October 2006

By Shelley Alpern

The average American consumer is long overdue access to affordable organic foods. Yet Wal-Mart's pledge to squeeze the typical premium paid for organic foods from 20-30% down to 10%1 is making a whole lot of people very nervous. Wal-Mart's modus operandi is to keep prices low by driving down costs in the production chain and keeping its own wages low; its competitors' practices are variations of the same theme, if less cutthroat. Good ol' American-style capitalism and its frequent bedfellow, inadequate regulation, now threaten to strip "organic" of everything it once stood for (and everything that has made it more expensive): small scale production, gentler treatment of animals, better treatment of farm workers, and the elimination of chemical aids to production.

Major producers and retailers - abhorring a vacuum at least as much as nature - are capitalizing on the public's appetite for organics and its willingness to pay a sometimes hefty premium at the checkout line. Major food producers with organic lines, most of them acquired through buyouts, include Coca Cola (Odwalla), Kraft (Boca Foods), Unilever (Ben & Jerry's), Kellogg (Kashi and Morningstar Farms), General Mills (Cascadian Farms) - and the list goes on. According to the Organic Trade Association, while organics are only about 2% of overall food and beverage sales, they are the fastest growing sector in the food business, having grown between 20 and 24% each year since 1990. According to the New York Times, organic foods could become a $23 billion market over the next three years, or even higher, given Wal-Mart's entry into the market.

The entry of these players has changed the game. For a dozen years, the large food concerns locked horns with small farmers and consumers during the formulation of national organics regulation known as the National Organic Plan, adopted in 2002. As a result, these regulations have loopholes that you can drive a herd of cattle through, holding costs down for large agricultural concerns but disadvantaging farmers struggling to remain true to the spirit of organics. By ignoring issues of water, animal well-being, long-distance food transport, and labor standards, the loopholes have facilitated the movement of most organic production to large farms and industrial-size feedlots.

The industry has also become increasingly concentrated. The retail market for organics is split roughly evenly between conventional supermarkets and natural foods chains, with only 7% covered by farmers' markets, food service and other non-retail store sales.2

A 2002 study conducted at the University of California at Davis found that 2% of California's organic farms - just 27 growers - owned over half of the state's market share.3 Whole Foods dominates the natural supermarkets sector with over four times the revenues of its closest competitor Wild Oats. Wal-Mart is the country's largest seller of organic milk, and could surpass all others in overall volume sold of all organic products within a few years.4 Horizon Organic produces 70% of organic milk in the U.S.5

What exactly is at stake?

One way companies like Wal Mart and General Mill's Cascadian Farms save money is by sourcing organic foods from China, Mexico and Brazil.6 The globalizing of organic food is a growing problem because it:
• Compromises local variety and diminishes freshness,
• Undermines rural communities by displacing shelf space formerly reserved
for local growers,
• Emits vastly more greenhouse gas emissions by increasing "food miles."

The Organic Consumers Association (OCA) is currently protesting the food importation from China and Brazil due to their permissive labor laws.

Ironically, squeezing domestic labor costs is not a strategy that would enhance the new market entrants' margins substantially, since there's so little room to squeeze. Organic agriculture workers have not, except for rare exceptions, enjoyed better treatment than their counterparts on traditional farms. The Nation's recent excellent "Food Issue" (September 11, 2006) contains an investigative piece by Felicia Mello that examines working conditions for processors of organic carrots at Grimmway, which sells 40% of the world's carrots. Like their counterparts working on traditional farms, the organic workers are non-unionized, earn low wages, and rarely enjoy health benefits. Repetitive stress injuries are common. Mello found that although many small farmers would like to provide benefits to their workers, most struggle simply to survive.

Another cost-squeezing device is the exploitation of the loosely written regulation concerning the welfare of animals on organic farms. Chances are quite good that the organic meat on your table did not originate from animals that enjoyed a pastoral lifestyle before meeting their fate. The National Organic Plan requires that animals be given "access to pasture" but the term is not defined, and as a result, industrial feedlots that cram livestock into inhumanely small pens and coops can still claim the organic label if the animals enjoy just the barest exposure to the outdoors.7 An additional problem is that the waste products of so many animals, in the words of one organic farmer, are "a critical resource for maintaining soil health in reasonable amounts, but a fetid nightmare when produced at mountainous levels."8

Small and large organic farmers are also duking it out over the use of synthetic ingredients in organic products. Currently, federal regulations permit organic foods (defined as products that contain at least 95% organic ingredients) to include up to 38 synthetic ingredients that don't have to be listed on the product's label. Consumer groups are upset that a 2005 Congressional amendment makes it easier for the USDA to permit up to 500 additional synthetic ingredients without rigorous review from the National Organic Standards Board; loosens restrictions on the use of non-organic ingredients when organic ingredients cost too much; and allows farmers to feed dairy cows more non-organic feed.9 Succinctly illustrating the ill will between consumer groups and the Organic Trade Association (which represents corporations), Consumers Union analyst Urvashi Rangan characterized the OTA's position on synthetic ingredients as "frankly written without any understanding of chemistry or science."10

Backlash and Hope

Organic farmers are not taking this sitting down (they never have time to sit anyway). The Organic Consumers Association is promoting a boycott of Dean Foods and Aurora Organic Dairy, the former for sourcing soy from Brazil and China, and the latter for "its practice of intensive confinement" of animals, "greenwashing," and its "bogus certification of animal welfare."11

Organic Valley stopped supplying to Wal-Mart two years ago, due to lack of supplies to meet the company's voracious demands. Once Wal-Mart's largest supplier, Organic Valley has now left it to its larger competitors to "duke it out figuring out how to service Wal Mart," a spokeswoman told Consumer Reports.12

There are also signs of hope. A spate of new books is shedding light on the current state of organic agriculture such as Michael Pollan's Omnivore's Dilemma, Julie Guthman's Agrarian Dreams: The Paradox of Organic Farming in California, and Organic, Inc.: Natural Foods and How They Grew by Samuel Fromartz. If problems cannot be solved overnight, raising awareness about the contradictions between hype and reality is a first step.

Endnotes

1. "Wal-Mart Eyes Organic Foods," May 12, 2006, The New York Times, by Melanie Warner.
2. Source: Organic Trade Association.
3. "Is Bigger Better? Corporate Clouds on the Organic Horizon," November 25, 2004, www.corpwatch.org, by Carmelo Ruiz-Marrero.
4. "The Green Machine," July 27, 2006, Fortune, Marc Gunther.
5. Ruiz-Marrero.
6. "Up Against the Wal-Mart," August 23, 2006, Grist.org, by Tom Philpott.
7. Ruiz-Marrero.
8. "Sour Milk," August 2, 2006, Grist.org, by Tom Philpott.
9. "Activists Move to Protect Organic Standards from USDA, Trade Group," New Standard, October 5, 2005, by F. Timothy Martin.
10.Transcript of United States Department of Agriculture National Organic Standards Board Meeting, April 19, 2006, p. 90.
11. See www.democracyinaction.org.
12. "When It Pays To Buy Organic," Consumer Reports, February 2006.