Organic Market Report 2005

Organic Farming In the UK - By The Soil Association - The Soil Association's Organic Market Report 2005 - the most comprehensive review of the organic sector - says sales of organic products through box schemes, farm shops and farmers markets increased by 33% in 2004.

• By January 2005, 686,101 hectares (ha) of land were managed to organic standards across 4,010 organic and in-conversion holdings in the UK.
• Since the last reporting period, the total area of fully organic land has increased by 0.6% to 634,222ha, while the area of in-conversion land has decreased by 10.7% to 51,879ha. The area of fully organic land under horticultural production increased by 4.5% to 7,711ha, while the area of fully organic arable land increased by 5.7% to 51,234ha. However, the area of organic grassland remained static at 88.6% of the total, 561,656 ha.
• The area of land used for herb production increased by more than 200% - due mainly to the growing demand for organic health and beauty products.
• The introduction of the Single Payment Scheme (SPS) has resulted in a growth of interest in organic conversion of all sectors. However, while opportunities still exist for organic producers a number of key constraints continue to challenge the UK’s organic sector, including continued high levels of imports, practicalities of balancing supply with uneven demand, pressure on UK organic farm gate prices and rising costs of production.

Number of Registered Organic and In-Conversion Producers in the UK (Jan 2003-2005)
	Number of registered organic and in-conversion producers
	January 2003	January 2004	January 2005	% change to January 2005	% of UK total
Northeast	73	73	78	7	1.9
Northwest	171	165	164	-1	4.1
Yorkshire and Humberside	136	132	137	4	3.4
East Midlands	220	217	212	-2	5.3
West Midlands	330	320	320	0	8.0
Eastern	248	250	244	-2	6.1
Southwest	1026	1007	1008	0	25.1
Southeast (inc.London)	418	406	399	-2	10.0
England	2622	2570	2562	-0.3	63.9
Wales	618	610	640	4.9	16.0
Scotland	725	687	632	-8	15.8
Northern Ireland	139	150	176	17.3	4.4
UK total	4104	4017	4010	-0.2
(2005 data source: OASIS, Defra 2005)

ENGLAND - REGIONAL INFORMATION:

Cornwall and the Isles of Scilly

• There are currently 132 registered organic producers in Cornwall, which compares with only seven converted before 1998. There are 41 organic processors in the country, many of whom have created successful brands.
• Organic South West is collaborating with the Isles of Scilly tourist board, Defra, Area of Outstanding Natural Beauty, and the Isles of Scilly Wildlife Trust, all of whom would like to see a higher level of environmental practice on the islands. The Isles of Scilly Wildlife Trust manages approximately three-quarters of the land mass of the Scillies and they are considering organic conversion.

For more information contact Organic South West on 01208 78988

North East

• The Northeast region of England includes County Durham, Tees valley, Tyne and Wear, and Northumberland. In January 2005, there were 78 registered organic and in-conversion producers and 26 registered processors, less than in any other region of England. Sheep and beef production predominate.
• The North East is host to a small number of both long established and newly formed organic retail outlets and box schemes, all of whom reported strong demand for quality organic produce in 2004.

For more information contact the Soil Association North East office on 0845 121 7645

North West

• The Northwest region includes Cumbria, Lancashire, Greater Manchester and Merseyside. In January 2005 there were 164 organic and in-conversion producers and 125 organic and in-conversion processors in the Northwest region.
• The Northwest has 11.6% of England's total organically managed land in January 2005. Demand for organic fruit and vegetables is increasing rapidly, and a number of box schemes in the region are finding it hard to keep up with demand. This situation looks set to continue.

For more information contact the Soil Association North West office on 01995 642206

Yorkshire

• In January 2005 there were 9,801ha of organically managed land in the Yorkshire region, 13% of which was in-conversion and 87% of which was fully organic. There are 137 organic and in-conversion producers in the region, representing a 4% increase on the previous year, as well as 134 organic processors.
• There is a strong and continued interest in regional and local branding in Yorkshire, which is continuing to prove advantageous to those organic producers with ready-to-retail products.

