Soaring consumer demand for organic food poses a direct threat to ‘human-scale’ farming and organic principles, a major International credit insurer has warned.
Reporting on growth in the fast-growing French organic food market, Paris-headquartered Compagnie Française d’Assurance pour le Commerce Extérieur (Coface) predicts annual growth of 14%, producing a turnover of over 8 billion Euros. But the company says that the country’s “still modest” organic supply system is struggling to keep up with demand (organic’s share of total farm land remains below the European average and is “far behind that of Austria, Sweden, Estonia, Italy, and the Czech Republic”).
While a marked increase in supply is predicted, following a wave of farming conversions launched between 2014 and 2016, Coface believes that the dynamics of consumption are such that the sector “will probably need to adapt its farming practices to increase yields and its scale of production”. If not, France will be forced to increase imports, which already run at 29%.
More encouragingly, Coface says recent data indicates that organic farms are generally in good financial health. Sectors with a larger share of organic production are also more resilient and recorded fewer business insolvencies between 2012 and 2016, it reports.
But Coface says that despite its dynamism and relative strength, the organic food sector needs to change. The direction of this change will largely hinge on its ability to increase yields, which – in France – are generally 19-25% lower than those of conventionally-farmed areas.
Coface says that organic producers will need to scale up production to stay economically viable. This, it says, will mean that the aspiration of many organic farmers to maintain ‘human-sized’ operations “will be challenged in the face of an inevitable trend in farm expansion and the concentration of the organic retail sector”
Coface points out that the power of France’s major retail groups is considerable, despite a rebalancing which has seen the share of specialist natural and organic retailers grow 5% during the period 2011-2016 to make up 30% of total grocery retail.
With many organic players still dependent on the major supermarket chains, there is the risk of downward pressure on prices paid to farmers. In this climate, says Coface, “the scenario of an organic market that moves away from some of its original principles (such as short transport journeys, low carbon footprint, social anchoring and balanced distribution of the value produced) could become a reality if the transition to market financing is made too rapidly”.
Lead author of the study, Bruno De Moura, concludes: “Ultimately, the increase in the consumption of organic food will necessitate changes in the sector. These changes could either be interpreted as adaptations or as an abandonment of its original principle.”