Australian Organic Industry Summary

The Australian Organic Industry
A Summary
D E PA R T M E N T O F A G R I C U LT U R E , F I S H E R I E S A N D F O R E S T R Y
The Australian Organic IndustryA Summary

A
The Australian Organic Industry

A Summary
Foreword
There is no doubt that consumershere and overseasare increasingly interested in knowing more about where and how the food they buy
The Australian Organic IndustryA Summary Commonwealth of Australia 2004
is produced. This has helped boost the appeal of organic foodso much so that there is now a significant
This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgement of the source is included. Major extracts or the entire document may not be reproduced by any process without the written permission of the Executive Manager, Food and Agriculture Business, Australian Government Department of Agriculture, Fisheries and Forestry, GPO Box 858, Canberra ACT 2601. ISBN 0 642 53955 3 A copy of this summary and the full industry profile are available from the Departments website at http://www.daff.gov.au/foodinfo
and growing number of certified organic and biodynamic operators in Australia, representing rural industries as diverse as grains, horticulture, viticulture, meat, dairy, wool and coffee. So far there has been very little data published on the organic industry. The Australian Bureau of Statistics and the Australian Bureau of Resource Economics collect regular and detailed data on Australian agriculture. However, this data does not distinguish between conventional and organically grown produce. This study represents a pioneering effort towards achieving reliable data for the organic
For further information, please contact: Food Policy and Communications Section Australian Government Department of Agriculture, Fisheries and Forestry Email: foodinfo@daff.gov.au Phone: 02 6272 4161 Fax: 02 6272 4367
industry. Not surprisingly, the study highlighted the inherent problems associated with collecting data on organic agriculturelargely because of the extensive range of products produced, the variable size of the farms involved and the different levels of information collected by the various certifying organisations. This report can play an important role by helping to lay the foundation for a uniform data collection system for the organic industry in this country. Collecting reliable datadata that spans several yearswill help the industry develop the strategic plans and marketing strategies that it needs to promote industry growth.
Disclaimer
The views expressed in this publication are not necessarily the views of the Australian Government. This publication is made available on the understanding that the Australian Government is not thereby engaged in rendering professional The Australian Organic IndustryA Summary advice. Before relying on material in this publication, users should independently verify the accuracy, currency, completeness and relevance of the information for their purposes and obtain any appropriate professional advice. References to information, organisations and products mentioned in this publication or associated with those mentioned do not constitute endorsement by the Australian Government of those organisations or any associated product or service. Readers should note that the Australian Government Department of Agriculture, Fisheries and Forestry has not investigated the nutritional qualities, health effects or environmental impacts of organic processes or products, or the financial performance of organic businesses. The Australian Government Department of Agriculture, Fisheries and Forestry seeks to publish its work to the highest professional standards. However, it cannot accept responsibility for any consequences arising from the use of the information herein. Readers should rely on their own skill and judgment in applying any information for analysis to particular issues or circumstances.
As the Parliamentary Secretary for Agriculture, Fisheries and Forestry I look forward to working closely with Australias organic industry in the coming years.
Senator the Hon. Richard Colbeck Parliamentary Secretary to the Minister for Agriculture, Fisheries amd Forestry
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About this publication

This publication summarises the key findings of a study conducted in 2003 and 2004 that provides a snapshot of the organic industry at this time. It is designed to provide general information to current and prospective producers, processors, distributors, exporters, retailers, consumers, certifying organisations, industry associations and others interested in the organic industry. The Australian Government Department of Agriculture, Fisheries and Forestry commissioned the study to help remedy the lack of data available on the organic industry.
Contents
Acknowledgements
Staff in the Department of Agriculture, Fisheries and Forestrys Food Policy and Communications Section managed the project and compiled this summary. The Department would like to thank, for their contributions to this work: Dr Darren Halpin, Central Queensland University Jackie Parkinson, Central Queensland University Dr Martin Brueckner, Curtin University of Technology Amarjit Sahota, Organic Monitor Assoc. Prof. Stewart Lockie, Central Queensland University Peter Donaghy, Central Queensland University Gary Hullin, Austrade Australian Quarantine and Inspection Service
Introduction What is organic farming? On the farm On the road In the factory In the shop In the home Over the sea
1 2 6 13 17 20 26 30 38
The Department would also like to thank the organic certifying organisations that provided data, the Organic Federation of Australia for instigating and assisting the project. Front and back cover photographs were provided by the Biological Farmers of Australia, the National Association for Sustainable Agriculture Australia and Tim Marshall. All organic producers included in case studies have received grants from the Australian Governments New Industries Development Program. The Department thanks those producers included in case studies.
Further information
Other publications from the Food Policy and Communications Section include:
The Australian Organic IndustryA Summary The Australian Organic IndustryA Summary
Australian Government Department of Agriculture, Fisheries and Forestry 2004, Australian Food Statistics 2004, report prepared by ABARE, Canberra. Smith, L and Dawson, P 2004, Food Exporters Guide to Indonesia, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Spencer, S 2004, Price Determination in the Australian Food Industry: A Report, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. BRI Australia Ltd 2003, The Australian Baking Industry: A Profile, Australian Government Department of Agriculture, Fisheries and Forestry, Canberra. Food News Bulletin (published quarterly), produced by the Australian Government Department of Agriculture, Fisheries and Forestry, Canberra.
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Figures
Tables
1. Distribution of certified organic farms by state, 2003 2. Estimated proportions of certified organic farms producing different products, 2003 3. Nature of information exchange with supply chain partners 4. Cooperative or collaborative arrangements among organic farmers 5. Primary source of organic food purchases 6. Organic consumption by education level 7. Organic consumption by income 8. Motivating factors behind food choice 9. Volume of certified organic exports, 19992003 10. Volume of certified organic exports by product group, 2003 11. Total certified organic export volume by destination, 2003
7 8 14
1. Farm-gate sales volumes from certified organic farms in Australia, 2003 2. Three-year projected changes in certified organic production, % of farmers, by product, 2003 3. Estimated national farm-gate receipts from sale of certified organic production,
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by state, 2003 4. Estimated national farm-gate receipts from sale of certified organic products, by product category, 2003 5. Average organic price premiums, by product
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11 21 22 22 23
27 6. Average price premiums for selected organic product groups, by state 28 7. Average price premiums for sales channels, by state 30 8. Prevalence of certifying organisation logos, by state 31 32
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Introduction
The modern organic movement began in Europe around the 1920s, when a group of farmers and consumers sought an alternative to the industrialisation of agriculture. Of key importance to these farmers and consumers was caring for the soil and natural processes upon which agriculture depends, including not using inputs such as artificial fertilisers and synthetic chemicals. A leading figure at the time was the Austrian thinker, Rudolf Steiner, whose ideas led to a system of cultivation known as biodynamic. In the middle of the 20th century enthusiasts brought organic techniques from Europe to Australia, a place with very different climate, soils and density of settlement. With growing consumer interest in how and where food is produced, organic food has become more popular. Products offered only through health food stores or food cooperatives in the 1970s and 1980s spread to the corners of supermarkets in the 1990s. Organic products now occupy prime shelf space in the big chain supermarkets and present export opportunities for Australian producers. Organic farms extend from market gardens clustered near Australias big cities, to dairy farms scattered along the East Coast to vast cattle stations in the outback. But the organic industry in Australia is more than the sum of its farms. It is composed of processing facilities, logistics operations, wholesalers, retailers, exporters, certification organisations and a range of other individuals and organisations. Organic products are a small but diverse range of productsincluding fruit, nuts and vegetables, meat from various animals, dairy products, cereals, oilseeds, plant and animal fibres, and health and body care products. The products may look like their conventional
equivalents, but differ in the way they have been produced.
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What is organic farming?
produce and to protect consumers and organic producers from others misrepresenting their produce as being organic. It also provides a guide to farmers contemplating converting from conventional to organic production. The standard sets out specific requirements for organic production, conversion and natural resource management. The standard includes lists for the allowable inputs for soil management, pest and disease control, and animal health. It also specifies the conditions for processing organic products, such as keeping certified produce separate from conventional produce. Producers must be capable of satisfying the requirements of the standard for at least one year before products can be labelled as organic in-conversion. Producers must then continue to meet the specified requirements for a further two years before being permitted to use the term organic. In 2003, there were about 2340 certified organic operators in Australiaincluding farmers, processors, exporters and retailers.
The basic principle of organic farming is achieving high yields of produce and food of high nutritional quality without the use of artificial fertilisers or synthetic chemicals. Organic farming emphasises the use of renewable resources, the need for conservation of energy, soil and water resources and the maintenance of environmental quality. Animal welfare is also an important consideration. Products or by-products that are derived from genetic modification technology, treated with ionising radiation or that interfere with the natural metabolism of livestock and plants are not compatible with the principles of organic agriculture. Biodynamic agriculture is similar, with some additional requirements for preparing the soil and growing conditions.
Certifying organisations
Certifying organisations inspect operators annually to ensure they comply with the National Standard. They are also authorised to issue organic produce certificates on behalf of the Australian Government. An AQIS-approved organic certifying organisation must undergo an annual audit of its documented system. AQIS also audits the inspection system of certifying organisations at various organic farms, processors, wholesalers and exporters.
Certification
The study that this publication is based on considered only those producers and products that were certified organic or biodynamic. Within Australia, the Australian Quarantine and Inspection Service (AQIS) is responsible for the organic inspection and certification system, in collaboration with seven approved certifying organisations. This co-regulatory system was set up in the early 1990s to ensure buyers of organic products could be confident that certified produce was grown and processed according to organic or biodynamic principles. The system is underpinned by Commonwealth legislation
AQIS and industry has established Administrative Arrangements outlining the administrative policies and operational procedures for certifying organisations. These arrangements cover requirements including objectivity and integrity, structure and training, sanctions and penalties, inspection and certification and export requirements.
and the National Standard for Organic and Biodynamic Produce (National Standard). The Export Control (Organic Produce Certification) Orders 1997, made under the Export Control Act 1982, require every person who produces or manufactures organic produce for export to be certified. For the domestic market, certification is optional. However, the Trade Practices Act 1974 and the various state and territories fair trading laws provide legal protection against misleading and deceptive practices. The National Standard provides the relevant guidelines for labelling organic and biodynamic products. The National Standard was first published in 1992. The third edition was published in 2002. The standard aims to harmonise requirements for the production and labelling of organic Australian Certified Organic (Biological Farmers of Australia) Phone: 07 3350 5706 http://www.australianorganic.com.au Currently, there are seven AQIS-approved organic certifying organisations in Australia:
Bio-Dynamic Research Institute (Demeter) Phone: 03 5966 7333
C A S E S T U DY
Barambah Organics
National Association for Sustainable Agriculture Australia Phone: 08 8370 8455 http://www.nasaa.com.au Ian and Jane Campbell of Barambah Organics near Murgon in Queensland produce, process and market certified organic milk. Their movement into organic production was born from a long family interest in sustainable agriculture and the need to create a point of difference for their products. Customers are often surprised by the unique taste of our milk. It comes from a balanced and healthy diet for the cows on our chemical-free broadacre pastures, said Ian. Soil health and weed control are important considerations and are carefully managed with compost manures and lime. Being organic also means that cows are treated only with natural remedies such as homeopathy and minerals to boost their strength and vitality. Ian and Jane also became involved in processing and marketing their own products about five years ago. They found that there is a lot to learn about running a paddockto-plate supply chain, including hiring staff and building strategic partnerships. Employment problems, particularly recruiting and training the right people, proved to be a significant issue for the business. Barambah Organics much larger involvement across the supply chain meant the business required a new range of skills and people with expertise in milk processing and financial management, as well as traditional farm management. Ian and Jane also found that finding the time to actively market their products was a significant challenge. We formed a strategic alliance with a coffee chain and it has proven a winner, said Ian. Half our business stems from that alliance. Theyre buying it for its quality because it enhances the taste of their coffee.
Adapted in part from the Department of Agriculture, Fisheries and Forestry 2004, Made in Australia: Taking Stock, Number 3, Series 3, pp.1012.
Organic Food Chain Phone: 07 4637 2600 http://www.organicfoodchain.com.au
Organic Growers of Australia Phone: 02 6622 0100 http://www.organicgrowers.org.au
Safe Food Production Queensland Phone: 07 3253 9800 http://www.safefood.qld.gov.au
Tasmanian Organic-Dynamic Producers Phone: 0408 171 473 http://www.top.org.au
Regulatory mark
Following the agreement of certifying organisations, AQIS has recently developed an Australian Government Certified regulatory mark. The mark does not replace the logos of certifying organisations but will help provide greater assurance for consumers wishing to purchase certified organic and biodynamic produce. While the mark is voluntary, its use is governed by formal conditions enforced by AQIS.
On the farm1
How many organic farmers are there?

