Understanding the Organic Supply Chain: New Data from ERS

The organic marketplace is still so new, and evolving so rapidly, that it's hard to find reliable and up-to-date research, especially on the finer points and deeper layers of the supply chain. Often, research will examine a broad category of "natural and organic," without a breakdown of what are two distinct categories. In consumer market research and opinion polling, often there is no exploration of what consumers mean when they say they buy organic (or don't), and whether they mean organic by legal food labeling standards or some other personal definition. So it's sometimes hard to tease out exactly what's happening.

That's why the work of Carolyn Dimitri at the Economic Research Service of USDA is so valuable. Carolyn was one of the speakers at last year's Organic Summit; she is awe-inspiring at number-crunching and codifying this still-new industry, and can also deliver the data in clear, interesting ways. I like to think of people like Carolyn when I pay my taxes, and telepathically send the dollars to her instead of the war in Iraq. But that's another blog.

Yesterday, Carolyn sent out an alert on some very useful and interesting new data on procurement by organic handlers:

Procurement and Contracting by Organic Handlers, http://www.ers.usda.gov/Data/OrganicHandlers/

New information is available from the Economic Research Service on procurement practices and use of contracts by certified organic handlers (packers, shippers, manufacturers, processors, brokers, and distributors). The interactive data product contains select results from the 2004 Nationwide Survey of Organic Manufacturers, Processors, and Distributors. Procurement information includes basic characteristics of organic handlers, their purchasing practices, and their relationship with suppliers, including important supplier attributes. Contracting information includes the use of written and verbal contracts between organic handlers and their suppliers.

This research examines purchasing practices and priorities by organic handlers, or the people who operate between the grower and the consumer. These food processors and manufacturers must adhere to organic standards just as farmers do, and must be certified for the final product to be sold as organic. This table is an overview of national totals for all commodities combined, and you can also view by specific commodities and regions or states.

Items of interest:

• 38% of all handlers purchase some products locally (within one hour's drive)
• 23% of all handlers buy more than half of their products locally
• 50% buy some product regionally (within the state or surrounding states) and 31% buy more than half of their products regionally
• 34% of handlers assist farmers in transitioning to organic
• 32% work with organic suppliers in business for less than one year
• 36% accept shipments that are less than a full carload
• Buying local is a high priority for 37% of all handlers and a medium priority for an additional 23%; reputation for quality and availability of year-round supply are high priority for more handlers (70% and 49% respectively) than price, which is high priority for 40%.

This paints a picture of a business environment where many, though certainly not all, organic food manufacturers are sourcing locally and from smaller farms, and are actively working to generate a greater and more consistent supply of organic ingredients. Smart organic manufacturers know that it's important to their longevity, their integrity and their brand to be farmer-friendly, and will keep taking steps in that direction.