Price gap with conventional narrows - The Packer

Price gap with conventional narrows

05/06/2014 03:20:00 PM
Tom Burfield

The price gap between organic and conventional produce seems to be narrowing, grower-shippers say, but organic fruits and vegetables still often cost significantly more because of market variations and the principle of supply and demand.

“Twenty years ago, I said in five to eight years, hopefully (prices) would be more in line with conventional,” said Bill McCoy, owner of Better Life Produce Inc., Los Angeles. “But to this day, it still hasn’t happened.”

That’s because availability and demand have outweighed use, he said.

“There are still shortages of the product.”

 

Learning and improving

The gap in the production costs between organic and conventional produce has narrowed for a couple of reasons, said Matt Seeley, vice president of marketing for The Nunes Co., Salinas, Calif., which has been growing organic product for five years.

As the company continues to grow organic produce, practices improve, yields get better and prices edge downward, he said, which means lower retail prices eventually.

“As we continue to go down that path, we are going to see things become a little bit more cost-efficient as we learn how better to do this,” he said.

If those cost savings are passed along to retailers and to consumers, Seeley said, “that’s all the better for everybody.”

The price difference between organic and conventional produce has lessened, but food prices in general have continued to rise, said Addie Pobst, organic integrity and logistics coordinator for Viva Tierra Organic Inc., Sedro-Woolley, Wash.

“The price point in dollars is higher than it was, but the differential between conventional and organic is narrower than it used to be 10 or 15 years ago,” she said.

The development of organic fumigants and fertilizers has made organic growing easier and allowed prices to generally come down, said Mayra Velazquez de Leon, chief executive officer at Organics Unlimited Inc., San Diego.

At the same, she said, production does not always keep up with demand, exacerbating the price gap.

McCoy said he doesn’t think producers are growing enough organic produce.

“More growers are getting involved, but more people are using organics,” he said, “so there are still availability problems, which still drive the cost up.”

McCoy said he doubts that organic will ever be priced the same as conventional.

“I believe it will always be a couple percentage points higher, depending on the item and where it’s coming from.”

When organic yields are only 50% to 70% of a conventional field, “that 30% is a huge cost factor,” he said.

 

Effort paying off

Growing organically isn’t easy, Seeley said.

“There’s a tremendous learning curve that you have to go through,” he said.

But he added that at The Nunes Co., the effort is paying off.

“We’re putting out better, more consistent product on a day-in, day-out basis,” he said.

Organic apple prices have been particularly strong this year as a result of tight supplies, Pobst said.

“It’s been a strong, demand-driven market for us this year,” she said. “We’re not really complaining about that.”

 

Certain realities

Still, she said, there are certain realities associated with the cost of organic production.

There are higher labor and material costs and increased shrink because growers don’t use conventional treatments to extend shelf life or storage life, she said.

“Not having those available to the organic producer and the organic marketer leaves us with a certain disadvantage (as far as) economies of scale go,” Pobst said.

She said she doubts the industry will ever see parity between organic and conventional produce.

“If we did,” she said, “our growers would be very disadvantaged. It would hurt them significantly.”

“The additional pennies at retail are what make the difference between keeping organic farmers able to do the work that they do and support their families,” she said.



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