There were an estimated 1511 certified organic farms in Australia in 2003, not including in-conversion, pre-certified or deferred farms. It is estimated there will be a 20 to 30 per cent increase in the number of certified farms within one to three years as in-conversion producers come on stream.
Where are the farms? About the data

Data on organic production was obtained from two sources. As a first step data was gathered from organic certifying organisations. The National Association for Sustainable Agriculture Australia, Biological Farmers of Australia/Australian Certified Organic, Tasmanian OrganicDynamic Producers and Safe Food Production Queensland provided data. The data gathered from certifiers has a number of limitations. Firstly, only the certifying organisations that charge a levy based on sales were able to supply data on farm production. The data that was provided is not consistent and often incomplete. In addition, the data does not take into account any products not sold under a certifying organisations label. Any producers who were customers of more than one certifying organisation may have had their products double-counted. In order to fill some of the gaps in the data, a telephone survey of 397 organic farmers was conducted in June 2004. The survey excluded those farmers in the process of converting to organic production or preparing for certification. The survey data has weaknesses as some survey respondents had difficulty supplying production and financial information on the telephone. Moreover, the data is based only on a sample of organic farmers. Therefore it relies on the assumption that those surveyed are representative of the broader organic population. Regardless of limitations, the data presented here will help bring a better understanding of the structure and performance of the organic industry. The researchers believe that, to improve communication and planning, the industry needs to collect and analyse data in a consistent
The Australian Organic IndustryA Summary Source: certifier data, n = 1095 (including in-conversion).
About three-quarters of certified organic farms were estimated to be in New South Wales, Queensland and Victoria. Figure 1 shows the distribution by state in more detail.
Figure 1 DISTRIBUTION OF CERTIFIED ORGANIC FARMS BY STATE, 2003
TAS 5% WA 9% SA 10% VIC 20%
NT 2%
NSW 28%
QLD 26%
What area do the farms cover?

Based on the survey data, the estimated area of certified organic farmland in Australia in 2003 was 7.9 million hectares. This is about 1.7 per cent of Australias agricultural area. Approximately three-quarters of the area under organic production was estimated to be
manner over several years. The researchers compiled the following estimates on the organic industry in Australia in 2003 by extrapolating from the data gathered from organic certifying organisations and the survey of 397 organic farmers.
in Queensland, mainly in extensive beef grazing lands. It is worth noting that some organic farmers did not have all their land certified organic. A further 600,000 hectares of non-certified land was estimated to belong to organic farmers.
What do organic farmers produce?

