Caren Wilcox, Executive Director & CEO
Organic Trade Association
Before the U.S. House of Representatives
Horticulture and Organic Agriculture Subcommittee
April 18, 2007
Mr. Chairman, Ranking Member, and Members of the Subcommittee, I am Caren Wilcox, Executive Director of the Organic Trade Association (OTA), the membership-based business association for organic agriculture and products in North America. I am here today speaking on behalf of the Organic Trade Association (OTA). We believe that this is the first informational hearing on organic issues ever conducted by a Congressional committee. Thank you.
OTA is the voice for the organic business community, and has had this role for over twenty-two years, since its founding in 1985. Since that time, OTA membership has grown more than eightfold, and now encompasses approximately 1600 members across all parts of the organic farming, processing, distribution, and retailing supply chain, for food, organic textiles and personal care products.
We appreciate the opportunity to provide this testimony about the business climate for organic production, its history, and where OTA believes we are headed. Organic agriculture forms the basis of a fast growing part of the agricultural economy, and offers hope to farms and shoppers alike, while contributing to the improvement of our land, air and water resources.
OTA also appreciates the fact that the subcommittee extended an invitation to so many individuals steeped in the organic tradition and practices to testify about their individual experiences with organic production, transition, marketing and sales. As any executive of a trade association will tell you, there is nothing like hearing from the individuals who directly make their livings in the production and sale of goods. Many farm businesses involved with organic production have started with a vision of changing agriculture for the better, and have grown over the years to become well-known products. You will hear from several farmers and business people today who represent that vision. And you will hear today that organic production is a life experience requiring attention to our environment, each crop or animal, and the integrity of growing and distributing the product through to the consumer.
Today I would like to tell you something about the current exciting growth in the organic marketplace, and the laws, regulations and practices that underlie that success. OTA provides private monitoring of the growth, and has been involved with passage of the laws and regulations for decades. At the end of this testimony I will cover some of the issues we believe need to have attention so that organic can continue to grow for consumers and for the benefit of the environment.
Organic In the U.S. Marketplace
In the United States, the buzz about organic has become a steady hum. Organic products are
increasingly appearing in more and more new venues, from ballparks and university cafeterias to local restaurants, mainstream supermarkets, club stores, and mass-market retailers. At the same time, U.S. college curriculums are beginning to add more courses that focus on organic agriculture.
U.S. Organic Sales
The U.S. organic industry grew 17 percent overall to reach $14.6 billion in retail sales in 2005, according to The Organic Trade Association’s 2006 Manufacturer Survey. Organic foods grew
16.2 percent in 2005 and accounted for $13.8 billion in sales. Organic foods‘ share of total
retail food sales is up to 2.5 percent. The fastest growing food categories and their rates of growth over the previous year are organic meat (55.4 percent – from a very small sales base),
organic sauces and condiments (24.2 percent) and dairy products (23.5 percent). The fastest-
growing non-food categories are organic flowers (50 percent), pet food (46 percent), and fiber (44 percent).
Organic products can be found in grocery stores, cooperatives, specialty stores, farmer‘s markets, farm stands, online, in many restaurants, and many other outlets. Organic foods are increasingly sold in mainstream retail establishments, which together represent roughly 46 percent of sales. Large natural food chains, along with small natural food chains or independent natural groceries and health food stores, represented about 47 percent of organic food sales. About 4 percent of organic food is sold through farmer‘s markets. (Source: The Organic Trade
Association (OTA) and Organic Trade Association’s 2006 Manufacturer Survey)
While OTA is currently in the field with a new study according to the OTA 2006 survey, sales of organic foods were expected to reach nearly $16 billion by the end of 2006.
Nonfood organic products (personal care products, nutritional supplements, household cleaners, flowers, pet food, and clothing, bedding and other products from organic fibers such as flax, wool, and cotton) grew 32.5 percent, to total $744 million in U.S. sales in 2005.
Sixty-one percent of respondents to the OTA Survey said they display the USDA (U.S. Department of Agriculture) Organic seal on their products. Of the 39 percent not currently using the seal, 53 percent intend to use the USDA Organic seal in the future. Also, 55 percent of respondents reported that the USDA labeling and certification programs had increased their sales of organic products.
Because USDA does not yet do comprehensive market studies of organic sales, as it does for conventional U.S. agriculture, OTA performs this research on the industry for its members and the public.
Industry watchers agree that the organic industry is at a new tipping point. Never before has it experienced the degree of acceptance and interest from mainstream supermarkets and consumers. Many supermarkets, in fact, have added private label organic lines to their offerings.
