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New RAFI-USA document - Who Owns Organic?

The Global Status, Prospects, and Challenges of a Changing Organic Market

By Michael Sligh, RAFI-USA Program Director, Just Food and Carolyn Christman

Organic agriculture is the most dynamic and rapidly growing sector of the global food industry. Its transformation from a small, niche market to a $23 billion enterprise has made "organic" an international phenomenon.

Who Owns Organic, a new report from RAFI-USA, describes the status of organic agriculture and proposes careful monitoring to track the changes that are occurring.

The two commonly used measures - acreage and sales - reflect dramatic growth in the organic market. But growth alone is not all that needs to be measured. Changes in the structure of the industry must be measured as well - such as increasing concentration and reduction in the price premium. It is also important to itemize the challenges facing organic agriculture, such as complex trade systems and the spread of genetically modified crops.

Will organic agriculture remain on the cutting edge and meet its potential? Or will it relinquish this role to the global food system and become little more than a marketing niche - or even the shadow of what it set out to replace?

The question debated now is how to both protect and expand the value of organic food. It is especially important to consider whether the value rests solely in a narrow agricultural framework or --as RAFI-USA believes -- based in a broad ideological framework as being good for the earth, the water, the air, the animals, the workers, the farmers, the consumers, and their communities.

This report is an essential snapshot of organic agriculture in 2003. It contains charts and graphs of global production and sales as well as information on the North American Industry. It offers an extensive bibliography for those wanting to extend their own research. Our hope is that it will inspire greater analysis and conversation about the future of organic food production.

Who owns organic? The answer, of course, is that we all do. Download the 35 page report from the RAFI-USA website at www.rafiusa.org under "What's New", "Publications", "Just Food Resources" or contact us at RAFI-USA, PO Box 640, Pittsboro, NC 27312, USA; phone 919-542-1396.

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USDA Decision Jeopardizes Organic Standard

By Michael Sligh, RAFI-USA Program Director, Just Food and Jill Krueger, FLAG Inc., Staff Attorney

The Farmers Legal Action Group in Minnesota, in a November 13th press release, stated that an administrative judge within USDA ruled that accredited certifying agents such as MICI have no right to appeal when USDA overturns their decisions, thus dismissing MICI's appeal.

In our e-Bulletin #10, February 2003, we recorded the fact that USDA allowed The Country Hen, a Massachusetts egg farm, to be certified as producing "organic" eggs even though the chickens were not given access to the outdoors as demanded by the National Organic Standards Board. RAFI's Michael Sligh worked as chair of that national board for many years with constituents from across the nation to agree on and codify the national organic standards now in effect. This USDA decision was immediately appealed by MICI, the Massachusetts Independent Certification, Inc.

The Farmers Legal Action Group in Minnesota, in a November 13th press release, stated that an administrative judge within USDA ruled that accredited certifying agents such as MICI have no right to appeal when USDA overturns their decisions, thus dismissing MICI's appeal.

MICI says that USDA overturned its decision to deny the farm the "organic" label the day after it was made. "No one from USDA ever reviewed our files, talked to our Certification Committee, or even asked us a single question concerning the denial," noted Don Franszyk, MICI's Certification Administrator.
The Farmers Legal Action Group, Inc. is representing MICI in its appeal of the ruling of the USDA Administrative Law Judge. MICI argued in its appeal to the USDA Judicial Officer that the program regulations were inconsistent with the Organic Foods Production Act, passed in 1990, which requires the Secretary of Agriculture to establish an appeal process that would allow any person to appeal an action by USDA that violates the requirements of the organic certification program.

MICI also alleged a violation of its Constitutional rights of due process of law, freedom of speech, and freedom of association. MICI argued that a USDA official unlawfully interfered with its enforcement of the requirements for labeling eggs as "organic".

Judith Gillian, an MICI Board member, points out that the issue is much larger than the concerns of one certifying agent. "If USDA can overturn a certifying agent's decision without even holding a hearing, how can consumers be confident that food bearing the USDA organic seal was produced in the manner they expect? We can't do our job if we are denied the right to appeal USDA decisions. It's that simple," Gillian said.

USDA's Agricultural Marketing Service is expected to respond to the appeal in the near future.
To read the judge's decision and MICI's legal pleadings, visit the Farmers Legal Action Group website at www.flaginc.org.

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Bargaining Associations Fight for Life in Free Trade Markets

By Laura Klauke, RAFI-USA Program Director, Contract Ag Reform Project

Of the twelve association reports delivered at the 48th Annual Pacific Coast Bargaining Conference in early December in Monterey, CA, the report that seemed to capture the essence of the current climate was the report from Adin Hester of the Olive Growers Council of California.

Hester’s report began with January 2003 when one of the only two major olive processors still operating cancelled all their current contracts with growers. The olive contracts have traditionally been “evergreen” (continued year to year) but contained an “out” clause that provided a specific time after the harvest when either party could exercise the right to cancel without penalty.

