12/22/2005

Source: LOHAS Weekly Newsletter

Author: Just-food.com

The increasing popularity of organic food products in the US means that most sectors of the organic food industry are suffering undersupply, which is stunting market growth, according to a research group.

Organic Monitor said that the shortage of organic products is making producers look outbound for raw materials. Increasing volumes 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 widen. It is estimated that over US$1.5 bn of organic products are imported into the US, compared to about $150m 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 US 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. US producers have resorted to imported organic beef from Australia and Latin American countries.

"Supply shortages are taking their 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," Organic Monitor told just-food.com

"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," it added.

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 US demand for organic foods expected to strengthen in the coming years, supply shortages are likely to continue. Unless more US farmers consider converting to organic practices, exporters are likely to capitalise on this lucrative market.