Not only do natural food stores and all of the major mainstream retailers see organic as a
growing category, but more and more mainstream manufacturers are adding organic products to their traditional brand lines. In addition, small product developers continue to create the new products of their dreams.
Such heightened interest in organic is driving demand for raw materials. In the OTA survey, fifty-two percent of respondents reported that a lack of dependable supply of organic raw materials has restricted their company from generating more sales of organic products. This highlights the need for additional measures to increase the supply of organic ingredients, and the opportunities for U.S. farmers to supply those needs.
There are no up-to-date statistics available on U.S. imports or exports of organic products. These statistics are not broken out from overall conventional data by Customs or Commerce. The only figures are in a February 2005 USDA report, which estimated the United States imported $1 billion to $1.5 billion in organic products in 2002, and exported somewhere between $125 million and $250 million. However, in a Miami Herald article published Dec. 18, 2006, a
spokesperson for the Center for Fair and Alternative Trade Studies at Colorado State University estimated organic exports to the United States from Latin America alone would reach approximately $250 million in 2006.
Almost three-quarters (73 percent) of the U.S. population buy organic products at least occasionally, up from 55 percent in 2000, according to The Hartman Group. Core buyers, who buy organic products at least weekly, represent 23 percent of U.S. consumers, according to the report, Organic2006: Consumer Attitudes & Behavior, Five Years Later & Into the Future.
Meanwhile, The Natural Marketing Institute‘s (NMI‘s) 2005 Health and Wellness Trends study
estimated 56 percent of consumers use organic products in varying frequencies across six product categories. Household penetration by category is as follows: fresh fruits and vegetables = 44%; packaged foods = 29%; dairy and milk = 24%; personal care = 21%; beverages (excluding milk) = 20%; and clothing/linens = 7%.
More and more consumers report trying additional categories of private label, natural and organic packaged foods, according to The Hartman Group. Consumers are seeking out these products at channels associated with middle-income shopping, such as Costco, Trader Joe‘s,
Wal-Mart, and mainstream grocers.
What draws consumers to want to purchase these products and farmers to produce them?
Market Development: Strong, Steady Growth at Retail
Unlike the information that is developed almost on a daily basis for conventional agriculture, organic has had to quantify the market size and changes over time by compiling this consumer data privately, and unfortunately because this is not the normal market data compiled by USDA for conventional agriculture, this data may not be readily available to America‘s farmers, who
could benefit the most by taking advantage of the opportunities revealed by the consumer data. We at OTA work to make it available to them however.
It is important to note here that organic agriculture and processing incorporates practices and
avoids substances commonly perceived to contribute adversely to the environment and to health. The National Organic Program is a marketing program overseen by USDA and is not marketed as a health program, but over the long debate about the impact of such substances as persistent pesticides and herbicides, hormones, anti-biotics as well as other health oriented debates, many consumers have identified a preference to avoid these substances in their food, textiles and personal care products. This preference is revealed when organic consumers are studied by social scientists.
We would also like to call to the Subcommittee‘s attention the fact that organic food products like all food products in the United States must meet the requirements of national, state and local food safety laws.
Shoppers who chose organic products cross all demographic, geographic, and economic boundaries. There is no typical organic consumer anymore. What is clear is that more shoppers are choosing more organic products in more places, and the market for organic products continues it strong steady growth. According to Organic 2006, a report prepared by the
Hartman Group, an independent market research firm, shoppers typically enter the organic category by beginning with fresh fruits and vegetables, and other products that help them avoid pesticides and hormones. As they become more involved in the category, they add more products, with fiber products and personal care products often being among the last they adopt.
Those most devoted to organic consumption reportedly have a high concern for personal and planetary health. They are interested in fair trade, prefer their foods to be either U.S. or locally grown and grown on farms that practice sustainable agriculture. They want to relate to the companies from which they purchase and look for those who are committed to their communities and to corporate social responsibility.
Who Are Organic Users?
The Natural Marketing Institute (NMI) has identified three distinct organic consumer segments: ―Devoteds?‖ (27.8 million adults or 13 percent of primary grocery shoppers) are the most integrated and health seeking organic users and have fully incorporated organic products into their lifestyles. ―Temperates?‖ (54.2 million adults or 25 percent of primary grocery shoppers) are attitudinally disposed toward health in general and towards organic in particular, but are attempting to fit organic usage into their existing lifestyle, rather than changing their lifestyle. Dabblers? (41.9 million adults or 19 percent of primary grocery shoppers) a
disproportionately male group that is non-committal, sprinkling a bit of organic usage into their lifestyle, and their usage appears to be more about participating in a trend than other concerns. Thus, according to NMI well over 50% of consumers have used organic products in the past
(Excerpted from an article by Maryellen Molyneaux, The Natural Marketing Institute, year to one degree or another.
published in the September 2006 issue of The Organic Report)
According to another researcher, The Hartman Group, as reflected in their study, Organic 2006
Consumer Attitudes & Behavior, Five Years Later & Into the Future, almost three-quarters
(73%) of the U.S. population buys organic products at least occasionally, and almost one-quarter (23%) of U.S. consumers buy organic products on a regular (at least weekly) basis. Furthermore, ―compared with 2000, more consumers are purchasing organic products on a
weekly (9% in 2000 vs. 14% today) and occasional basis (34% in 2000 vs. 44% today).
