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Organic Trade Association
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Harvey v. Veneman and Its Impact on the Organic Supply Chain

 

Because organic agricultural production is an integrated system of farming and production, changing one part of the market will most likely affect every part of the market. The situation is evolving, so it is hard to say exactly what the effects will be. Nevertheless, here are some theories of the potential effects by industry sector:

 

Agricultural Suppliers:

  • Reduced demand for organic ingredients could reduce the demand for organic crops and therefore reduce the demand for agricultural inputs for organic farms.
  • There may be an increased need for organic feed for dairy animals if farmers continue to convert to organic dairy production. However, there may be a reduced need for feed if added expense to transition to organic dairy discourages farmers from switching to organic production.

Farmers:

  • The market for organic ingredients for processing may be severely diminished, affecting price premiums and eroding farm incomes.
  • Farmers considering transitioning to organic dairy production face added expense.  
  • Post-harvest handling practices, including cleaning, storage, and handling, may need to be adjusted to eliminate certain materials or processes.

Shippers/Handlers:

  • The market for organic ingredients for processing may be severely diminished.
  • Post-harvest handling practices, including cleaning, storage, and handling, may need to be adjusted to eliminate certain materials or processes.

Ingredient suppliers:

  • There may be less demand for organic ingredients, especially minor ingredients, if manufacturers scale back the percentage of organic ingredients in their products.
  • Growth in the organic dairy sector may stall as farmers put off transitioning to organic production, making all kinds of organic dairy products harder to find.
  • There may be a need to further investigate how materials have been processed, which might add to costs that are passed along the supply chain.
  • There may be a need for more proof of the commercial unavailability and the need for more accurate projections of supply so that petitions for review of items based on commercial availability can be conducted in a timely manner.

Importers:

  • There may be less demand for organic ingredients (see ingredient suppliers).
  • Certain materials and processes that were previously allowed might be prohibited, resulting in the need for changes in post-harvest handling, and processing of organic ingredients and/or finished goods (see manufacturer/processor).
  • Importers need to take time to stay informed, and inform their suppliers about any changes in the rules.
  • Extra due diligence may be required.


Manufacturers/Processors:

  • Dairy ingredients may be more expensive and in shorter supply.
  • Sourcing ingredients may require extra due diligence to determine that they are not processed with materials previously allowed under 205.605(b).
  • Items in the “organic” label category that cannot be formulated without the materials/processes on 205.605(b) of the National Organic Regulations may drop into the “made with organic” category.
  • These changes could result in the loss of the use of the “USDA organic” seal and could lead to the need to revamp marketing materials such as advertising, web sites, and promotions.

Retailers:

  • Fewer products carrying the “USDA Organic” seal may be available, reducing the visibility for organic products in the store.
  • There may be reduced availability of organic packaged products and certain organic fresh products (banannas and dairy, for example).
  • Retailers with private label products may need to do extra due diligence to comply with USDA NOP labeling requirements.
  • Consumers may be confused or concerned about changes, causing a drop in sales.

Consumers:

  • Less availability of organic products leads to fewer options, of both organic processed products and certain fresh organic products (pineapple, bananas, and dairy products, for example).
  • Prices on the items that are available may be higher (dairy, especially).
  • There will be limited use of the "USDA Organic" seal thus removing uniform clear labeling for organic products.

Fiber/Personal Care/Pet Foods:

  • Emerging sectors are developing standards based on or parallel to the food standards.
  • Revisions to the rules for producing and labeling organic foods may become a precedent for rules for other emerging sectors.
  • If the organic gateway catergories (foods, especially produce and dairy) are less available and less visible, there may be fewer consumers entering the organic category, and therefore fewer qualified prospects to move on to other organic product sectors, such as clothing and personal care.

Certifiers/consultants/support services:

  • If any part of the supply chain scales back production, there is less need for certification, consulting and other support services specific to organic agriculture and production.
  • There may be a need for additional due diligence concerning materials and processes used in ingredients destined for processed products.
  • There may be a need for graphic design, branding, and other marketing and promotion tasks if processors need to reformulate and change labels.

In the short term, uncertainty in the marketplace will slow or stop new investment. Reduced visibility and reduced availability mean reduced growth overall. Less growth means less opportunity for every business involved in the business of producing or selling organic agricultural products or that provides services to those businesses.

 

Ultimately, less land converted to organic agriculture means a less sustainable environment for everyone.

 
 
2014 Annual Fund

Research and Promotion 2012

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