For more information contact the Soil Association Yorkshire office on 01756 796222

NATIONAL INFORMATION:
Northern Ireland

• Organic production in Northern Ireland continues to expand and in January 2005 some 6,713ha of land was managed to organic standards. Of this area, 5,140ha is fully organic, while 1,574ha is in-conversion, representing an increase of 25% in in-conversion land during the nine months to January 2005. But despite this Northern Ireland has just 1% of the UK’s organically managed land. In January 2005, there were 176 organic and in-conversion producers and 41 organic processors in Northern Ireland.
• Volumes of organic sales in Northern Ireland continue to grow, with most produce sold through direct sales to consumers.

Scotland

• The area of organically managed land in Scotland fell for the second year running by 3.7% from 373,249ha in April 2004 to 356,764ha in January 2005. The fall in the amount of organically managed land in Scotland is primarily due to a number of large extensive farms withdrawing from organic certification as they reach the end of their five-year Organic Aid Scheme agreements.
• Over 341,200ha (or 95%) of Scotland’s organically managed land is grassland, 1,490ha (0.4%) is under horticultural production, 10,388ha (2.9%) is under arable production and 2,524ha (1.5%) is woodland.
• Limited information about organic supply and demand has often been blamed for difficulties in the marketing of organic produce from Scotland. In order to address this, funding was provided to Scottish Agricultural College (SAC) by SEERAD and Scottish Food and Drink (through its Graduate into Food Business Programme) to establish a one-year Market Link project. For the first time a survey of organic producers has provided reliable information on the supply of organic finished beef, lamb and grain from Scotland.
• SAC provides a SEERAD-funded advisory service to producers considering conversion to organic farming, as well as to those who are already converted. The level of interest in converting to organic farming in Scotland remained more or less static for most of 2004, although more producers began to express an interest in converting towards the end of the year. These farmers were mostly from mixed arable and livestock farms.

Wales

• Between April 2004 and January 2005, the area of organically managed land in Wales increased by 12.3%, out performing every other part of the UK. By January 2005, 64,390ha of land was managed to organic standards in Wales, 8,948 ha (14%) of which was in-conversion and 55,442ha (84%) was fully organic. Organically managed land now accounts for 4% of the total agricultural land in Wales.
• In January 2005, there were 640 registered organic and in-conversion producers in Wales - 30 more than in the previous year - and 115 organic processors.
• Agricultural production in Wales is predominately associated with beef and sheep production. Consequently, in January 2005, 51,064ha (92%) of fully organic land in Wales was grassland.

ORGANIC CONSUMERS IN THE UK

• A survey conducted by BRMB in early 2005 suggested that the proportion of shoppers consciously buying organic food is growing, and showed that the quality and taste of food are important to more people than low prices. When a representative sample of 1,010 people was asked what was important to them when buying food for a meal to serve to family or friends, 95 per cent said ‘the taste and quality of the food’. Only 57 per cent said low prices were important. These results were consistent across all social classes. Even among the least well off quality and taste were considered important by 94 per cent and low prices by only 65 per cent.
• Even among the less well off, the appeal of organic food is clearly widening, with 58 per cent, 48 per cent and 55 per cent respectively of the social brackets C2, D and E now saying they eat organic.

ORGANIC FOOD AND FARMING - WORLDWIDE AND EUROPE

Countries with largest areas of organic farm land, 2003
Country	Hectares
Australia	11,300,000
Argentina	2,800,000
Italy	1,052,002
USA	930,810
Brazil	803,180
Uruguay	760,000
Germany	734,027
Spain	725,254
United Kingdom	695,619
Chile	646,150
Source: Willer and Yussefi, 2005

• Global sales of organic food and drink grew by an estimated 7 - 10% to 15.5 billion in 2004.. While sales are concentrated in Western Europe and North America, the market for organic food products is growing across the world.
• Western Europe accounts for more than half of all organic food sales, due in part to the depreciation of the US dollar. Many European countries showed healthy growth rates in 2004, following a couple of years of consolidation.
• Total sales of organic food in North America were in excess of 7 billion in 2004, and consumer awareness of organic production methods continues to increase in Asia, Australasia, Latin America, and Central and Eastern Europe. Demand for organic foods is also spreading to countries in the Middle East and Russia, where high growth rates are occurring.