Hartman also reports strong interest in organic products among Hispanic and Asian American consumers.
How are U.S. Farmers Meeting This Demand From Consumers?
As you will note in later testimony the National Organic Standards have only been in place since late 2002. Of course, much organic land was in production at that time, but without a national market with a certified label, some farmers were not interested in becoming organic. In addition, it takes three or more years to convert land previously treated as conventional to be certified to produce organic food and fiber.
We raise these factors to point out that not only has much data not been collected by USDA, much production was not there to be measured until the national rule was instituted.
Organic is growing in the United States, but not at a rate to meet the consumer demand outlined above.
According to the latest available statistics for U.S. organic production released in December 2006 by USDA‘s Economic Research Service (ERS), there were - at least - 8,445 certified
organic farm operations in the United States in 2005, up from 8,035 certified organic farms in 2003. The 2005 operations represented slightly more than 4 million acres under organic management, up from 3 million acres in 2004 and nearly 2.2 million acres in 2003. For the first time, all 50 U.S. states had some certified organic farmland.
Pointing out that farmers face a number of hurdles when considering converting to organic production, ERS cited high managerial costs and risks in shifting to a new way of farming, limited knowledge of organic farming systems, lack of marketing and infrastructure, and inability to capture marketing economies.
Nevertheless ERS also reports that ―many U.S. producers are embracing organic farming in
order to lower input costs, conserve nonrenewable resource, capture high-value markets, and boost farm income.‖
ERS data for 2005 showed 1,722,565 acres in organic cropland (about 0.51 percent of all U.S. cropland) and an additional 2,281,408 acres in pasture and rangeland (about 0.5 percent of all U.S. pasture). Organic cropland in 2005 was up from 1,451,601 acres in 2003, while organic pasture grew substantially from the 745,273 acres recorded for 2003.
Livestock numbers in 2005 were up substantially from 2003, reflecting the growing demand for organic milk and meat in the United States. The number of organically raised milk cows grew from 74,435 in 2003 to 86,032 in 2005. The number of organic beef cattle grew from 27,285 in 2003 to 70,219 in 2005. In addition the number of organic hogs and pigs grew from 6,564 in 2003 to 10,018 in 2005. Total livestock (which included young stock and sheep) was up to 229,788 in 2005, from 124,346 in 2003. Total organic poultry—including layer hens, broilers
and turkeys—reached 13,373,270 in 2005, from 8,780,152 in 2003. According to ERS, nearly one percent of dairy cows and 0.6 percent of layer hens in the United States in 2005 were managed using certified organic practices.
Despite surging retail sales, growth in organic farm acreage in the United States is not keeping the same pace, creating a disparity between the amount of U.S. farm acreage devoted to organic production and the consumption of organic finished goods. While we do not know how much, we do know that part of the market demand for organic goods is being filled from imported agricultural products. (OTA certainly understands this situation and also acknowledges that there are many products that cannot be grown in the United States and which consumers want to acquire as organic – coffee, cocoa, certain fruits etc.) However, in many cases U.S. farmers are missing an opportunity, and the U.S. is not reaping the full environmental benefits of organic production.
The “USDA Organic” Label/Seal
The Subcommittee Members have all seen the ―USDA Organic‖ seal on products. The
standards for those seals are enforced by USDA and products that are made from 95 percent to 100 percent organic ingredients and are labeled according to the organic standards are as ―100% Organic‖ or ―Organic‖ for the 95% category.
Products that contain at least 70 percent organic ingredients and are handled according to the organic regulations can use the phrase ―made with organic. . .‖ on the front label, and then list
up to three organic ingredients or food groups such as vegetables or grains.
These are the labels that consumers use to identify U.S. organic produced products and ingredients. And these are the labels that need strong standards and enforcement behind them to retain consumer confidence.
Highlights of the regulations follow. For complete details, and the most up-to-date regulations, see www.ams.usda.gov/nop.
Overview: What is Organic?
