Price premium sustains organic category - The Packer

Price premium sustains organic category

11/05/2013 04:34:00 PM
Melissa Shipman

Courtesy Nature Fresh FarmsNature Fresh Farms is working on its first year supply of organic greenhouse bell peppers. The company also must establish the right price point because the higher cost of organic production. Organic prices still generally hover higher than conventional to help growers recapture the difference in input cost.

Ray Wowryk, director of business development at Nature Fresh Farms Inc., Leamington, Ontario, said the company is working hard to establish consistent supply in its first year of producing organic greenhouse bell peppers.

However, he said finding the right price point is also important because of the difference in cost of organic production.

“Because of the investment in switching to organic, the cost is higher,” Wowryk said.

Others agree the premium is important.

“We have to have a sizable spread in price to pay for the difference in organic farming,” said Roger Pepperl, marketing director for Stemilt Growers Inc., Wenatchee, Wash.

However, it isn’t necessarily that input costs are that much higher than with conventional farming, it’s just that each dollar doesn’t earn as much end product.

Wowryk says the growing medium is one cost factor.

Because of the change in growing medium, the platform also had to be changed.

“We are growing in larger units, which take up the square footage in the greenhouse. One of the reasons the cost of production is higher is that there are simply less plants per square acre,” Wowryk said.

Yields also usually are lower with organic fruits and vegetables.

“The production of organic orchards is lower, and without those high yields, the cost per acre becomes more expensive,” Pepperl said.

He said the price premium of organics, if it holds, will pave the way for the organic category to continue to grow.

“As long as that price spread continues, I don’t see an end in the organic category in the next 10-15 years,” Pepperl said.

The higher price of organic produce isn’t a set percentage, however, so there will be some fluctuations.

“It depends on the time of the year, and for the most part, the price reacts to the supply and demand curve,” said Jim Roberts, vice president of sales with Naples, Fla.-based berry grower-shipper Naturipe Farms LLC.

“We don’t look at conventional pricing and then set the organic prices a certain percentage above that,” he said.

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