SECTOR INFORMATION:
Retail

• In 2004, the retail market for organic products in the UK was worth an estimated 1.213 billion, demonstrating continued and sustained growth across the sector. Sales of organic produce through direct and alternative markets, such as box schemes and independent retail shops, increased considerably during the year. Retail sales of organic produce through the multiple retailers continued to grow but at a much slower rate than in previous years. Consequently, the supermarket share of the organic market fell for the third consecutive year.
• The multiple retailers continue to dominate the organic retail market with an estimated 913.2 million worth of organic sales in 2004. However, their share of the organic market continues to decline, falling from 80% in April 2003/04 to 75.3% in the calendar year 2004. The growth of organic sales in the multiple retailers slowed significantly to 1.5%, in direct contrast to organic sales through other outlets, which increased considerably over the same period.
• Direct and alternative market sales, such as box schemes and mail order, were worth an estimated 144 million or 11.9% of the market, while retail sales of organic products through independent retail shops were worth approximately 156 million or 12.9% of the total retail market.

Box schemes and mail order

• Sales of organic products through box schemes were an estimated 38.5 million in 2004. There are an estimated 379 vegetable-based box schemes in the UK with a retail sales value of 36.3 million.
• There are also an estimated 97 organic meat boxes in the UK with a retail sales value of 2.2 million. Meat box schemes typically tend to retail fewer boxes a week than vegetables-based schemes, but with a higher average box price.
• There were 437 organic mail order schemes in the UK in 2004 with a retail sales value of 39.5 million.

Farmers’ markets

• The National Farmers’ Retailer and Markets Association (FARMA) estimates that farmers’ markets turned over 200 million in 2004. It is estimated that 10-15% of stallholders at farmers’ markets sell organic produce, with a retail value of 25 million, representing a 21% growth on the previous year.

Processing

• The number of organic processors in the UK has increased steadily over the last three years. In January 2005 there were 2,028 organic processors in the UK, a 4.5% increase on the previous year. Most processors are based in England (84%), predominantly in the Southeast, while 9% are based in Scotland and 6% are based in Wales. In January 2005, Northern Ireland had 41 organic processors, representing a 24.2% increase on the previous year.
• In 2004, the retail value of the UK baby food market (organic and non-organic) was worth an estimated 147 million. Organic baby food sales accounted for 43% of the total market, at a value of 63 million.

Horticulture

• The area of organic land under horticultural production increased by 4.5% from 7,377ha in April 2004, to 7,711ha in January 2005. There were increases in the area of potatoes (11.7%), fruit and nuts (12.7%) and - most notably - herbs (231.4%). Herbs are a high value crop which are experiencing a surge in demand as the popularity of organic health and beauty products continues to grow. However, there were decreases in the areas of alliums and root vegetables (-28.1%), and flowers and ornamentals (-38.2%) over the same period.

Arable

• Arable production accounted for 8% of the UK’s organic land - an increase of nearly 6% from 48,494ha in April 2004 to 51,234ha in January 2005. There were significant increases in the areas devoted to wheat (16%), barley (9%), and sugar beet (43%), however, contracts to grow organic sugar beet ended in 2005 so this increase is not expected to continue. There were notable decreases in the areas of peas and beans (-7%), as well as maize (-50%) and oil crops such as linseed (-26%), of which the latter are notoriously hard to grow organically. However, variations in the proportion of organic land under different arable crops can be largely attributed to rotational variations.

Aquaculture

• Scotland produces the vast majority of organic salmon sold in the UK. Organic aquaculture in Scotland is focused around the islands, and the majority of production is in the Western and Orkney Isles. The smaller amount of organic production in the Shetlands is expected to increase in the near future, with newly certified salmon farms and expansion into new species such as cod and shellfish.
• Production has decreased in the last year with approximately 2,500 tonnes of organic salmon produced on organic fish farms in Scotland in 2004/2005 at a farm gate value of 6.8 million, compared to 3,117 tonnes produced in 2003/2004
• Approximately 60% of farmed salmon is sold fresh, mainly within the UK, with the balance going for smoking and other forms of processing - usually within Scotland. Small amounts are sold direct at local farmers markets.
• Organic trout is produced in England and Ireland. Production has remained stable through 2004/2005 at approximately 320 tonnes.

