Organics Spotlight: Pricing, preferences, and market impact

Dating back to the 1940s, organic farming has had a decades-long slow start but is now seeing exponential growth. The U.S. organic products category, as a whole, is expanding, and this includes produce.

According to the Organic Produce Network, U.S. sales of organic fruits and vegetables reached $10.6 billion last year, capturing a 13-percent share of grocery retail sales, and 8 percent of overall produce volume. 

Globally, North America is behind other parts of the world when it comes to organics, especially in cropland.

A recent report from the Research Institute of Organic Agriculture (known as FiBL, with locations in Switzerland, Germany, Austria, France, and Belgium) lists one country as far outpacing the rest in acreage devoted to organic fruits and vegetables: Australia.

Down Under growers cultivate a stunning 53 million acres, eclipsing the next contenders, India and Argentina, at over 4 million acres each, followed by Uruguay at 3.5 million acres.

For its part, the United States comes in at about 4 million acres this year, up from just over 3 million acres in 2021. This bodes well for grower-shippers, as more acreage is being transitioned to organics.

“We’ve handled organics since 1984; it’s been our primary deal since the beginning.”

Making the Switch

The process of converting from conventional to organic, however, is arduous and costly. To earn organic certification from the U.S. Department of Agriculture (USDA), it takes three years. For many, the transition is new or a recent endeavor, but for others, they were all-in decades ago.

“We’ve handled organics since 1984; it’s been our primary deal since the beginning,” notes Ryan San Jose, national sales manager and vice president of Access Organics, Inc. BB #:164336 in Kalispell, MT.

“Back then, organics were the butt of the joke, everything was relegated to a small area in the produce department. In the 1990s, people started looking at alternative options and organics started to catch on.

“In the early 2000s,” he adds, “organics were catching on even more and now we’re seeing a 25- to 50-percent increase in sales every year.”

Joe Eisinger, organics buyer for Katzman Produce, Inc. BB #:103742 in New York, has seen a similar upward trajectory.

“Katzman Produce has always handled organics, but over the last few years we’ve really expanded the program in response to growing customer demand. We launched a dedicated organic department, added specialized staff, and increased our organic SKU count from about 20 items to more than 200.

“What started with core items like berries and a few vegetables has grown into a much more complete organic offering.”

“Our goal is to offer organic options across all the major categories we carry conventionally, from berries and vegetables to salads, mushrooms, and tropicals.”

Trending Crops

According to the Organic Produce Network, berries led the way in U.S. organic produce sales last year at nearly $3 billion, followed by apples at over $700 million, bananas at almost $600 million, and carrots at over $400 million.

“Organic berries continue to be one of the strongest categories for us, along with staple vegetables like broccoli, cucumbers, romaine hearts, and string beans,” Eisinger says, noting the vital role imports play to maintain supply levels.

“We source our organic produce locally, domestically, and globally to maintain availability year-round, with international imports coming from countries like Mexico, Peru, Chile, Argentina, and Holland depending on the commodity and season.

“Our goal is to offer organic options across all the major categories we carry conventionally, from berries and vegetables to salads, mushrooms, and tropicals.”

Colo-Pac Produce, Inc. BB #:140581, based in Denver, CO, also packs and distributes both conventional and organics. In business since 1929, the company handles organics, but it’s a relatively new facet of the business.

“Organics are a new addition; we’ve been doing them since 2005,” notes CEO Tony Garin. “We don’t grow anything organic, just repack it,” he says. “We import organics from outside the United States and all over the world.” 

Andy Martin, president of A&A Organic Farms Corporation BB #:169698 in Watsonville, CA, says, “We work with growers and have farms in Mexico that grow year-round for us. We also source organic produce from Peru, Argentina, and Fiji.

“Our sweet spot is the specialty tomato market—organic Rainbow Cherry tomatoes are our flagship item. We’re introducing an organic yellow cocktail tomato with a high brix rating called Bellezas Doradas. In addition, we’ve planted an organic mini San Marzano and organic chocolate tomato-on-the-vine.”

Martin mentions other organic tomatoes, including heirlooms, as well as a broad range of organic offerings including green beans, broccolini, zucchini, snap peas, squash, mini bell peppers, and garlic, all grown in Mexico.

Another particular highlight of A&A Organics’ lineup is melons. “All of our melons are very popular. We can’t keep enough of our late-May season melons on the floor, the first one being the Honeysaurus (a honeydew hybrid) and our Black Raven seedless watermelon.”

He says these proprietary items along with a cantaloupe similar to Western Shipper are bestsellers. “On the winter veg side, we have our broccoli, baby broccoli, cauliflower, green onions, and greens.”

“With all prices rising, growers are spending more to grow the crop than in past years.”

The Downsides

There’s no disputing costs have risen for all growers, and organic growers often have lower yields than conventional crops. Yet profits are generally higher as well.

“On average we get 20- to 25-percent bigger profits for organic than conventional,” notes San Jose of Access Organics. “But with today’s farming costs in California that difference is not enough.” He cites soaring costs for fertilizer and pre- and postharvest inputs, as well as regulation as hurdles.  

Another challenge is retail pricing. “Retailers demand a price that works for them, and that price might be the same for the last five years and doesn’t account for all these increased costs—this isn’t sustainable by any means.”

Beyond state legislation, there are federal issues. “For us, there’s an anti-dumping tariff for tomatoes from Mexico,” says Martin, referencing the Tomato Suspension Agreement, which set minimum prices for tomatoes from Mexico.

When the agreement was terminated last year, a 17.9 percent anti-dumping tariff was placed on all tomatoes imported from Mexico.

“This has caused many Mexican growers to drop out of the tomato market and could have been a big reason we saw record tomato prices this past winter season, about January to May,” he explains. “With all prices rising, growers are spending more to grow the crop than in past years.”

“Demand tends to shift seasonally, with stronger interest in fruit during peak summer seasons and vegetables during other parts of the year.”

What’s Next

While organic produce certainly isn’t outpacing or even replacing conventional produce anytime soon, its growing popularity is carving out a chunk of the produce department in grocery stores across the United States and beyond.

Whether the category will manage to maintain this momentum in the coming years remains to be seen.

“Demand tends to shift seasonally, with stronger interest in fruit during peak summer seasons and vegetables during other parts of the year,” notes Katzman’s Eisinger. Yet he’s not worried about demand leveling off.

“We’ve seen growing consumer interest in organic produce as part of broader wellness and lifestyle trends, especially for everyday staple items.”

San Jose agrees. “The focus on healthy living is even higher today than in the 1990s,” he observes, with the kids from that generation now making their own decisions and choosing organics. “In the last 20 years, people have really sought out organics for their primary produce usage.”