Organic food prices soar...

The organic food movement has taken off in the past five years in America, with sales up over 125% during that time. This same five year period saw ever growing numbers of farmers and acres of crop land going organic. According to an article in today's NYT Business section, this trend has slowed dramatically with the new heightened prices of all commodities.

The organic movement is based around the premise that consumers have a higher willingness to pay for food that is grown without the aid of chemicals, fertilizers and hormones. This premise seemed to hold true over the recent past, as the market share of organics grew significantly. The problem with this assumption now, however, is that many believe there is a likely inflection point in the food markets -- whereby, consumers will forego purchasing the organic goods due to the high absolute price. The interesting thing about this is that it doesn't appear that organics are decoupling from their normal 20-100% premium over conventional foodstuffs. Instead, the fear is that there is a pyschological barrier involved and that $7 a gallon milk is something the consumer cannot tolerate. For exmaple, two years ago a gallon of "regular" milk was around $2 and organic milk was about $4, which was a 100% price premium. Now with regular milk at $3.39 and organic at approximately $6.65 (once again roughly 100% premium), the market may begin contracting. It seems to me that in the stumbling economy, this slight (but very real to some) absolute increase, along with the aforementioned pyschological impact of the pricing, could very likely put a huge downward pressure on demand for organic goods. Another possibility proposed by a friend is related to this mindset, as he postulated that the growth in the organic food sector was due almost exclusively to the faddiness of it and the additional disposable income from a subset of the population. He may be right...

I know that at home we try to use some organic products, but have focused more on the local sourcing aspect of our food and this increase in costs has played a role in keeping us from moving more into the organic marketplace. Even with an increase in disposable income, we are often made aware of the price disparity of our food choices compared to the "cheaper" alternatives. I hope we won't have the need to leave the local food market, but I will be interested to note if there is any marked change at the big Dane County Farmer's market this year.