Organic farms produce a wide variety of products. The survey indicated that the most common
1 This section is a summary of Chapter 1 A farm-level view of the Australian organic industry by Darren Halpin in The Australian Organic IndustryA Profile, 2004. Please refer to this chapter for detailed discussion of the sampling method, survey methodology and basis for extrapolation.
product categories were fruit and nuts, vegetables, beef and cereals. The survey only collected data on the product types shown in Figure 2.
Figure 2
ESTIMATED PROPORTIONS OF CERTIFIED ORGANIC FARMS PRODUCING DIFFERENT PRODUCTS, 2003
Table 1 Farm-gate sales volumes from certified organic farms in Australia, 2003
Product Estimated Australian total Organic sold as organic Beef (kg live weight) Sheep and goats Pork (kg live weight) Poultry (kg live weight) Eggs (dozen) 11 544 824 1 733 697 106 780 57 545 384 960 15 048 000 41 848 Organic sold as conventional 4 676 113 3 239 156 5 320 6 650 0 9 235 454 15 713 Est. % volume sold as organic 71.2 34.9 95.2 89.6 100.0 62.0 72.7
45 Percentage of organic farms 40 35 30 25 20 15 10 5

Cereals Poultry Wool Vegetables Sugar Sheep and goats Fruit and nuts Coffee beans Beef Milk Pigs Eggs Tea
Milk (litres) Cereals (grains, pulses, oilseeds) (tonnes) Vegetables (tonnes) Fruit and nuts (tonnes) Source: farm survey data, n=397.
109 141 19 508
299 6 361
99.7 75.4
Source: farm survey data, n = 397. Each farm may produce multiple commodities. Cereals include grains, pulses and oilseeds.
It is very common for one organic farm to produce a number of different commodities. Some common patterns are identifiable from the survey, including livestock production of various kinds and cereals and/or wool production. Fruit and vegetable production is also a very common combination. Conversely, milk, sugar, coffee and tea producers tend not to produce multiple products on their farms. Data from the certifying organisations indicated that a significantly higher proportion of farms than shown in Figure 2 were certified to produce fruit and nuts, vegetables, cereals and sheep in 2003. This suggests that some producers limited production in some areas during 2003, most likely because of the drought. Table 1 shows the estimated volumes of selected organic products sold by certified organic
Table 2 shows how the organic growers surveyed expected to change their production over the next three years. Except for the producers of eggs, poultry and cereals, most survey respondents expected to increase their production. The low level of increase reported for cereal production may be significant given that feed availability is a continuing limitation to expansion in poultry, egg, milk and other livestock production. Table 2 Three-year projected changes in certified organic production, % of farmers, by product, 2003
Product Pork Increase % 80 72 69 58 53 52 45 43 39 Decrease % Stay the same % 0 7 9 0 15 16 18 57 17 20 17 16 33 23 26 29 0 44 Dont know % 0 4 6 8 8 6 9 0 0 Total % 100 100 100 100 100 100 100 100 100 The Australian Organic IndustryA Summary
farms. Because of the volatility of supply and demand, some organic produce is sold as conventional produce.
Fruit and nuts Vegetables Milk Beef Sheep and goats Cereals Poultry Eggs Source: farm survey data, n=397.
What is the value of organic production?

The national value of farm receipts from the sale of organic produce was estimated to be $140.7 million in 2003. This was calculated by asking each survey respondent to estimate the average annual receipts from their property and the percentage of that accounted for by sales of certified organic products. The results have been extrapolated to obtain a total estimate for Australia.
Table 4 Estimated national farm-gate receipts from sale of certified organic products, by product category, 2003
Product category Beef Vegetables Fruit and nuts Cereals (grains, pulses and oilseeds) Frequency 61 89 107 46 8 21 13 4 6 355 Estimated national sum of receipts $ 52 349 101 24 384 964 21 373 875 17 565 525 7 410 000 2 915 387 795 755 745 750 353 337 127 893 694
Table 3 Estimated national farm-gate receipts from sale of certified organic production, by state, 2003
State or territory of farm Qld Vic NSW SA WA Tas NT Total Source: farm survey data, n=309. Data includes organic products sold as organic and sold as conventional. Estimated total sum of receipts $ 59 314 339
Milk Sheep and goats Eggs Pigs Poultry
32 415 970 28 836 545
Total Source: farm survey data, n=355.
11 893 084 6 236 720 1 890 616 82 320 140 669 594
Data does not include on-farm processing or organic products sold as conventional.
What are the costs of organic production?

The survey asked farmers about the costs of organic farming. Most of the farmers who converted from conventional farming agreed that the financial rewards of becoming a certified organic producer were greater than the financial costs. They disagreed that the input costs of organic farming were higher than those of conventional farming.
How do farmers become organic?

In addition to total receipts, organic farmers were asked to estimate their receipts from the sale of specific organic products. The extrapolated results are shown in Table 4. Given that the Table 4 data does not include organic products sold as conventional, on-farm processing and only specific product categories, a greater difference would be expected between the total
$127.9 million reported here and the total $140.7 million reported in Table 3. It is important to note that these figures are estimates and not exact data and therefore either or both figures may be over or underestimated.
The farm survey indicated that 62 per cent of organic farmers converted their operations from conventional farms. The remaining 38 per cent started farming as organic producers. The majority of livestock and broadacre farmers had converted an existing farm to organic production. This pattern is different from fruit and vegetable producers, where around half started up organic farms. Relatively new enterprises in Australian agriculture, such as coffee and tea production, have a larger proportion of growers starting up as organic rather than converting an existing enterprise.
What are the characteristics of organic farmers?

There is a perception among some observers that the organic industry is populated by parttime or hobby farmers. This was not borne out by the farm survey. About 77 per cent of organic farm operators stated that their farm business was their main occupation. One-third of farmers surveyed had a university degree or higher level of academic achievement. More than 40 per cent were from a non-farming family background. One-quarter of the survey respondents were women. The average age of organic farmers was 51.
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On the road2
Kialla Pure Foods

Kialla Pure Foods is one of Australias biggest processing businesses dedicated to organic foods. It grows, manufactures and sells bulk and value-added organic grain products to Switzerland, the United Kingdom, Italy, Germany, the United States, New Zealand, Taiwan, Hong Kong, Japan, Malaysia and Indonesiaas well as to Australian supermarkets. Demand for their products has grown so much that Kialla is supplied by about 250 growers, spread from Emerald in Queensland to the South Australia-Victoria border. More are needed. The organic farming model used at Kialla is based on green manuring. The two most important elements are organic matter in the soil and the soils biological life, or biomass, explains owner Graham McNally (pictured above and below). So our cropping regime is based around two cash crops, winter and summer, interspersed with green manure crops. The green manure we grow in the winter cycle is fenugreek, a legume that produces 93 kilograms of nitrogen per hectare. The summer crops are rotated with mung beans and cereal buckwheat which are good for phosphorous. To build up the soils biomass, cattle are also included in the rotations because rumen bacteria are needed for the soil. Before we started biological farming our soil was like plasticine. Now its lovely and friable and the soil moisture retention is much higher, said Graham. The manager of the manufacturing side of the business, John Egan, indicates the company could sell much more grain into the international market if more growers were prepared to make the switch to organic production. However, he says it requires
Supply chain relationships

