Select Committee on Agriculture Second Report


ORGANIC FARMING

II. EXPANSION OF ORGANIC FARMING


Organic production in the UK

11. Although there is some discrepancy in the figures supplied by MAFF and those supplied by the Soil Association, it is clear that there has been a major increase in the amount of land and number of farmers engaged in organic production in recent years. It is equally clear that the rate of growth is accelerating. At the end of 1996 some 50,000 hectares of land in the UK was being farmed organically (either fully organic or in conversion).[4] By April 1999 the figure was 276,000 hectares and by the end of that year it had reached 425,000 ha, or just over 2 per cent of all agricultural land in the UK.[5] The Soil Association, whose figures tend to be lower than those of MAFF, estimated that in April 2000 organic farming covered about 2.3 per cent of the total UK agricultural area, of which 0.6 per cent was fully converted.[6] The geographical distribution of this land is weighted towards the South and West and Scotland, reflecting the increasingly high proportion of organically farmed grassland (87 per cent of all organic land in April 2000 and 79 per cent in April 1999) compared with arable and horticultural production (13 per cent in April 2000 and 21 per cent a year earlier).[7]

12. Statistics on the number of registered organic producers also reveal significant increases: as of April 2000, there were 2,865 farmers licensed as in conversion or fully organic, compared with 1,568 in the previous year, 1,064 in April 1998 and 828 in April 1997.[8] Placed alongside the data for organic acreage, these figures illustrate a trend, identified by the Soil Association, towards the conversion of larger holdings. While there have been some very large-scale conversions of Scottish moorland and it remains the case that organic holdings in Scotland are significantly larger on average than those in the rest of the UK (330 ha compared with 116 ha in 1999), the average farm size is on the increase, even discounting the Scottish figures.[9] The conversion period before produce can be marketed as organic varies between sectors (24 months for crops and grassland; 36 months for perennial crops)[10] but it inevitably involves a timelag in increases in the acreage of organically farmed land feeding through to the production of organic foods, so the full effect of these changes is yet to be felt. Nevertheless, organic primary production in the UK grew by 25 per cent in the year from April 1998 to reach a total of £50 million (0.4 per cent of the total UK agricultural output).[11] We turn now to the individual sectors within that global picture.

Meat

  

  13. In 1998/99, the latest year for which statistics are available, the farm gate value of UK organic meat reached £7 million, an increase of £2 million on the previous year's figures.[12] This total included 4,200 cattle, with beef production increasing by 24 per cent on 1997/98, 26,000 sheep (representing an increase in lamb production of 13 per cent), nearly 200,000 table birds (up 52 per cent) and 12,000 pigs (an increase of 71 per cent).[13] Table 1 below sets out these increases in more detail.

Table 1: Organic meat production

1997/98  1998/99

Product
Number of animals/birds
Farm gate value (£m)
Number of animals/birds
Farm gate value (£m)
Beef
3,400
1.96
4,200
2.5
Lamb
23,000
1.04
26,000
1.4
Pork
7,000
0.96
12,000
1.8
Poultry (table birds)
125,000
0.77
190,000
1.2
Total
  
4.73
  
6.9

Source: SA (1999), p. 8.

It is expected that future increases in the livestock sector will dwarf those already seen, with the Meat and Livestock Commission (MLC) estimating that the number of cattle will increase by 300 per cent and of sheep and pigs by 500 per cent by 2001.[14] Eastbrook Farm Organic Meats Ltd, one of the largest players in the UK organic pig market, anticipated a tenfold increase in business by the end of 2004.[15]

14. Eastbrook Farm also expected that in four years' time it would be exporting "in reasonable volumes".[16] In most livestock sectors, however, there will be difficulty in meeting domestic demand. The MLC stressed that even if its predictions for 2001 were borne out, organic livestock would still account for under one per cent of total production in Great Britain and would be unlikely to rise above five per cent by 2010, unless cost differentials were reduced.[17] Although MAFF told us that the UK is currently "self-sufficient in most organic meats",[18] the MLC indicated that imports were increasing, with beef coming in from South America and beef and pigmeat from Scandinavia and Northern Europe.[19] ASDA singled out home-reared organic meat as the clearest illustration of the shortfall in British product.[20] At the moment, ASDA is able to source only seven beef cattle per week from the UK whereas the supermarket predicts a future demand for 140 head of organic beef a week, that is over 3,000 more than the current UK annual total output.[21] Overall, in 1999 UK producers took a 95 per cent share of the retail market for organic meat[22] but this position looks decidedly shaky. Constraints on expansion specific to this sector include the conversion time (a minimum of four years for organic beef production); the cost of rearing organic dairy calves; and the costs of conversion and ongoing costs for pig production.[23] The impact of the scarcity of organic animal feed is also a factor (see paragraph 17 below).

