Sydney Rosen and Bruce A. Larson
Harvard Institute for International Development
February 1, 2000
This paper reviews and analyzes what is known about the U.S. organic market and expectations for its growth and development. Sales of certified organic products in the U.S. approached $5 billion in 1997 and have probably topped $7 billion since then, giving organic products a 1-2% share of the overall U.S. food and beverage market. Estimates in the literature imply that organic products could constitute 5–6% of the U.S. market by 2007 and as much as 18% in 2015. It is likely that retail level organic price premiums will persist over the next several years as growth of organic demand keeps pace with growth of organic supply, but organic farming in general is not likely to be more profitable than conventional farming unless production costs for organic farms are lower. Organic production is a high-technology process that requires sophisticated methods of soil fertility management and pest management. Central America has a comparative advantage relative to the U.S. in labor costs. Central America does not have a comparative advantage in soil fertility, however. Maintaining and enhancing soil fertility will be a major challenge for Central American organic farmers, who must compete with farmers in tropical countries with better soils. Competition from organic producers in other countries is already strong for most commodities of current export. For most U.S. organic farmers, organic farming is not the only source of household income. Before starting the transition to organic methods, Central American farmers will need to consider carefully how organic farming will support the overall income needs and goals of larger and smaller farms.
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