The organic industry is amongst the fastest ever growing sectors in the United States. Organics have increased at a rate of almost twenty percent in the last couple of years and it is expected to maintain a steady growth. The following aspects constitute the trends of organic farming in detailed perspective.
The amount of organic production has increased over the previous years. The Organic Production Survey of 2008 points that 4.1 million acres in the United States are used for organic production. This acreage divided into 1.8 million acres for organic pasture and 1.6 million acres for organic crops. In 2008, the number of certified organic ranches and farms stood at 14, 540. California is the leading state with the most certified organic crop acreage followed by Minnesota, North Dakota, Wisconsin and Montana. Furthermore additional forty five states ad their acreage certified in 2008. The average total certified organic pasture and acreage represented 0.6 percent of the total farmlands in the United States. Fresh produce is the leading top seller in the retail sales (Willer and Sorensen, 2008).
Transition to organics
Conventional producers have been attracted by Organic farming that has subsequently made them to change to organic farming due to the premium rates in the markets. According to the Organic Production Survey (2008), about 128, 500 acres of farmland and 66,000 of pasture has been transitioned to organic production in the United States. The States include; Montana, Nebraska and Idaho.
The total value of farm organic sales peaked 3.2 billion dollars in 2008 an increase from 1.7 billion dollars in 2007. According to the Organic Production Survey organic yields accounted for 1.9 billion dollars, organic poultry, livestock and their products accounted for $ 1.2 billion. Top sellers States include; Washington ($282million) and Pennsylvania ($ 212.7 million). Majority of the United States organic producers sell their produce locally. Moreover, on the basis of outlets, 82.6% of organic sales were from wholesalers, distributors and processors. A meager 10.6 percent of the sales constituted retailers including natural food stores and supermarkets. The estimated U. S turnover sales of organic products have increased from $ 1 billion to a whopping $28.6 billion.
The increasing global demand has resulted to the increase of sales reaching over $ 54.9 billion in 2010. U.S is the largest market for organic foods closely followed by United Kingdom, Germany and France. Organic farming is carried in 160 countries in 2009, an allocation of 37.2, million hectares of land and about 1.8 million farmers. Finally the total number of certified organic organization rose from 489 to 532 in 2009 (Willer and Sorensen, 2008).
In 2008, The Farm Act was amended to include provisions that will assist producers in the U.S to meet and mitigate challenges of organic agriculture. Forming the Organic Transition Support was fundamental. Initiative such as Environmental Incentive Program is seen as a positive step towards embracing organic farming.
Impacts on the Organizations
It is obvious that an increase in the production rates of both organic foods and beverages will automatically increases the sales of the organic organizations. Increase in production also pushes for the opening of other stores in various parts of the country and world. This will consequently increase exportation of the organic products to the rest of the world (OECD, 2003).
The transition to organics also has the same effects as increasing production. This results to additional acreage for organic farming increasing the overall production. Monopoly for the organization will also increase since they will be controlling the prices of the organic foods and beverages.
Domestic and international sales highly increase the economy of a nation. Sales witnessed by the proportions of the various organic products are crucial to the nation’s Gross Domestic Product by remitting taxes and act as a source of revenue. The organization will increase sales and create employments within the industry. Finally, policies can impact the organizations in both positive and negative ways. Policies offering incentives to encourage organic farming will stimulate the growth of this industry thus increased profitability amongst the organization. Negative policies such as excessive tax regime affects the sales of the organization and hence withdrawal from the venture.
The following are Potter’s five factors the organic organizations will ensure to safeguard to increase their competitive environment. Industry competitors; will arise and rivalries between the same organizations. There will be a significant competition to increase their market share. Factors such as Introduction of new products, and attractive customer services will play a crucial role in determining the sales of these organizations. This might result to slow growth within the industry, lack of product differentiation, price cutting and high risk of industry exit.
Secondly, the pressure from substitute products also affects the organizations with organic products as their interest. Specifically, products referred to as natural and fresh from farmland pressure the organic produce in every angle. They tend to reduce the profitability of the industry in terms of sales.
Third is the bargaining power of suppliers; the producers can influence the prices and product quality of the organic products at any moment. Since the players surrounding the organic industry are minimal they exert more power on the wholesalers and convenient stores.
Moreover, the bargaining power of buyers can greatly influence, the organic industry, consumers can force prices down and demand for higher quality of the organic products. Since the organic markets are spread all around the world consumers exercise more power. Finally, the potential entrants in to the organic industry will stir a competitive environment. The existing players in the organic industry will consolidate their niche in the market and their loyal customers. Moreover, they will seek the government order to prevent them to enter the market.
The Organic Food industry has both Strengths and weakness as in will enumerate systematically. Strengths include; an extensive and wide market for selling the organic foods and beverages all around the world. Moreover, there is large acreage for certified farming both in the U.S and countries for example Argentina and France. The availability of technological advancement also steers the industry to stand out. The weaknesses include; shortage of organic raw materials for example, organic sugar and grains. Weak U.S economy due to the World’s overall inflation and debt crisis, there is also the competition from other food products marketed as locally grown and natural. Opportunities available to the organic food industries include the availability of ready market and suppliers of the organic products both locally and international. Moreover, the government incentives to the producers in the industry offers some cushion in terms of profitability and risks involved. Finally the threats involved range from, the competition from the natural food products being occasionally marketed. Global economic instability also affects the industry and rapid technological revolution that will produce another method of food production also puts it at risk of collapsing.
A competitive advantage can be reached by extensive marketing of the organic foods all other the world for increased. Moreover, by taking advantage of the opportunities available will increase the profitability of the industry and subsequently the economies. Being able to mitigate the threats involving the industry will considerable reduce the risks involved and enhance production.
Willer, H., Yussefi, M., & Sorensen, N. (2008). The world of organic agriculture: Statistics and emerging trends 2008. London: Earthscan Publications.
Organization de cooperation et de développement économiques., & OECD Workshop on Organic Agriculture. (2003). Organic agriculture: Sustainability, markets and policies. Paris: Organization for Economic Co-operation and Development.