Dairy

  

  15. Organic milk production in 1998/99 was 17 per cent higher than the previous year, with output of 27 million litres and a farm gate value of nearly £8 million.[24] The UK is largely self-sufficient in organic liquid milk but the demand for processed dairy products means that around 40 per cent of the total organic dairy sector is met by imports.[25] Of all the agricultural sectors, the organic milk producers have perhaps been the most willing to work together through the establishment of the Organic Milk Suppliers Co-operative (OMSCo), which has negotiated rolling contracts with supermarkets such as Sainsbury's or with processors such as Yeo Valley Organic Company Ltd. The success of the latter company can be demonstrated by the fact that organic yogurt now accounts for 6.3 per cent of the total UK yogurt market[26] and illustrates the need for dedicated processing capacity.

Eggs

  

  16. The organic egg industry has outstripped the rate of expansion experienced by other agricultural sectors with a doubling of production between 1997/98 and 1998/99 in terms of number of eggs and farm gate value, now 75 million and almost £6 million respectively.[27] The UK meets 100 per cent of domestic demand for organic eggs, although as yet this represents only 2 per cent of the total egg market.[28] As with the meat production sector, the organic egg industry faces a new challenge in the form of the EU organic livestock regulations which came into force on 20 August 2000. The Soil Association predicted that this might "result in a short-term reduction in organic poultry enterprises as producers adapt to meet the new standards".[29] We discuss the issues raised by the livestock regulations in more detail below (see paragraphs 57 to 60).

Arable crops

  

  17. Organic arable crops - mainly wheat (58 per cent of the organic cereal sector), oats (20 per cent) and barley (10 per cent) - reached an estimated farm gate value of £6 million in 1998/99, with production just 19 per cent higher than in the previous year. This relatively small increase reflects the lack of interest shown by arable farmers in organic conversion and perhaps the greater difficulty in achieving conversion, compared with farmers in other sectors. Shortfalls in arable crops have an unfortunate knock-on effect on the availability of organic animal feed for the livestock sector, making witnesses identify it as one of the key problem areas.[30] Only 30 per cent of UK demand for organic cereals is met by domestic supplies.[31]

Horticulture

  

  18. The picture is still worse for horticulture which accounted for just 5 per cent of organic land in 1998.[32] Organic vegetable production saw year-on-year growth of 13 per cent to a total value of £18 million in 1998/99.[33] Most of this was potatoes, followed by other root crops.[34] The fruit sector lags even further behind, showing an increase of 5 per cent in farm gate values from 1997/98 to 1998/98 to reach £2 million. Both in terms of value and tonnage, the sector is dominated by apples, although even here we were told that 90 per cent of organic apples sold in the UK were imported.[35] Particular problems facing horticulture specialists wishing to convert include both the cost and technical difficulty of doing so.

Processed products

19. As with conventional foodstuffs, most organic food is processed or packaged in some way before it reaches the consumer. This part of the supply chain has seen similar growth to primary production in recent years, with an increase from 500 to 800 in the number of businesses licensed for the processing of organic foods in the UK from the end of 1997 to April 1999.[36] These 800 businesses accounted for nearly 2,500 individual enterprises engaged in a variety of businesses, as shown in table 2 below.

Table 2: Licensed organic processors by enterprise type and location, April 1999

TypeNorth MidsScotland WalesNI SouthWest EastTotal
Abbatoirs
7
8
2
7
3
4
14
6
51
Animal feed
0
11
0
2
0
6
12
3
34
Baby food
0
3
3
0
0
3
3
2
14
Beverages
4
8
2
2
0
19
14
12
61
Breads/baked
11
26
4
3
0
27
11
2
84
Cereals/cereal products
14
27
10
8
0
20
12
27
118
Chilled/frozen
3
8
0
2
0
8
3
4
28
Conserves,etc
14
15
4
10
0
20
15
10
88
Distribution and packing
71
98
28
66
3
124
102
111
603
Dairy processing
3
22
15
4
0
28
43
2
117
Dried goods
2
8
3
2
0
11
3
8
37
Exporting
0
2
0
2
0
4
0
2
10
Fish
0
2
3
3
0
0
0
0
8
Fresh foods
47
155
46
71
6
153
146
139
763
Importing
22
30
12
2
0
88
27
44
225
Meat processing
10
16
4
10
2
8
26
14
90
General food processing
22
26
8
11
0
22
18
26
133
Total
230
465
144
205
14
545
449
412
2464

Source: SA (1999), p. 18.

For the year to April 1999, the UK organic processing market was worth over £300 million (domestic plus imports), of which £135 million was fruit and vegetables.[37] Intensive processing of organic foods is a matter of some argument within the organic movement, as the philosophy advocates simply prepared foods whilst consumers often seek organic equivalents of conventional processed foodstuffs.[38] However, there is widespread willingness among processors to supply the growing demand for organic products.