In the early days, organic producers sold directly to consumers through roadside stalls, farmers markets and vegetable box arrangements. As the organic market has grown and diversified, supply chains have become more complex; involving a number of supply chain businesses. The organic farmers relationships with supply chain businesses, and the flow of information between them, has become crucial to sustaining a demand-focused industry. The farm survey looked at the relationships organic farmers have with six types of business customers in the supply chain: agents, brokers and distributors processors wholesalers retailers food service customers export consolidators. The survey looked at who the farmers deal with in selling their product, what feedback they receive from their supply chain partners and whether the relationships are formal (a contract or some other written agreement) or informal (a handshake subject to renegotiation for each sale). The survey firstly indicated that while most organic farmers supply product direct to the consumer, on average this is only a small proportion of total sales. Most organic product reaches the consumer via supply chain intermediaries. The most common group that organic farmers deal with are processors. Meat, milk and cereals are usually sold by this route. Poultry, where farmers often have their own processing facilities, and eggs are commonly sold direct to specialist retailers and health food stores. Fruit, vegetables and nuts are most frequently sold through agents/distributors, or directly to wholesalers and retailers.
a total commitment because reliability of supply is crucial to keeping hard-won markets. The company has been active in product research and development and in 2002 received a grant from the New Industries Development Program to build a dedicated organic maize mill.
Adapted from Brad Collis 2003, Ground Cover, issue 44, with the kind permission of the Grains Research and Development Corporation.
This section is a summary of Chapter 2 Organic food supply chain relations and collaborative marketing by Darren Halpin in The Australian Organic IndustryA Profile, 2004.
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The survey suggested that most organic farmers deal with only one type of supply chain business. Fruit, vegetable and nut producers were the most likely to supply multiple businesses along the supply chain. However this was only around 30 per cent of the respondent producers. In terms of information exchange, the survey indicated that retailers are generally the best at keeping growers informed about the quality, prices and acceptance of their produce. The exception is milk, where processors provide extensive feedback to producers. The relationships between farmers and supply chain businesses are predominantly informal, except for milk production.
Collaborative marketing
Inconsistent supply is one of the organic industrys major obstacles to growth. Collaboration between farmers could capitalise on market opportunities, increase sales volumes and improve the efficiency of distribution and marketing. Types of collaborative arrangements include grower cooperatives, group packing sheds, group value-adding companies, grower networks and other marketing groups. The survey showed that a significant majority of producers are not involved and have no plans for any type of collaboration with other farmers. On average, across all commodity groupings, between 5 to 10 per cent of organic farmers are already collaborating, 20 to 25 per cent are interested in future participation and 65 to 70 per cent are not interested in collaboration in the future. There is greatest interest in future participation among beef, cereals and fruit and vegetable growers and least interest among egg and poultry producers.
Figure 3
NATURE OF INFORMATION EXCHANGE WITH SUPPLY CHAIN PARTNERS
70
A B C
Percentage of respondents
60
Figure 4 COOPERATIVE OR COLLABORATIVE ARRANGEMENTS AMONG ORGANIC FARMERS
50 40 Percentage of responses 30 20 10
To export consolidator (n=5) Agent/distributor/ broker (n=154) Direct to wholesaler (n=125) Direct to reltailer (n=93) Processor (n=93) Direct to food service trade (n=9)
100 90 80 70 60 50 40 30 20 10
Sheep and goats (n=31) Poultry (n=7) Vegetables (n=127)
Current Future intention Not interested
Source: farm survey data. A = They buy my product, but I dont know what happens afterwards. The Australian Organic IndustryA Summary B = They give me some feedback on what the market is looking for and how well my product is received. C = They keep me informed of all the issues with the product including margins, quality, and market feedback.
Fruit and nuts (n=156)
Beef (n=86)
Eggs (n=18)
Milk (n=12)
Pig (n=5)
Cereals (n=56)
Source: farm survey data. Data is an amalgamation of survey responses that were split according to the type of collaborative arrangement.
According to the researchers, the apparent low level of collaboration is likely to limit the industrys capability to supply the volume, range and consistency of product necessary to capture domestic and export markets. Reliance on vertical chain relationships may limit the industry to niche markets until very large growers come into production.
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C A S E S T U DY
In the factory3
Inglewood Farms
The success of Inglewood Farms lies in much more than a passion for organic foods; it also comes from a dedication to commercial realities and professionalism. Operated by brothers John and Clive Wylie at Inglewood in South East Queensland, Inglewood Farms is an industrial scale producer of organic chicken. They use a vertically integrated closed loop production system, growing their own organic grain, milling the feed, producing, processing, marketing and distributing the product and composting the waste as fertiliser for crops. Their move into organic chickens was born from a need to produce a noncommodity, branded, value-added niche product to capture better economic returns. They responded to this idea by confirming with six months of intensive market research and feasibility studies that there actually was a market for their proposed product. At first the company used outsourced providers to perform many business functions. One of the most important things was to invest in our own equipment and service delivery, as this allowed us to vertically integrate our business and control product quality, John Wylie said. A commitment to professionalism and quality is absolutely vital because being organic is simply not enough. Our product must also be of the highest quality. If I had my time over again, I would invest in our own equipment and services sooner to get the product right. This allows us to produce a professional, industrial-scale product that the market will pay attention to, rather than a cottage industry-type product. John believes the real challenge now is to control supply chains and grow the market segment, not compete with other organic producers. Inglewood Farms organic chicken is experiencing market growth in double digit figures, domestically supported by their own sales team. The company is undertaking market research for possible expansion into Japan and Korea, further underlining the importance of having a demonstrated market as well as a quality product.
This section looks at the role of processors, wholesalers and distributors involved in the organic industry. It is based on interviews conducted with over 20 companies in early 2004. Those interviewed were generally committed and optimistic about their role in the organic industry.
Processed organic food in Australia

As the demand for organic products has grown, there has been a marked increase in the range of processed organic foods. Many products are processed on the farm. Some farmers add value to their products to sell them in niche markets while others operate boutique food businesses on the farm. Examples of farm processing include making yoghurt, cheese, honey, olive oil, wine, chocolate-coated nuts and confectionery, and preserving or juicing fruit and vegetables. Beyond the farm-gate, a range of companies process organic foods such as breakfast cereals, noodles, pasta, flour, meat portions and burgers, dairy products, juices, shelf-stable groceries, oils, jams, sauces and salad mixes. These processors tend to be either big companies with a small organic unit or small companies that are supplied by a few organic farmers. In the big companies, organic champions seem crucial to the development of an organic product line. Smaller companies are often driven by a sense of mission. While this does not mean commercial considerations are discarded, it does show that there is also an ethical base for building the industry. Above all, most processors that were interviewed felt that for organic lines to be successful there is a need for the entire supply chain to work together.
Challenges of supply for organic processing

While the supply of organic raw produce to processors is generally sufficient for current sales levels, it is not enough to deliver reliably and consistently, nor to enable processors to meet latent demand. Sometimes the inputs for processing have to be imported. This suggests that, overall, demand for organic foods exceeds supply, even though there are reported surpluses associated with seasonal fluctuations and a relatively undeveloped organic supply chain.
3 This section is a summary of Chapter 3 Beyond the farm-gate: the perspectives of processors, wholesalers and distributors in the organic industry by Darren Halpin and Jackie Parkinson in The Australian Organic Industry A Profile, 2004.
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Processors indicated that processing capacity is not a constraint on the growth of organic products. Rather, growth is limited by the difficulties sourcing inputs of the right quality, price and volume. This discourages investment in product development, brand building and manufacturing technology.
maintain price premiums. It was also considered that as volumes increased, premiums would inevitably decline for some products. This long-term reduction in premiums will require a transparent understanding of price premiums among supply chain partners.
Costs of organic processing

Organic standards require special regimes for separating organic products from conventional products, and for cleaning machinery and packaging. Despite these complications, processors report that after any initial outlay for equipment, the running costs of processing organic food are about the same as for conventional food. Transport and handling costs are higher because of the need for segregation and inefficiencies arising from low volumes of organic products.
C A S E S T U DY
MiEssence skin care products

ONE Group, in Queensland, is producing a range of certified organic skin care products and cosmetics. The range was launched in 2002 under the brand name MiEssenceTM, with skin care, personal care, oral care and hair care products. More recently the company introduced an organic cosmetic line, assisted by a pilot commercialisation project grant under the New Industries Development Program. ONE Group has focused its marketing on the niche market of consumers who are already looking for healthy alternatives, rather than directly competing with the major players in skin care and cosmetics.
The role of processors, wholesalers and distributors in the organic supply chain
Planning, communication and coordination are key challenges for organic supply chains. Processors, wholesalers and distributors have often taken on roles as organic supply chain facilitators, taking steps to deal with over and undersupply while maintaining prices and the viability of the whole chain. In the fruit and vegetable sector, wholesalers and distributors deal with a large number of small growers, making communication and coordination difficult and costly. One wholesaler helps coordinate supply by sending out requests and information to farmers on what to grow and when, based on market demand. Another undertakes research to be shared with farmers on managing barriers to production, such as weed control and crop nutrition. Some meat processors have also set up mechanisms to help organic farmers and better manage supply and demand. For example, one processor has helped farmers develop business plans for their future growth. This operator also pays full organic prices to in-conversion farmers to encourage new suppliers to come on board. One processor is undertaking a brokerage role assisting farmers to sell their products to retail outlets. Another processor maintains a system of tracking producers and their stock available for sale to ensure demand and supply are more adequately matched.
From left: John Hunter, Narelle and Colin Chenery and Alf Orpen are joint directors of ONE Group
The easiest market penetration for us is health food shops, explained Alf Orpen, the groups joint director. They represent the highest acceptance without too much product explanation. The company has undertaken a market education campaign to explain its principles to customers. This campaign includes a corporate newspaper and articles for health magazines. The education campaign has led to the cosmetics line and an extensive mail-order business. The company is looking to United States markets. MiEssence is currently the only Australian skin care product range to meet the stringent organic certification requirements of the United States Department of Agriculture. Participating in industry networks has been a key factor in the companys success. Queenslands Australian Organic Institute Inc, a group of certified organic growers, processors and wholesalers, and the New Industries Development Program have provided valuable assistance during the development of the business.
Adapted from Australian Government Department of Agriculture, Fisheries and Forestry 2003, Made in Australia: Markets, Number 2, Series 3, pp.1617. The Australian Organic IndustryA Summary
In dairy, a cooperative distributor pools the organic milk supply from a group of producers ensuring that manufacturers of value-added products have a reliable supply of organic milk, both in terms of volume and quality.
Perspectives on the growth of the organic industry