Now we want to describe to you the philosophy, law, practices and standards behind organic production in the United States.
Organic refers to the way agricultural products are grown and processed. It includes a system of production, processing, distribution and sales that assures consumers that the products maintain the organic integrity that begins on the farm.
Building healthy soil is the foundation of organic agriculture. Organic production is based on a system of farming that maintains and replenishes soil fertility without the use of toxic and persistent pesticides and fertilizers. Organic production views farms as part of the ecology, and each component of the farm system affects all other parts of the system.
Organically produced foods also must be produced without the use of antibiotics, synthetic
hormones, genetic engineering and other excluded practices, sewage sludge, or irradiation. Cloning animals or using their products is considered inconsistent with organic practices. Organic foods are minimally processed without artificial ingredients or preservatives to maintain the integrity of the food, and with a carefully reviewed and approved list of a few synthetic ingredients such as baking soda, baking powder, and chlorine.
The following definition of "organic" was passed by the National Organic Standards Board (NOSB) at its April 1995 meeting in Orlando, FL. This board, comprised of citizens appointed by the U.S. Secretary of Agriculture, advises the Secretary on issues concerning organic production, and takes an active role in examining materials and methods for their acceptability in every part of the organic system of production. Within the NOSB definition of organic are key statements which show that sustainability, especially how a healthy environment relates to human health, is the very foundation of organic agriculture
"Organic agriculture is an ecological production management system that promotes and
enhances biodiversity, biological cycles and soil biological activity. It is based on minimal use
of off-farm inputs and on management practices that restore, maintain and enhance ecological
‗Organic‘ is a labeling term that denotes products produced under the authority of the Organic
Foods Production Act. The principal guidelines for organic production are to use materials and
practices that enhance the ecological balance of natural systems and that integrate the parts of
the farming system into an ecological whole.
Organic agriculture practices cannot ensure that products are completely free of residues;
however, methods are used to minimize pollution from air, soil and water.
Organic food handlers, processors and retailers adhere to standards that maintain the integrity of
organic agricultural products. The primary goal of organic agriculture is to optimize the health
and productivity of interdependent communities of soil life, plants, animals and people."
These statements are the framework for stringent standards put in place to certify that specific practices are used to produce and process organic agricultural ingredients used for food and non-food purposes.
Regulating a Philosophy: Codifying Certification and Accreditation
Use of the word organic to describe farm products is regulated in the United States, thanks to enabling legislation passed by Congress in 1990 and the National Organic Program regulations, which were implemented in October 2002.
Following the establishment of several voluntary and state standards for organic production, the stage was set for U.S. National Organic Standards, and the U.S. Congress adopted the Organic Foods Production Act (OFPA) in 1990 as part of the 1990 Farm Bill. This action was followed by over a decade of public input and discussion, which resulted in a National Organic Program final rule published by the U.S. Department of Agriculture (USDA) in December 2000 and implemented in October 2002. This rule was, at the time, the most commented upon rule in USDA history.
Organic production is practiced worldwide, and products sold as organic in the United States must meet or exceed the U.S. regulations for organic production no matter where those products are grown and processed.
Organic Foods Production Act of 1990
The Organic Foods Production Act‘s (OFPA) purpose was to establish national standards for
the production and handling of foods labeled as "organic."
Previous efforts to create private and State agencies certified organic practices did not establish national uniformity in standards and therefore there was no guarantee that "organic" meant the same thing from state to state, or even locally from certifier to certifier. In some key states, such as California, organic certification was not required, and many states had no laws at all about organic production and labeling.
National standards for organic products were desired by both producers and consumers to clear up this confusion in the marketplace and to protect against mislabeling or fraud, so the organic business community, along with consumers and environmentalists pushed for this ground-breaking enabling legislation.
OFPA established the National Organic Program (NOP) now located within the Agricultural Marketing Service at USDA; The National Organic Standards Board; mandatory certification; accreditation of certifiers; labeling categories; and many of the principles that would later comprise the regulations. Like many pieces of legislation, OFPA was not perfect, but it did represent regulations that were both workable and innovative.
OFPA allows for state standards that are more restrictive than the federal standards, but they must be approved by the USDA. In addition, states cannot discriminate against out-of-state products that meet the federal standards.
The National Organic Standards Board
Under OFPA, a National Organic Standards Board (NOSB) was created to advise the Secretary of Agriculture in setting the standards on which the USDA‘s National Organic Program is
based. The NOSB wanted their recommendations to be based on industry consensus. They
asked for and received an unprecedented amount of public input from farmers, businesses and consumers during every step of their decision-making process. After considering the recommendations of the NOSB, the Secretary has final authority in determining the regulations.