Retail market

20. The expansion in organic production is racing to keep up with the growth in customer demand. In April 2000 the total organic retail market was worth almost £550 million on an annual basis and no-one has seriously questioned predictions that it will reach £1 billion next year.[39] Figure 1 below shows the trends in market growth since 1993.

Figure 1: UK retail market growth - actual and projected


Source: SA (1999), p. 22.

To keep these figures in perspective, in 2000 organic food accounted for just 2.5 per cent of the total UK food market. To reach the market share of 20 per cent sought by the Soil Association by 2005, would require annual growth of 50 per cent which, of course, is much harder to achieve when the amounts involved are already significant. Doubts have been expressed about the ability of the market to sustain such growth; for example, the MLC cited a survey of multiple retailers which revealed expectations that the market for organic meat would command between 3 and 10 per cent of total meat consumption in five years' time.[40] Nevertheless, the supermarkets are gearing up for further strong growth over the next few years: Sainsbury's predicted that the market will "begin to level out" in 2003 or 2004 and would "reach a peak at the 10 year mark by 2010".[41]

21. The major supermarkets have responded to consumer demand by stocking vastly increased ranges of organic foods. Sainsbury's now offers over 630 products, including frozen meals, vodka and pet foods.[42] By comparison, in 1996 it offered just 42 lines, covering basic commodities and fruit and vegetables.[43] Despite the cornucopia of products now on offer, it is still the fruit and vegetables sector which dominates the organic market, as figure 2 below illustrates.

Figure 2: Retail value of UK organic market, 1998/99


Source: SA (1999), p. 22.

The biggest expansion in the future is likely to come in baby food where organic products are variously predicted to take 40 per cent of the market by the end of 2000 and 100 per cent by the end of 2001.[44]

22. The "organic trade gap" is set to continue to grow as demand outstrips the rate of conversion. It currently stands at around 70 per cent, although this varies between sectors (see figure 3 below).


Figure 3: Imports of organic food (% share), April 1999)


Source: SA (1999), p. 21.

Given the dominance of fruit and vegetables in terms of overall sales, the large percentage of imports in that sector plays a major part in setting the average for the whole organic market. This indicates the need for some caution in assessing the trade gap in organics since many of these products are inevitably sourced from abroad, for example, oranges, mangoes or bananas. By comparison, in 1999 home production for the conventional market accounted for 71 per cent of vegetable supplies but only 11.9 per cent of fruit. Imports are not by definition a bad thing: the NFU argued that they were crucial to developing the market at this stage before UK farmers had had time to complete conversion.[45] Nevertheless, it is clear that there is a huge opportunity for UK producers to expand still further into organic farming to meet a ready market.


4  Ev. p. 131, para 7. Back

5  IbidBack

6  Ev. p. 99, section 3.1. Back

7  Ibid; The Organic Food and Farming Report 1999 [SA (1999)], p. 8. Back

8  Ev. p. 100, section 3.1; SA (1999), p. 7. Back

9  SA (1999), p. 7. Back

10  UKROFS Standards, January 1999 edition, 2.3. Back

11  Ev. p. 131, para 7. Back

12  Ev. p. 132, para 8. Back

13  Ev. p. 234, para 5; Ev. p. 100, section 3.1. Back

14  Ev. pp. 234-5, para 5. Back

15  Ev. p. 152. Back

16  Ev. p. 153. Back

17  Ev. p. 235, paras 5-6. Back

18  Ev. p. 132, para 8. Back

19  Ev. p. 236, para 31. Back

20  Ev. p. 223. Back

21  Ev. p. 233. Back

22  SA (1999), p. 21. Back

23  Ev. p. 235, paras 7-8. Back

24  Ev. p. 132, para 8; SA (1999), p. 8. Back

25  Ev. p. 132, para 8. Back

26  Ev. p. 61. Back

27  Ev. p. 132, para 8; SA (1999), p. 8. Back

28  Ev. p. 238. Back

29  SA (1999), p. 8. Back

30  Q 184; Q 444. Back

31  Ev. p. 132, para 8. Back

32  IbidBack

33  IbidBack

34  SA (1999), p. 11. Back

35  SA (1999), p. 11; Ev. p. 185, para 13. Back

36  SA (1999), p. 17. Back

37  SA (1999), p. 18. Back

38  Qq 521-522. Back

39  Ev. p. 100, section 3.2. Back

40  Ev. p. 235, para 10. Back

41  Ev. p. 73, para 3.5. Back

42  Ev. p. 73, para 3.3. Back

43  Ev. p. 73, para 3.2. Back

44  Ev. p. 73, para 3.1; Ev. p. 100, section 3.2. Back

45  Ev. p. 36. Back


 
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