Processors, wholesalers and distributors generally believe the organic industry is growing, but perhaps not as fast as some had predicted. Some suggested the key to future growth is promoting the principles and perceived health benefits of organic food. However, it was also noted that there is some difficulty differentiating the added benefits of organic food given that conventional Australian food is seen as clean, green and healthy. Some companies indicated they would rather keep their outputs small and build their products as unique and high quality, not high volume. By retaining a niche status organic products can
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In the shop4
Table 5 Average organic price premiums, by product

Product Spaghetti (plain wheat) Hard cheese Extra virgin olive oil Minced beef (standard quality) Muesli Weighted national average % 287 178 158 152 141 129 120 119 103 100 94 93 77 76 73 66 64 61 51 46 44 41 40 35 34 The Australian Organic IndustryA Summary 32 31 29 23 20 17 11 80
This section presents the results of a retail price and promotion study conducted in late 2003 and early 2004, which involved over 70 shops in six capital cities. The range of organic products in Australian retail outlets was found to be generally patchy and inconsistent. Cheese, sugar and breakfast cereals were perhaps the only exceptions. Even those stores claiming to be stockists of organic food had a narrow range. The researchers suggested that this cannot be explained by seasonality alone and points to larger coordination problems in the organic supply chain.
Wholemeal flour Beans Zucchini Rump steak Carrots Pork cutlets Pumpkins
What are the retail prices of organic products?

Organic products usually sell for higher prices than conventional products. The price premiums attached to organic products at the retail level do not guarantee nor indicate price premiums for producers but they are nevertheless used as signifiers of a viable and potentially lucrative industry. The retail survey found that the average price premium for a basket of organic products compared to a similar basket of conventional products is 80 per cent. Table 5 shows the premiums for a range of organic products.
Brown onions Plain flour Whole chickens (for roasting) Potatoes (unwashed) Tomatoes Sweet potatoes Soft cheese Lettuce Lamb chops (mid-loin chop) Chicken eggs Rolled oats Fresh milk (full fat) Fruit yoghurt
Baby food in glass jars Apples Plain wholemeal wheat bread Natural yoghurt Minced pork Oranges Wheat biscuit cereal 4 This section is a summary of Chapter 4 The retail pricing, labelling and promotion of organic food in Australia by Darren Halpin and Martin Brueckner in The Australian Organic IndustryA Profile, 2004. Please refer to this chapter for detailed dicussion of the sampling method, survey methodology and weighting process. Average Source: Retail survey data
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The price premiums for organic products vary considerably within product groups, from one product group to another and from place to place. Table 6 shows that overall New South Wales tends to have smaller price premiums than other states. Fruit and vegetables have higher premiums in Queensland, Western Australia and South Australia, while meat products have higher premiums in Victoria and dairy products have higher premiums in Tasmania and Queensland. Table 6 Average price premiums for selected organic product groups, by state
Product Meat Fruit and vegetables Dairy Total average Source: Retail survey data nd = no data. SA % 33 76 48 64 WA % 19 88 44 90 Qld % 56 91 98 99 Tas % nd 24 122 83 Vic % 92 68 59 115 NSW % 65 53 57 56
Do high prices deter consumers?

Surveys conducted in 2000 and 2001 showed that 28 per cent of respondent Australian consumers were unwilling to pay any price premium at all for organic products. Between 18 and 21 per cent more were unsure if they would pay a premium (Sofres T 2001, The Organics Market Briefing Paper, unpublished report). A representative of one supermarket chain told the researchers that ordinary consumers would not be prepared to pay a price premium above 15 per cent for organic foods. Expanding sales from the dedicated to the general consumer may depend on a drop in prices.
Product placement
The study found that packaged organic goods are distributed throughout supermarkets, not placed in dedicated organic sections. Even so, organic products are often concentrated in the health food aisle.
Messages on the shelf

Communicating to consumers that an organic product has special qualities is very important to gaining a price premium. The key way of making consumers aware that a product is organic is by labelling and the use of certifying organisation logos. Retail products have a large range of logos from Australian and international certifying bodies. Table 8 reports the prevalence of certifying organisation logos across all products by state. No products were identified as certified by Safe Food Production Queensland. Table 8 Prevalence of certifying organisation logos, by state
Certifying organisation SA % 42 36 12 0 5 0 5 100 WA % 48 23 17 0 0 1 11 100 Tas % 26 26 8 26 4 1 9 100 Vic % 42 29 26 2 1 1 0 100 Qld % 66 10 5 0 8 6 5 100 NSW % 74 14 3 0 0 0 9 100 The Australian Organic IndustryA Summary
Table 7 shows the relationship between price premiums and sales channels. Supermarkets have higher price premiums in Tasmania, Queensland and South Australia. Table 7 Average price premiums for sales channels, by state
Channel Supermarkets Other retail outlets Source: Retail survey data SA % 87 52 WA % 75 92 Qld % 102 94 Tas % 112 79 Vic % 56 122 NSW % 48 64
ACO NASAA
Why are organic products more expensive?

There are a number of reasons why organic products are priced more highly than conventional products. It is often claimed that organic production methods are more labour-intensive and the yields for crops, fruit and vegetables are often below those of comparable conventional products. Additionally, organic products require dedicated processing, storage, handling and distribution chains, which can increase costs. However, the vast fluctuations in price premiums across and within states, and across and within different sales channels, suggest that existing premiums are only loosely based on such considerations. The researchers observed that price premiums are largely driven by what stores are able to charge and the kind of clientele they serve (committed organic buyer versus general consumer). Availability of organic products was found to be at its greatest in high-income areas or in areas with a perceivably high quality of life. This suggests that high premiums are being charged to a clientele with a disproportionately high willingness to pay due to high-income levels or lifestyle preferences.
BDRI/Demeter TOP OGA OFC International Total Source: Retail survey data ACO Australian Certified Organic
NASAANational Association for Sustainable Agriculture Australia BDRIBio-Dynamic Research Institute TOPTasmanian Organic-Dynamic Producers OGAOrganic Growers of Australia OFCOrganic Food Chain
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The researchers noted that, in the absence of any systematic promotion of organic products in Australia, consumers are likely to have a poor understanding of organic products and certification processes. The proliferation of labels would therefore seem counterproductive. They suggested that a single Australian organic label would assist market growth. European research credits part of the success of countries like Denmark in promoting organic agriculture with the existence of a single well promoted organic label with high levels of consumer recognition (Hamm U, Gronefeld F & Dalpin D 2002, Analysis of the European market for Organic Food, vol. 1, Ceredigion, University of Wales). The researchers found little information to explain or promote organic products in shops. There are few if any banners, pamphlets or shelf signs. The only arguments put to consumers are usually on the product labels. About 40 per cent of all products sampled had a sales argument on their label. Most of these emphasise the chemical-free nature of the product and the perceived environmental merits of organic farming. However, the researchers felt that the fine print on labels is unlikely to shift consumer sentiment and raise sales in a large way. They suggested that the organic industry, in concert with retailers, should make an effort to better explain what organic means and the significance of certified organic labels. C A S E S T U DY
Organic Fish
Tim Jones and Anne Montgomery (pictured below) are producing some of Australias first certified organic fish at their silver perch fish farm near Grafton in New South Wales. They currently have four earthen dams and plan to establish more dams over the coming years. Our stocking densities are about half that used in conventional farming, said Anne. This helps optimise water quality and ensure the health of our fish. The perch are fed certified organic feed, which is around 50 per cent more expensive than conventional feed. Most fish are sold to restaurants and direct to consumers through local producer markets. A lot of thought has gone into identifying the markets for what is a very special product, and we spend a lot of time cultivating personal contacts with buyers and potential purchasers. Meeting chefs, making them fully aware of our product and receiving their comments has been the main focus of our visits in various parts of Australia, said Anne. Tim and Anne have also sold their fish to restaurants in Japan. With the assistance
of the New Industries Development Program and Austrade they were able to visit Japan and meet potential buyers. They hope to eventually sell up to 50 per cent of production to Japan. To make exporting and retail sales more profitable, they are developing a retail pack, probably with vacuum packing. They are also attempting to determine the shelf life and quality of their product under different storage and handling conditions.
Adapted in part from the Department of Agriculture, Fisheries and Forestry 2004, Made in Australia magazine: Investing in People, Number 1, Series 4, pp.24.
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In the home5
What are the characteristics of organic consumers?

