American consumers can’t get enough organic foods with producers unable to meet demand. As a result most sectors of the organic food industry are suffering undersupply, which is stunting market growth.
Shortage of organic products is making producers look outbound for raw materials. Increasing volume of organic fruit, vegetables, grains, seeds, beans, and herbs are being imported into the US. Finished products are also imported to meet consumer demand for all things organic.
The flood of imports is making the organic food trade gap to widen. It is estimated that over US $1.5 billion of organic products are imported into the US, compared to about US $150 million in American exports.
Scarcity of raw material is leading Stonyfield Farm, the dominant producer of organic yoghurt, to look at sourcing organic milk powder from New Zealand. The company is to send inspectors to New Zealand to ensure the organic milk meets American standards. The low number of organic livestock producers in the US has been responsible for the organic meat industry to experience undersupply for a number of years. American producers have resorted to imported organic beef from Australia and Latin American countries.
Supply shortages are taking its toll on the market. Nearly all market sectors would grow at much higher rates if sufficient supply was available. For instance, lack of organic milk has caused many retailers to have empty shelves throughout the year. The organic juices market appears to have become the major casualty however with news that a leading organic juice producer is to exit the market because of shortage of raw material.
The organic food company cannot find enough orange juice to meet its growing production needs and has decided to withdraw from the market and focus on other product categories. The Florida hurricanes depleted orange juice stocks and imports are prohibitively expensive. Organic Monitor predicts the refrigerated organic juice segment could contract by up to 20% in 2006 because of the company’s market withdrawal. Although competitors are likely to increase market share, few have the distribution and marketing resources to replace its strong presence.
With American demand for organic foods expected to strengthen in the coming years, supply shortages are likely to continue. Unless more American farmers consider converting to organic practices, exporters are likely to capitalize on this lucrative market.
Posted: December 15th 2005
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