There has been a lot of news recently about steep increases in the price of staple foods like rice, wheat and cooking oil. More expensive food and oil are taking bigger and bigger bites of household food budgets. How does organic or local food fit into this?
An article in Friday’s New York Times, Sticker Shock in the Organic Aisles, examines this issue:
Organic prices are rising for many of the same reasons affecting conventional food prices: higher fuel costs, rising demand and a tight supply of the grains needed for animal feed and bakery items. In fact, demand for organic wheat, soybeans and corn is so great that farmers are receiving unheard-of prices.
But people who have to buy organic grain, from bakers and pasta makers to chicken and dairy farmers, say they are struggling to maintain profit margins, even though shoppers are paying more. The price of organic animal feed is so high that some dairy farmers have abandoned organic farming methods and others are pushing retailers to raise prices more aggressively. Several organic manufacturers worry that sales may slow as consumers cut back
Ok, so we have several things going on at once here.
1. Rising demand for organic products. More and more people are including organic foods in their diet, if not moving towards eating organics exclusively.
2. The amount of organic crops is rising less quickly than the demand is. It takes 3 years and lots of inspections and paperwork to become a certified organic farm; it’s a complicated process. The amount of organic farmland is still increasing, but it’s not growing as fast as demand for organic crops is. So we have a classic case of supply and demand economics. From the article:
The United States had 4.1 million acres of organic farmland in 2005, triple the amount in 1997. But farmers and grain buyers say the growth of new organic acreage has slowed, falling short of rising demand and causing organic grain prices to soar. That is partly because prices for conventional corn, soybeans and wheat are at or near records, so there is less incentive for farmers to switch to organic crops; making the switch requires a three-year transition and piles of paperwork.
3. Energy inputs are getting more expensive as the cost of oil goes up. At the most basic level, farming still needs oil to power the tractors and to drive the crops to the farmers’ market. If the farm uses oil-intensive fertilizers or pesticides, those are getting more expensive, too. For farms that sell their crops to a distributor or processor, that’s more energy that’s needed, and another place in which rising energy costs could increase the costs of that product. Generally, the rule of thumb seems to be that the more processed something is, organic or no, the more the price can rise. A bag of organic apples has fewer processing steps than a box of organic mac and cheese, and hence fewer places where the cost can rise.
4. Right now, most of the rising prices revolve around grain. Commodity prices for wheat, rice and soybeans are up. Prices for things that are made out of grain, like pasta and bread, are up. And prices for things that are usually produced by feeding them grain, like chickens, eggs, and beef are up even more. This is exacerbated for organic products, because there isn’t any spare capacity in the amount of organic grain produced. There simply isn’t any extra organic wheat to buy, and so the price of organic wheat goes up, and the price of everything that depends on organic wheat goes up, like organic pasta.
The article also goes into more depth on the pricing of some staple foods:
Over all, grocery prices have increased about 5 percent over the last year, though some staples like conventional eggs jumped 30 percent and milk, 13 percent, according to the Consumer Price Index. That government index does not break out prices for organic food.
Eric Newman, vice president for sales at Organic Valley, a farmers’ cooperative that sells mostly dairy products, said a half gallon of milk cost $3.49, on average, in 2007 while a gallon cost about $6. He said he expected the average price of a half gallon to exceed $4 in the months to come, while a gallon could cost more than $7. The average retail price for Eggland’s Best Organic eggs in 2007 ranged from $3.79 to $4.29, company officials said. So far this year, the range has risen to $4.59 to $4.99.
Organic food is typically 20 percent to 100 percent more expensive than a conventional counterpart; the gap has narrowed in recent years as discount retailers like Wal-Mart have offered organics and more private-label organic products have become available, according to the industry.
I don’t shop at conventional supermarkets, only at the farmers’ market and the co-op, so I can’t attest as to whether those prices are realistic or common. My guess is that you can get better prices than those above at the farmers’ market.
I buy eggs for between $2 and $4 a dozen, depending on what size I need, ranging from medium to jumbo. These are eggs that are produced by free-range chickens in the Hudson Valley at a small-ish farm. The large organic free-range eggs at Fresh Direct are $3.60.
I get a big loaf of multi-grain bread made in the Hudson Valley from organic Minnesota flour for about $4. Most of the organic whole-wheat bread at Fresh Direct is about $3.60, and it’s mass produced.
My favorite apple seller, who practices integrated pest management, charges $1.50 a pound for apples and pears. There are about 10 varieties of apples and about 4 of pears, all the time. Fresh Direct has 4 types of organic apple, the predictable Red and Golden Delicious, Gala and Granny Smith, for ridiculous prices. You an get 4 organic Gala apples (about 2 lbs.) for $5.99, which works out to about $3 per pound. Golden Delicious is only a little better, working out to about $2 per pound. Only their non-organic Granny Smiths compare in price, at $1.49 a pound.
I do pay a premium for my milk, $3 a quart, from Ronnybrook Dairy. $1 of this is for the glass bottle deposit, making the ‘real’ price $2 per quark, or $8 a gallon. This, to me is worth it. Ronnybrook is a family-owned dairy in upstate NY, and they grass-feed their cows most of the time, with corn and hay silage in the winter. It’s not organic, but I trust their “all-natural” more than I trust big companies’ “organic.” Plus I love the retro glass bottles and that the cream that floats to the top of their whole milk. Plus I only drink maybe a quart a week.
These prices have been steady since at least October of 2007. So I’ve been largely insulated from the rising prices. Whether this is due to an unwillingness to raise prices for fear of losing customers, or well-negotiated supply contracts for feed and grain, I don’t know.
I am a lot more comfortable paying higher prices for a given item if I know what kind of farm, or bakery, or producer the product comes from. Like I said above, I’m much more likely to trust a small farms’ “all-natural” or “minimal pesticides” or “integrated pest management” than a huge agrobusiness’ “organic”. Part of my comfort with the price, aside from feeling better about the treatment of the animals and the amount of chemicals used on the plants, is that I think the prices charged by small farms more accurately reflect the costs involved in running the farm, making sure the farmer has a living wage, and not depleting the soil or damaging the water tables. With a big “organic” agrobusiness, there are still various externalities that are unpaid for, even if the major concern of pesticides, fertilizers and other chemicals are addressed. An “organic” CAFO (confined animal feeding operation) is still likely to have an un-addressed externality of large amounts of animal waste, while a large “organic” agribusiness still could cause lots of erosion. Both are likely to have underpaid, mostly immigrant labor.
Hopefully, continuing strong demand for organic food will ensure continued acreage for organic crops and more switch-overs to organic and ease the tight supply pressure. With oil at near-daily record highs, the high costs of conventional fertilizer and pesticides, both very oil-intensive, may also encourage some organic switching. Still, I think some of the best food per dollar is found at farmers’ markets. Furthermore, the prices of grass-raised beef and milk are likely to rise more slowly, if at all, compared to their organic equivalents that are raised on more-expensive grains. So give it a shot, head on down to your farmers’ market and see if it’s as expensive as Whole Foods (a.k.a. Whole Paycheck).