The national survey showed that organic food consumers are more likely to be women (44 per cent of women claimed to have consumed some organic food compared to 34 per cent of men). The research also suggests that organic consumers are well educated and have at least middle-level incomes. However, there were many people who claimed to consume organic food who did not fit this pattern, suggesting that organic food consumption has become more mainstream.
This section on organic consumers comes from two 2001 surveys, one carried out nationwide and one in Queensland (see Further information: Lockie et al. 2002, Donaghy et al. 2003). Over 40 per cent of respondents to the national survey claimed to have consumed at least some certified organic foods over the preceding 12 months. About 8 per cent claimed that half or more of their total diet was organic. This suggests that about half the total amount of certified organic food is sold to committed organic consumers while the rest is sold to Percentage occasional organic consumers. 40 30 20 10 0
Figure 5 PRIMARY SOURCE OF ORGANIC FOOD PURCHASES Figure 6 ORGANIC CONSUMPTION BY EDUCATION LEVEL
60
general education science education
50
Where do consumers purchase organic food?

Figure 5 shows that among those who consumed at least some organic food, supermarkets were the primary place of purchase. However, it also shows high levels of support for smaller retailers and farmers selling direct to consumers through farm-gate sales or farmers markets.
primary
10th grade
trade certificate
leaving certificate/ 12th grade
tertiary
2% 6%
2% 3%
Source: National consumer survey, Lockie et al. 2002.
16%
42%
Supermarket Greengrocers Farmers Butchers Home delivery Restaurants, cafs Other
Figure 7
ORGANIC CONSUMPTION BY INCOME
50 45 40 Percentage 35 30 25 20 15 10 5 0
less than $20 000 $20 34 999 $35 49 999 $50 000 and over
29%
Source: National consumer survey, Lockie et al. 2002. Farmers = farm-gate and farmers markets.
This section is a summary of Chapter 5 Who consumes organic food in Australia by Stewart Lockie and Peter Donaghy in The Australian Organic IndustryA Profile, 2004. Figures 58 are based on data provided in this chapter.
Source: National consumer survey, Lockie et al. 2002.
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What are the motivating factors of organic consumers?

C A S E S T U DY Figure 8 shows the level of motivation expressed by consumers on a range of factors believed to influence consumption decisions. These were compared for consumers of organic and nonorganic products. The motivations of organic and non-organic consumers are similar, with the only significant difference being that organic consumers rate the importance of factors such as natural content, animal welfare, environment and health slightly higher.
Figure 8 MOTIVATING FACTORS BEHIND FOOD CHOICE
Grandvewe cheeses
Grandvewe, based in Tasmania, produces a range of nine sheep cheeses along with 16 cows milk cheeses. Diane Rae and Alan Irish run 80 sheep, a cross-breed of East Friesland and Dorset, and the cheeses made from their milk follow the great traditions of Europe. Prior to leasing our onsite retail space we had established distributorships in New South Wales and Victoria and a sales base in Hobart, said Diane. But the reality was we didnt have enough sheep cheese to service
4.5 4.0 3.5 3.0 2.5 2.0 1.5
non-organic consumers
organic consumers
weight control
polititcal values
environment
convenience
religion
familiarity
fitness
sensory appeal
price
natural content
mood
animal welfare
health
1.0
these markets and there was no way we could run enough sheep to do so. The couple planned and built a shop on their farm with a New Industries Development Program grant. Visitors can pat the sheep, sample the product and talk to Diane about the unique tastes of the cheeses and their organic heritage. They love the small scale of the businesswith their family working together on all aspects of production and marketing. As well as selling cheese from the farm, they also sell at low cost through the Internet
Source: National consumer survey, Lockie et al. 2002. 1 = not at all important, 5 = extremely important
The national organic survey also indicated that the people most likely to eat substantial quantities of organic foods are motivated by the desire to eat what they believe is natural, that is, produced without artificial chemicals and unnecessary processing. They want to eat food that makes them feel good, physically and emotionally. Women and those responsible for household food provision were the people most likely to express these views.
Additional research conducted in Queensland in 2001 suggested that consumers place importance on many of the qualities attributed to organic foods, but many believe these are adequately supplied by conventional production systems. The aspect of organic production that stands out for many consumers is the opportunity for better environmental management. However, most people who are favourably disposed to the environmental claims of organic production are unwilling to pay as much for these benefits as the price premiums often attached to organic products. Confusion over the accuracy of claims about organic foods and the reliability of labels also limits their consumption of these foods. The researchers concluded that the key to increasing consumption of organic foods is to promote the perceived environmental benefits and perceived natural methods of organic production. In addition, the organic industry could explore ways to reduce the price difference between organic and conventional foods without undermining the livelihoods of organic producers.
and maintain a mailing list of restaurants and private connoisseurs. Diane and Alan do not see giving up their former distribution network as downsizing but as a refocusing to make the business more profitable and sustainable. The money that used to be swallowed up in distribution, transport and packaging stays in the bank. The farms output has expanded, with increasing production of cows milk cheese and a larger sheep herd. A selection of wines is also produced and sold from the farm.
Adapted from the Department of Agriculture, Fisheries and Forestry 2004, Made in Australia: Business Sustainability, Number 3, Series 4, pp.24.
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Over the sea6
Figure 10 shows the export volumes of different categories of products. As data is submitted at various levels of detail it is only possible to show broad categories of products. For example, some data is entered as carrots, lettuce and parsnips while other data simply states mixed vegetables.
Figure 10
VOLUME OF CERTIFIED ORGANIC EXPORTS BY PRODUCT GROUP, 2003
Exports
Australian agriculture is a largely export focused sector. Around 80 per cent of Australias annual agricultural production heads overseas in unprocessed and processed forms. Australian organic producers similarly look to opportunities in overseas markets. AQIS collates the only data available on organic exports from organic produce certificates that are issued to producers by approved certifying organisations. The data only covers the volume of organic exports, as there is no requirement for exporters to provide estimates of value. Figure 9 shows the total volume of organic exports from 1999 to 2003. Exports grew rapidly until 2001 and then dropped substantially. This decline is most likely related to the effects of drought. Other factors that may have contributed to this decline include the increase in the Australian dollar and the possibility that domestic demand has increased, diverting product away from export markets. The researchers commented that there is not enough data to show a long-term trend.
Standardised net mass ('000 kg or I)
1400 1200 1000 800 600 400 200

Processed products Drinks and juices Animal products Cereals Meat products Wine Sugar Vegetables Beverage and spices Fruit and nuts Other
Source: AQIS export data. Figure 9 VOLUME OF CERTIFIED ORGANIC EXPORTS, 19992003
Indicative products Standardised net mass ('000 kg or I) 40000 35000 30000 25000 20000 15000 10000 5000 0 774
1999 2000 2001 2002
37470
Cereals Processed products Drinks and juices Meat products
grains, pulses and oilseeds muesli, flour, noodles, pasta and oils fruit juices, soy milk beef (portions and burgers) red and white wines The Australian Organic IndustryA Summary coffee and tea milk, honey, eggs sugar carrots, celery, onions, potatoes apples, oranges, peaches, pears plant material, seeds
15770
16195
Wine Beverage and spices Animal products Sugar
4089
2003
Vegetables Fruit and nuts Other
Source: AQIS export data
This section on exports and imports is a summary of Chapter 6 Australian organic food exports and imports by Darren Halpin and Amarjit Sahota in The Australian Organic IndustryA Profile, 2004.
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Figure 11 illustrates the destination of organic export volumes from Australia in 2003. About 70 per cent of export volume went to Japan, the United Kingdom, France and New Zealand.
Figure 11 TOTAL CERTIFIED ORGANIC EXPORT VOLUME BY DESTINATION, 2003
It is not clear whether imports are replacing shortfalls in Australian production or competing with domestic products. Certainly some products similar to those imported are produced in Australia and even exported. The researchers argue that organic imports will continue to increase unless Australian producers and processors build the capacity to compete with the extensive product range, high quality and economies of scale of foreign manufacturers.
Standardised net mass ('000 kg or I)
1600 1400 1200 1000 800 600 400 200

