local direct-marketing outlets.

Enhance Local Direct-Marketing Assistance
• Develop a comprehensive program of local direct-marketing assistance designed to assist entry into local direct-marketing outlets.

Develop an Organic Agriculture Industry Business Incubator and Innovation Center
• Initiate an organic agriculture industry “business incubator and innovations center” for the region, to provide support for the entrepreneurial processes within the organic agriculture market, especially for small-scale producers and community-based value-added processors. A regional “business incubation meeting” is suggested in order to “jump-start” this proposed center.

Perform Targeted Research
• Perform targeted research on processing and distribution in the Four Corners States, including mapping, categorization, and census of all organic and non-organic
processing and distribution operations in the region.

Promote Policy Improvements
• Promote policies in support of organic production and marketing in the region, including continued cost-sharing from USDA for certification, increased support from Four Corners State departments of agriculture for organic production, transition, research and promotion, and increased USDA research funding for organics.

These recommendations are intended to stimulate dialogue between industry members, governmental and educational institutions, and non-profit organizations. An open discussion among all interested parties about this report and its recommendations is a critical step toward reaching the project’s goal. You can participate
in this discussion at the next SWMN annual conference. Contact SWMN annual conference organizers at http://www.swmarketingnetwork.org to be notified of date, time, and meeting details when these become available

Participation Summary

Educational & Outreach Activities

Participation Summary

Education/outreach description:

The full report (45 pages) of this project is titled “The Organic Market in the Four Corners States: Opportunities for Growth” and can be found on the Southwest Marketing Network web site http://www.swmarketingnetwork.org

In addition, an 8-page summary report with highlights can be found on the same web site as above.

There may be further publications on this work forthcoming but none are currently in print.

Project Outcomes

Project outcomes:

The intent of this project was to evaluate the status of organics in the Four Corners States. Literature about the growth of organics, both nationally and internationally, is presented in the report but an economic analysis was not a particular aspect of the project.

Farmer Adoption

Our survey results presented below most likely reflect “farmer adoption” of organic practices and what they anticipate into the future. While there were only 285 certified organic producers in these 4 states in 2005, the reply by 141 producers (49.5% response rate) to our survey makes the project team comfortable with the results we achieved. Here are some survey results:

Demographic Information About Survey Respondents
• 78 percent men and 22 percent women
• Average age: 51
• Average number of years classified as certified organic: 7
• 59 percent consider their business a “Family farm or ranch”
• 35 percent consider their business a “Family partnership or corporation”
• 12 percent attribute some of their sales from agritourism activities
Producer Views on the Organic Market
• Over 40 percent of producers plan to increase their certified organic acreage in the next five years.
• Less than 3 percent plan to decrease their certified organic acreage in the next five years.
• Most make the majority of their income from organic products. Less than 10 percent said they suffered net losses from their organic operations.
• Almost 80 percent indicated they felt organic certification made them more profitable.
• Less than 10 percent indicated they felt organic certification made them less profitable.
• Profitability played a significant role in producers’ decisions to be certified organic
in the first place

Recommendations:

Areas needing additional study

Through the survey and interviews with experts in the region, the project has outlined
several needs of the organic agriculture industry in the Four Corners Region. In order for the organic agriculture industry to thrive in the region, the SWMN recommends the following:

Plan a Regional Organic Summit
• Organize a summit on regional marketing and distribution of organic products bringing together a coalition of organic and “organic interested” retailers and distributors, as well as producers and manufacturers, to develop a comprehensive Four Corners States organic product marketing plan. This plan should address
educational, financial, and direct-marketing needs, as well as other topics to be decided upon.

Enhance Producer Education
• Create an educational program that brings together both certified organic and non-organic producers to learn about the opportunities and challenges that the regional organic market presents, and provide additional resources on organic certification procedures that target non-organic producers.

Enhance Producer Financial Assistance
• Improve regional efforts to assist producers with the expenses related to organic certification.
Enhance Local Direct-Marketing Assistance
• Develop a comprehensive program of local direct-marketing assistance designed to assist entry into local direct-marketing outlets.

Develop an Organic Agriculture Industry Business Incubator and Innovation Center
• Initiate an organic agriculture industry “business incubator and innovations center” for the region, to provide support for the entrepreneurial processes within the organic agriculture market, especially for small-scale producers and community-based value-added processors. A regional “business incubation meeting” is suggested in order to “jump-start” this proposed center.

Perform Targeted Research
• Perform targeted research on processing and distribution in the Four Corners States, including mapping, categorization, and census of all organic and non-organic
processing and distribution operations in the region.

Promote Policy Improvements
• Promote policies in support of organic production and marketing in the region, including continued cost-sharing from USDA for certification, increased support
from Four Corners State departments of agriculture for organic production,
transition, research and promotion, and increased USDA research funding for organics.

These recommendations are intended to stimulate dialogue between industry members, governmental and educational institutions, and non-profit organizations. An open discussion among all interested parties about this report and its recommendations is a critical step toward reaching the project’s goal.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.