How will organic food hold up in the recession?

By Jess Halliday

- Last updated on GMT

Related tags Organic food Late-2000s recession

How will organic food hold up in the recession?
Market analysis have expressed concern that demand for organic food will shrink in the tight economic situation, as consumers become less willing to part with a premium.

Organic certifiers have started considering ways to reduce the impact of higher costs and lower demand on farmers; for instance, one plan would allow farmers to give animals conventional feed for a limited period, without compromising their organic status in the longer term.

But Mark Waugh, spokesperson for Organic Farmers and Growers, told that so far “the talking down of organics has been more serious than the reality.”

“We are not feeling huge waves of panic from licensees​,” he said, adding that they are “feeling the pain, but hopefully they can ride it out”.

So far only a handful of egg producers have handed back their organic licenses, as consumers appear to be switching from organic eggs to free range as a middle ground.

Lost premiums

Amarjit​ Sahota, director of consultancy Organic Monitor, told that demand for organic meat has gone down in the economic downturn because it can carry a premium of 100 per cent over conventional meat.

“Because of the price differential, either people don’t eat meat or they buy conventional.”

Organic dairy produce and vegetables, on the other hand, tend to carry a 20 to 30 per cent premium.

The high premium on organic meat is due not only to the higher cost of organic feed, but also the costs of a more labour intensive process.

In some cases, farmers have had to sell meat reared as conventional – even though it has been reared as organic – because of the lack of demand. This means that, despite having incurred more costs, they do not see the premium.

Prospects for 2009

Sahota said that certainly there was a “big dip” ​in organic demand between August and October 2008, but “demand has stabilized since then”.

Although he said that consumers are being more cautious with their spending, organic demand could rebound if the UK comes out of recession this time next year.

Organic Monitor valued the global organic market at over US$40bn (c€25.8 bn) in 2007.

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