United States United Kingdom New Zealand Switzerland Belgium Italy Malaysia Netherlands Singapore Germany France Japan Other
Market access
Access to international markets is crucial for Australias organic and biodynamic producers. AQIS has successfully negotiated preferential access to the European Union, Switzerland and Japan for all plant-based certified products. Australias national standard for organic and biodynamic produce has been recognised as equivalent to the standard operating in these markets. Negotiations for access for livestock products to the European Union and Switzerland continue and a positive result is anticipated. Japan has only recently introduced a draft standard to cover livestock and Australia will be making an application to the authorities for preferential access once the standard has been finalised. Another market of interest for Australian exporters is the United States with its considerable consumer market. While two AQIS-approved certifying organisations are recognised by United States authorities, AQIS is negotiating with the United States Department of Agriculture for recognition of Australias organic export certification system. Once these negotiations are finalised, all AQIS-approved certifying organisations will be able to certify suppliers to this market. Australian exporters also want AQIS to negotiate preferential access to the Republic of Korea, China and Thailand, but these negotiations are in their early stages.
Source: AQIS export data.
Imports
The estimated value of organic products imported into Australia in 2003 was $13 million (Organic Monitor 2004, The Global Market for Organic Food & Drink, forthcoming report no. 700240, Organic Monitor, London, UK). This estimate is based on interviews conducted with key importers. Over half of imported organic products are processed foods, such as biscuits, breakfast cereals, muesli, chocolate, pasta, soups, coffee, tea and other beverages. Most global organic food processing occurs in North America and the European Union and it is these two regions that supply the majority of organic processed food imported into Australia.
Prospective export markets7

Japan
Organic food sales are being driven by a general demand for healthy foods and products
Other organic imports include herbs, spices, grains, pulses, nuts, dried fruits, rice, honey, sunflower oil and olive oil. Organic fruit and vegetables are mainly imported from New Zealand to meet shortfalls in domestic supply. Apart from organic food and drinks, an increasing number of organic personal care products such as skin care products, hair care products, deodorants and soaps are imported into Australia. Companies that specialise in distributing organic products or more commonly specialise in health foods and natural products bring in about 85 per cent of organic imports into Australia. Importers of organic food usually play a dual role, importing products and distributing them to organic food retailers, health food shops and supermarkets.
that can be traced back to the source. Tokyo and Osaka are the biggest organic produce markets in Japan. Japanese consumers in these markets have a relatively high awareness of environmental issues, want assurances about food health and safety and are prepared to pay a premium for certified organic products. Organic Monitor (2003) estimated the Japanese market at US $350 million in retail sales in 2002.
This section is a summary of Selected market summaries in Chapter 7 Organic food in overseas markets by Gary Hullin, Austrade in The Australian Organic IndustryA Profile, 2004.
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According to Austrade, the main opportunities for organic products in Japan include soybeans and soy-based products, corn, corn-based products, grains and flours, edible oils, meat and fresh produce. However, with fresh produce, fumigation can result in the product being certified non-organic. Organic products sell mainly through supermarkets, convenience stores, restaurants and cafs. Austrade notes that Japanese consumers generally demand high quality products. Mainstream consumers are generally prepared to accept a 10 per cent premium on organic foods. Other things to note about the Japanese market are that marketing can be costly, labelling laws are complex, import duties on some products are high and exporters may have to commit to long-term contracts.
The top-selling organic products are fruit and vegetables (led by carrots, tomatoes and onions), sausages, milk and meat. Sales of meat products are high but not growing. Organic products are sold through a variety of channelsfarm shops, cooperative shops, street markets, organic retail chains, conventional retail chains, food service suppliers, mail order, direct marketing and factory shops. Austrade suggests that demand for various organic confectionery items is growing in Germany and there is also potential for high quality, differentiated products.
The United Kingdom

The United Kingdom is the third largest organic market in the world, after the United States
The United States

United States consumers are becoming increasingly educated in the importance of a good diet in maintaining health and wellbeing. This is helping to drive sales in organic foods. A 2002 survey by the United States Food Marketing Institute showed that many Americans believe that organic foods are more beneficial to their health than non-organic foods. One estimate has suggested the US organic market was worth US$11 billion in 2002 (Organic Monitor 2003). The greatest demand is on the West Coast and in the North-East. Organic foods have made major inroads into the mainstream consumer market, primarily through independent natural food chains such as Whole Foods Markets, Wild Oats and Wegmans. The main organic food items sold in the United States include fresh produce, cereals and grains, dairy products (yoghurt and long-life milk), dried pasta and health bars. Areas of greatest growth are fresh produce, fresh meat, seafood and nutrition bars. Keeping up with the demand for organic products from mainstream consumers has supermarkets adding organic versions of many of their core product category items. No longer confined to fresh produce and meat, opportunities for Australian packaged or processed organic foods exist in categories ranging from dairy to breakfast cereals, salad dressings, soups and confectionery.
and Germany. The value of organic sales in 2002 was about US$1.5 billion (Organic Monitor 2003). Most of the sales were unprocessed meat, fruit and vegetables. Organic food retails mostly through supermarkets. There are also specialist organic shops, farm shops and home delivery firms. Somewhat like the German market, some commentators believe that demand in the United Kingdom for organic foods has peaked, with the rate of growth to slow over the next few years. Imports accounted for over half of organic food sold in the United Kingdom. Many domestic meat producers are converting to organic production replacing some imported products. Strongly performing segments include gourmet and specialty packaged and processed foods, chocolate, coffee, juices and pasta sauces. These are some of the key areas of opportunity for Australian organic food exporters.
A further opportunity is to supply the food service industry, with white-tablecloth restaurants increasingly adding organic versions of their popular dishes to menus.
Germany
Germany has a long tradition of marketing organic products. Germany is the largest and fastest growing organic food market in Europe, with estimated retail sales of US$3.06 billion in 2002 (Organic Monitor 2003).
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C A S E S T U DY
to negotiate the contract. Cattle are supplied within 14 days. Good communication along the supply chain ensures accuracy, trust and a stable business environment for all partners. Simone Tully, the company secretary, said part of OBE Beefs success is its large supply base, which provides critical mass and the ability to meet customer delivery demands. Also of high importance is the companys close relationship with its processor and distributors. OBE Beefs processor has to be willing to accept high producer involvement and have a demonstrated commitment to organic product, and distributors have to be willing to assist in market development of organic beef. Regular business trips overseas by OBE Beefs directors and business manager continue to provide many new business enquiries and market information. This assists in the further development of supply chains. OBE Beef and Stockyard are developing exclusive distribution contracts with highly regarded companies in Japan and the United States that are committed to developing long-term relationships with both their suppliers and their customers. OBE Beef is committed to working with its supply chain partners in order to further promote the benefits of organic production. This commitment is reflected in OBE Beefs willingness to participate in domestic and international forums. The company understands that sharing knowledge provides a whole-of-industry benefit.
OBE Beef
OBE Beef Pty Ltd, founded in 1995, is an initiative by a group of more than 30 beef producers in the Channel Country of outback Australia. The area that is collectively owned by producer members exceeds seven million hectares and represents the largest organic beef project in Australia, and possibly the world. OBE Beef producers have been able to implement the change to organic management practices effectively due to the unique location and low incidence of pest species. The cattle graze on the Channel Countrys unique flora, including the many native shrubs, herbs and grasses. This is what creates the distinctive taste of the beef and forms the basis for the companys successful brand image. Individual producers researched the biodiversity of their properties and identified the native plants nutritional value, such as protein content, palatability and energy content. This information helps determine stocking rates and preserve the ecosystems unique and delicate balance. Modern technologies, including light aircraft, computer communications, television and radio telephones, enable OBE Beefs entry into global and domestic food markets. The company uses the Internet to conduct most of its business. Within a 24hour period, a client in Asia may request an order of beef by email. OBE Beef arranges specifications, logistics and supply and then requests its logistics partner, Stockyard,
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Further information
Rural Industries Research and Development Corporation (ed.), Inaugural OFA National Organics Conference 2001. Record of Proceedings, vol. 01/121, Rural Industries Research and Development Corporation, Canberra. http://www.rirdc.gov.au/fullreports/org.html Smith, P 2003, Organic food, an Australian perspective, Australian Food Statistics 2003, Department of Agriculture, Fisheries and Forestry, Canberra. http://www.daff.gov.au/content/publications.cfm?Category=Food
Department of Foreign Affairs and Trade 2004, Subsistence to Supermarket II: Agrifood Globalisation and Asia, Volume III: Asian Agrifood Demand Trends and Outlook to 2010, Canberra. http://www.dfat.gov.au/publications/agrifoodasia/index.html Donaghy, P, Rolfe, J & Bennet, J 2003, Consumer demands for organic and genetically modified foods, presented to the 47th Annual Conference of the Australian Agricultural and Resource Economics Society, 1214 February 2003, Fremantle, Western Australia. Hassall & Associates 1996, The Domestic Market for Australian Organic ProduceAn Update, no. 96/1, Rural Industries Research and Development Corporation, Canberra. http://www.rirdc.gov.au/fullreports/org.html Kondinin Group (ed.) 1997, Organic Farming in Australia, no. 00/97, Rural Industries Research and Development Corporation, Canberra. http://www.rirdc.gov.au/fullreports/org.html Lockie, S, Lyons, K, Lawrence, G & Mummery, K 2002, Eating green: motivations behind organic food consumption in Australia, Sociologia Ruralis, vol. 42, pp. 2037. McCoy, S & Parlevliet, G 2000, Export market potential for clean and organic agricultural products, no. 00/76, Rural Industries Research and Development Corporation, Canberra. http://www.rirdc.gov.au/fullreports/org.html National Organic Program, United States Department of Agriculture
Soil Association, United Kingdom http://www.soilassociation.org Wynen, E 2003, Organic Agriculture in AustraliaLevies and Expenditures, no. 03/002, Rural Industries Research and Development Corporation, Canberra. http://www.rirdc.gov.au/fullreports/org.html Yussefi, M & Willer, H (eds.) 2004, The World of Organic AgricultureStatistics and Emerging Trends2004, International Federation of Organic Agriculture Movements, Bonn, Germany. http://www.ifoam.org See also the list of websites of AQIS-approved certifying organisations listed earlier.
Government websites and programs