Beef

• Overall, demand for organic beef increased throughout 2004 and the supply and demand were reasonably balanced. Some 19,284 beef cattle were slaughtered, representing an increase of 4.2% since the previous year, with a farm gate value of approximately 13.7 million.
• A significant quantity of organic beef was imported in 2004, much of it from South America. This was despite the fact that UK producers could meet the processor requirements.

Dairy

• In 2003, 94% of all organic dairy products were sourced from the UK, increasing to 99% in 2004. This is higher than the comparable non-organic equivalent in all categories surveyed.
• 2004 saw the first real signs of recovery for the organic milk market after several years of significant oversupply. New research suggested that organic milk is healthier than non-organic milk, with more omega 3 and more vitamin E and beta-carotene. This is due to the high clover diets associated with organic dairy production.
• 2005 started very positively with research from the University of Newcastle confirming the health benefits of organic milk. This resulted in immediate gains of 30% in organic milk sales, and subsequent increases in sales of other organic dairy products.

Eggs

• The retail market for organic eggs was worth an estimated 17 million in 2004, approximately 3% of the total egg market. The organic egg market is still dominated by the multiple retailers who have an 82% share. The UK organic flock amounts to approximately one million hens.
• Organic eggs are a key growth area with some egg packers reporting double figure sales increases to the multiple retailers during 2004.
• Growth in the organic egg market is still hampered by discrepancies in production standards between organic certification bodies. This has not been helped by the announcement in November 2004 that the derogation allowing flock sizes and stocking densities greater than that specified in the EU regulation will be extended until 2010. This derogation prolongs the disparity of production standards, scales and costs of production and creates a very uneven playing field for producers. It also exacerbates consumer confusion about different organic standards and the comparison with free-range standards.
• There is resistance from some multiple retailers to stocking eggs from systems with higher animal welfare standards on the basis that the additional costs would limit sales. For example, 2004 saw Sainsbury’s de-list Soil Association certified organic eggs in favour of eggs certified to the base line standards. However in 2005, Sainsbury’s reintroduced Soil Association eggs, produced in Yorkshire, to its Yorkshire stores, and reported sales growth of more than 50% in six months - indicating that some consumers are prepared to pay more for regional provenance and high animal welfare standards.

Lamb

• In 2004, some 158,912 organic lambs were slaughtered with a farm gate value of approximately 9.4 million.
• Although higher numbers of organic lamb were sold in 2004 than 2003 a significant quantity of organic lamb still ended up in non-organic markets, both as stores and finished animals. There was a low price differential between organic and non-organic lamb in the spring of 2004 which enabled producers to sell their lamb locally as non-organic without reducing profit margins.
• The percentage of organic lamb sourced in the UK increased from 76% in 2003 to 89% in 2004 - higher than the non-organic equivalent, which was 82% UK sourced.

Pigs

• In 2003, 41% of organic bacon and ham was sourced in the UK, falling slightly to 39% in 2004. This is higher than the non-organic equivalent, which was just 25% UK sourced in 2004.
• An estimated 47,000 organic pigs were slaughtered in 2004, representing a 6% decrease on the previous year. This was due to continued imports of pork products at lower costs and financial pressure on UK organic pig producers. However, farm gate prices appear to have largely stabilised at 6.8 million after the depressed prices in 2003/04.
• Although the derogation allowing certain European countries to rear non-organic weaners on organic feed and market them as organic no longer exists, there are still differences in standards between the UK and other countries. Many European countries have no requirement to keep pigs outside from weaning onwards, demanding only that they have access to an ‘outdoor area’ that could be a straw covered concrete run. The costs of producing pigs in these straw barn systems are much lower than free range systems.
• Direct sales of organic pig meat continued to grow. This sector does not have the issues of carcass utilisation that the multiples do, and any unwanted joints can easily be converted to sausages.

Poultry meat

• During 2004, an estimated 5.7 million birds were produced, representing an increase of 35% on the previous year’s figures. Growth was constant throughout 2004 and shows no sign of abating in 2005.
• Small independent and direct retailers are struggling to satisfy the demand of their customers and can therefore demand a healthy premium.
  

Source: Soil Association - November 2005