Appointments to the NOSB are made by the Secretary of Agriculture for five year terms, and must include: four farmers, two handlers/processors, one retailer, one scientist (with expertise in toxicology, ecology or biochemistry), three consumer/public interest advocates, and three environmentalists.
In addition to making recommendations on the national standards, the NOSB is authorized to convene Technical Advisory Panels to advise on materials to be included on a National List of materials allowed for use in organic production.
National Organic Program Implementation
After more than a decade of public discussion, consensus-building, two rounds of public comment which generated a record-breaking number of public comments for the USDA, national organic standards were implemented in October 2002.
The standards detail the organic certification process, how certifiers are accredited, what methods and materials are allowed and prohibited in organic farming and processing. The standards are comprehensive in that they cover farming methods for every type of farm product—fresh fruits and vegetables, grains, eggs, poultry, beef, dairy, cotton, wool, oils, flowers, and anything else that can be grown on a land-based farm. The processing of all food and beverage products is covered as well. When the rules were implemented, it was expected that there would be changes and additions as additional sectors of the organic market developed, such as organic cotton products, personal care products, pet foods, and any other products that might include components that could be grown on organic farms. Although the organic business community has grown tremendously, in many ways it is still a very nascent sector, and, as innovations occur, there will be a need for the regulations to evolve as well.
Fortunately, the regulations were set up to evolve as the industry grows. For example, there are sunset provisions to reexamine materials allowed and prohibited in organic production, so that as more environmentally sound materials become available, the use of less environmentally sound materials can be phased out.
Some key elements of the U.S. organic regulations include annual inspections of organic farms and food processing facilities to ensure they are following the regulations; farms must not have used any prohibited materials for at least 3 years before crops can be sold as organic; livestock must have access to the outdoors; dairy cows must have organic feed for at least one year before milk can be sold as organic and poultry and beef cattle must have only organic feed. The use of genetically engineered seeds and growth hormones is prohibited, as is the use of sewage sludge as fertilizer, and irradiation. Cloned animals and their progeny are not compatible with organic production, either.
Because soil rehabilitation and development is at the core of organic farm production, there are provisions and practices to enhance soil, as well as to protect the soil.
The organic standards are the only place where animal manure is overseen as an input to agriculture. The U.S. regulations for organic production impose strict requirements for the use of animal manure if it is used on the farm. The regulations require that raw animal manure must be composted unless it is applied to land used for a crop not intended for human consumption; or is incorporated into the soil not less than 120 days prior to the harvest of a product whose edible portion has direct contact with soil; or is incorporated into the soil not less than 90 days prior to the harvest of a product whose edible portion does not have direct contact with the soil surface or soil particles. See 7 CFR 205.203 (c)(1) and (2).
The requirements for making compost are regulated as well, and are designed to encourage soil health while minimizing risks to human health or the environment. The National Organic Program Rule‘s defines compost (7 CFR 205.2) as follows:
Compost: The product of a managed process through which microorganisms break
down plant and animal materials into more available forms suitable for application to
the soil. Compost must be produced through a process that combines plant and animal
materials with an initial Carbon:Nitrogen ratio of between 25:1 and 40:1. Producers
using an in-vessel or static aerated pile system must maintain the composting materials
at a temperature between 131 deg. F and 170 deg. F for 3 days. Producers using a
windrow system must maintain the composting materials at a temperature between 131
deg. F and 170 deg. F for 15 days, during which time, the materials must be turned a
minimum of five times.
The organic process does not stop at the farm gate. The standards cover all aspects of farming for all kinds of farm products, and covers processing and handling of food and beverage products after they leave the farm, which makes these standards far-reaching and complex to characterize simply.
For food and beverage products, the regulations cover both growing and processing, and every business that produces more than $5000 of organic foods must be certified in order to sell the product as ―organic‖. Farms that sell less than $5000 worth of organic goods, and sell only direct to consumers or direct to retail establishments do not need to be certified, but they must follow all other aspects of the organic regulations in order to call the products organic. Growers falling under this "Small Farm Exemption" may not use the term "certified organic" when marketing their crops, and may market through direct sales only (i.e. farm stands, farmers‘ markets, or direct sales to a retailer). At present, distributors and retailers are not required to be certified, although they may voluntarily become certified.
Organic Labeling, Processing, and Handling
Standards for the processing, handling and labeling of organic food and beverage products cover all steps in the process from receiving organic raw materials, acceptable processing aids and ingredients, appropriate packaging materials and labeling, to cleaning methods, waste disposal and pest management at processing facilities.
The following highlights address some of the questions most frequently asked about the organic processing, handling & labeling standards.