Listed below are government websites describing programs or containing information that may assist participants in the organic industry.
Australian Government
Department of Agriculture, Fisheries and Forestry http://www.daff.gov.au Food Policy and Communications Section http://www.daff.gov.au/foodinfo
http://www.ams.usda.gov/nop/indexIE.htm Organic Federation of Australia http://www.ofa.org.au/ Organic Industry Export Consultative Committee 2002, National Standard for Organic and Biodynamic Produce, 3rd edition, Organic Industry Export Consultative Committee, Canberra. http://www.aqis.gov.au/organic
For specific information on organics: click on Food Issues, then Organics. Australian Quarantine and Inspection Service http://www.aqis.gov.au/organic GrantsLINK http://www.grantslink.gov.au Business Entry Point
Organic Monitor 2003, The Global Market for Organic Food & Drink, Organic Monitor, London, UK.
http://www.business.gov.au
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New Industries Development Program http://www.daff.gov.au/agribiz AgricultureAdvancing Australia http://www.daff.gov.au/aaa Rural Industries Research and Development Corporation (Organic Produce Research Program) http://www.rirdc.gov.au National Food Industry Strategy Ltd http://www.nfis.com.au Austrade http://www.austrade.gov.au Envirofund http://www.nht.gov.au/envirofund/index.html National Landcare Program http://www.daff.gov.au/landcare Environmental Management Systems http://www.daff.gov.au/ems Commercialising Emerging Technologies Commercial Ready Program Australian Tourism Development Program http://www.ausindustry.gov.au
South Australia
Department of Primary Industries and Resources, South Australia http://www.pir.sa.gov.au
Tasmania
Department of Primary Industries, Water and Environment http://www.dpiwe.tas.gov.au For specific information on organics: click on Food and agriculture, then Organic farming. Department of Economic Development http://www.development.tas.gov.au
Victoria
Department of Primary Industries http://www.dpi.vic.gov.au For specific information on organics: click on Agriculture and food, then General farming, then Organic agriculture. Department of Innovation, Industry and Regional Development http://www.iird.vic.gov.au
Western Australia
Department of Agriculture http://www.agric.wa.gov.au For specific information on organics: click on Farm management, then Organic farming.
New South Wales

Department of Primary Industries http://www.agric.nsw.gov.au For specific information on organics: click on Farm Management, then Farming systems and planning, then Organic farming.
Department of State and Regional Development http://www.business.nsw.gov.au
Queensland
Department of Primary Industries and Fisheries http://www.dpi.qld.gov.au For specific information on organics: click on Horticulture and fresh produce, then DPI and organics.
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For further information on the report, please contact: Food Policy and Communications Section Australian Government Department of Agriculture, Fisheries and Forestry Email: foodinfo@daff.gov.au Phone: 02 6272 4161 Fax: 02 6272 4367
www.daff.gov.au/foodinfo
The Australian Government Department of Agriculture, Fisheries and Forestry has portfolio responsibility for increasing the profitability, competitiveness and sustainability of Australias agriculture, fisheries, forestry and food industries. The Departments Food and Agriculture Business Group is focused on developing the food and fibre value chain from farm production through processing to the consumer.
D E PA R T M E N T O F A G R I C U LT U R E , F I S H E R I E S A N D F O R E S T R Y

Australian Organic Industry Summary

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Australian Organic Industry Summary

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The Australian Organic Industry

The Australian Organic IndustryA Summary

The Australian Organic Industry

About this publication

The Australian Organic IndustryA Summary

The Australian Organic IndustryA Summary

equivalents, but differ in the way they have been produced.

What is organic farming?

Bio-Dynamic Research Institute (Demeter) Phone: 03 5966 7333

Organic Food Chain Phone: 07 4637 2600 http://www.organicfoodchain.com.au

Organic Growers of Australia Phone: 02 6622 0100 http://www.organicgrowers.org.au

Safe Food Production Queensland Phone: 07 3253 9800 http://www.safefood.qld.gov.au

Tasmanian Organic-Dynamic Producers Phone: 0408 171 473 http://www.top.org.au

The Australian Organic IndustryA Summary

The Australian Organic IndustryA Summary

How many organic farmers are there?

Where are the farms? About the data

TAS 5% WA 9% SA 10% VIC 20%

What area do the farms cover?

What do organic farmers produce?

ESTIMATED PROPORTIONS OF CERTIFIED ORGANIC FARMS PRODUCING DIFFERENT PRODUCTS, 2003

45 Percentage of organic farms 40 35 30 25 20 15 10 5

109 141 19 508

What is the value of organic production?

Milk Sheep and goats Eggs Pigs Poultry

32 415 970 28 836 545

Total Source: farm survey data, n=355.

What are the costs of organic production?

How do farmers become organic?

The Australian Organic IndustryA Summary

What are the characteristics of organic farmers?

Kialla Pure Foods

Supply chain relationships

NATURE OF INFORMATION EXCHANGE WITH SUPPLY CHAIN PARTNERS

Current Future intention Not interested

Fruit and nuts (n=156)

The Australian Organic IndustryA Summary

Processed organic food in Australia

The Australian Organic IndustryA Summary

The Australian Organic IndustryA Summary

Challenges of supply for organic processing

Costs of organic processing

MiEssence skin care products

Perspectives on the growth of the organic industry

Table 5 Average organic price premiums, by product

What are the retail prices of organic products?

The Australian Organic IndustryA Summary

Do high prices deter consumers?

Messages on the shelf

Why are organic products more expensive?

The Australian Organic IndustryA Summary

The Australian Organic IndustryA Summary

The Australian Organic IndustryA Summary

What are the characteristics of organic consumers?

Where do consumers purchase organic food?

leaving certificate/ 12th grade

Source: National consumer survey, Lockie et al. 2002.

Supermarket Greengrocers Farmers Butchers Home delivery Restaurants, cafs Other

ORGANIC CONSUMPTION BY INCOME

The Australian Organic IndustryA Summary

Source: National consumer survey, Lockie et al. 2002.

What are the motivating factors of organic consumers?

4.5 4.0 3.5 3.0 2.5 2.0 1.5

Over the sea6