When they cancelled the existing contract, the processor sent out a new contract with several requirements unfavorable to the grower. These included: a penalty for small growers (a 15% price cut if they deliver less than 30 tons), a production cap, an exclusivity clause that eliminated the growers’ option to sell excess to another buyer, and requirements to cut production through excessive pruning, spraying and deficit irrigation.

With all predictions pointing to a plentiful season, the other major processor was not taking any new growers. Therefore, to have a home for their crop, growers had no choice but to sign the new contract. Hester reported that, “within weeks 75% of the new contracts had been signed and returned. The growers did not even bother the read them. Those that did read them eventually relented and signed. They had no where else to take their olives.”

Despite concerns over the legality of some of the clauses contained in the new contract, most growers are in no position to go to court. They at least had a home for their product for one more year. Hester added, “Growers are caught in such a severe economic crossfire many are just getting out.”

The price for olives delivered under contract is negotiated each year by the Olive Growers Council and the major processors. After the new contract came out, price negotiations began. The processor who had put forward the new contract put an initial bid on the table of $400 a ton. The other major processor came in with an offer of $500 a ton but had a clause in their offer to allow them to pay the price settled on between the growers and the larger firm if that figure was lower. The price last year was $625 a ton. Breakeven for an average grower is around $685 a ton, excluding harvest costs.

Under California law, if the processor and association cannot reach agreement, they can opt for conciliation and a third party arbitrates a settlement. Hester reported, “After ten hours of conciliation we realized another party was in the room who we couldn’t even see, and that person was determining the course of the negotiation. That person was the bank. Basically the bank was dictating what the processor could spend on raw product this year. When there are only two players in town and they are your major buyers, what can you do?”

The Olive Growers Council was able to raise the price to $450 a ton. But even with that increase, the growers took an almost $600 per acre loss when you factor in the typical cost of harvest. “It is the age-old game plan: take it out of the growers’ hide.”

Two major factors were effecting the domestic olive industry and the price processors could offer this year. One was that the processors were entering the year with significant carryover and it looked like a big harvest.

But a perhaps more critical factor was that competition from less expensive imports has been cutting the market share for domestically produced table olives. The general feeling was, “The imports are killing us. We are tired of this ‘free trade’ baloney. We need fair trade.”

Hester explained, “The olive market is growing but we are losing our share. Imports now make up about 40% of the market and are growing. The food service industry is now almost exclusively supplied by foreign competitors who can offer a Pizza Hut or Domino’s several dollars off per case. If you buy thousands of cases, that adds up.”

The major supplier of imported olives is the European Union which has olive subsidies of over $2 billion a year. That comes out to $150 a ton at the grower level.

This story is sadly familiar to those who have watched as agricultural contracting expands in today’s concentrated markets. But, unlike most commodities outside of a few states with bargaining legislation, the olive growers’ report does not end with the signing of the contract. While the growers did not negotiate the contract terms, they did have a voice at the table and an opportunity to discuss their concerns with the processor.

Likewise, as an association, they were able to bargain for a better price than was initially offered. However, the association must work within the confines of the olive market and is not immune to the impacts of imports and market concentration.

The Olive Growers Council’s experience is in line with the findings of a 2003 report from the Henry A Wallace Center for Agriculture and Environmental Policy. The report, The Effect of Laws That Foster Agricultural Bargaining: The Case of Apple Growers in Michigan and New York, says in summary:

"It is clear that the presence of a bargaining cooperative has enhanced the welfare of Michigan growers, especially members of Michigan’s bargaining association, the Michigan Agricultural Cooperative Marketing Association (MACMA). A comparison of apple prices in Michigan, New York and the US as a whole from 1969 to 2001 showed that Michigan growers received higher prices for their apples throughout most of this period. … Bargaining association members appear to reap substantial benefits from their membership in the bargaining cooperative. These include having input into contract terms and public policy that affects them... …but, [collective bargaining] is not by itself sufficient to enable growers to maintain their operations in the face of steep international competition."

Adin Hester ended his report, as did most of the representatives, with a note of concern about where the industry and American agriculture in general are going. The Olive Growers Council successfully facilitated the creation of a new growers’ processing co-op and the purchase of a processing facility that had closed a few years ago. He is hopeful that the co-op will be able to offer growers more options in the future. They are actively exploring niche markets and new packaging technology.

But these are difficult times for farmers. And now, when they need their bargaining association the most, it is one of the most difficult times for the Olive Growers Association or any association to successfully build membership and cooperation across the industry.

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Bulletin produced by Rural Advancement Foundation -USA

Edited by Mary Clouse - 919-542-3339; clouses64@yahoo.com

For more about RAFI-USA and back issues of the bulletin, see the RAFI-USA Home Page or call 919-542-1396.

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