Organic Supply and Demand in the United States
The organic food and agriculture market in the United States is growing exponentially as consumer preferences shift towards naturally produced goods. This article explores the growing aggregate demand for organic products as well as the production challenges that the United States faces in order to achieve market equilibrium.
Organic Supply and Demand in the United States
The organic food and agriculture industry in the United States is highly atomized and greatly dependent on small producers. Within the national market, major companies such as General Mills (GIS) and WhiteWave (WWAV) Foods represent only 1.7% and 5.4%, respectively, of the total supply. Nevertheless, aggregate demand for organic products in the United States has grown consistently for more than a decade. In 2015, the organic foods market grew 11%, which stands in stark contrast to the 3% growth of the food market in general. Likewise, organic non-food products, such as soaps and oils, increased their sales by 13% during 2015. This dramatic growth in the demand for organic products has strained US-based organic producers and increased overall organic imports into the country. Because of the scarcity of arable land available and the high costs of transitioning a farm from non-organic to organic, companies and investors are looking to foreign suppliers for organic goods.
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Looking for New Organic Markets
One of the world regions that produces a substantial amount of the organic imports into the US markets is Latin America, another important one being Europe. Products such as passion fruit, grass-fed cattle meats, and coconut-based goods come from countries like Brazil and Colombia. Similarly, given the current political context, US-based investors and producers are exploring the possibility of a new organic supplier in Latin America, Cuba. As Washington and Havana normalize relations and gradually (re)open to trade, food and agriculture interests in the United States are looking into the possibility of using Cuban farms for organic production destined to mainland markets. In this regard, Cuba is an attractive location because of its proximity to the US mainland and because the island nation’s agriculture already functions as an organic industry. Ever since the collapse of the Soviet Union, Cuba’s agriculture has developed and prospered without the use of chemical pesticides or fertilizers.
Since 2008, consumer spending on organic goods in the US has gone up more than 70% and this trend is expected to continue growing as the economy recovers and consumer preferences keep shifting towards naturally produced foods. During 2015, the US Secretary of Agriculture along with a group of private-sector agricultural partners visited Cuba on an exploratory mission to assess the great potential that Cuba has as an organic goods partner. It is expected that the US would benefit from lower costs by importing highly demanded agricultural products from Cuba, such as coffee, bananas, and mangoes. These topical food products are currently imported into the US from farther away regions of the world and represent an aggregate commercial value upwards of US$600 million. Likewise, agricultural trade would benefit Cuban farmers who would expand and diversify their markets as well as benefit from better sales prices. Therefore, organics trade with island nation could be mutually beneficial for Cuban farmers and US consumers.
(Read more about The Organic Foods Market in the United States)