*This category includes farms for which reported sales are aggregated fruit, nut and vegetable sales.Looking only at crop production (excluding livestock, poultry and related products) in 1994-95, 1,363 registered organic farms in the state reported almost $95 million in sales from almost 45,000 acres. This accounted for less than 1% of the total value of crop production in the state. However, organic production generally has exceeded the state's rate of yearly increase in total agricultural value. Vegetable crops were the single most valuable organic commodity group, accounting for at least half of the state's gross sales from approximately one-third of the registered acreage each year. During 1992-95, vegetable crops posted only a 4% increase in the number of producing acres, but a 46% increase in total sales---suggesting a shift in products grown, considerable gains in production or marketing efficiency, and/or increased consumer demand. In comparison, fruit and nut crops received about one-third of the state's total organic sales value from almost half of the registered organic acreage. During 1992-95, fruit and nut crops recorded a 7% increase in acreage, but an 8% decline in overall value of production. Field crops, though of considerably less value to California's organic industry than vegetables or fruit and nut crops, nonetheless recorded a 28% increase in sales during 1992-95. Geographical Distribution of Organic Acreage and Crop Value. Vegetable crops predominated in the Central Coast/Bay Area, the San Joaquin Valley and the South Coast regions. Fruit and nut crops were particularly important in the San Joaquin Valley and North Coast regions, and field crops in the Sacramento Valley. During 1992-95, the San Joaquin Valley claimed the largest number of registered organic acres of any region, with about one-third of the state total. The Sacramento Valley was second with approximately one-fourth of the total acreage, followed by the Central Coast/Bay Area region with roughly one-sixth of the total. During the three-year period:
Farm Numbers. Size, Sales. During the three years of analysis, average acres per registered organic farm decreased by 10%, while sales per acre went up 18%---resulting in an average increase in sales per farm of 6%. In crop categories:
ACREAGE AND SALES DISTRIBUTIONS ACROSS FARMSMost registered organic farms have few acres and small annual sales. In the third year of the program, 50% of all registered farms consisted of less than five acres, and grossed under $6,000. Because the two categories of vegetables and fruits/nuts represented 95% of all farms, their statistics were similar to the overall numbers:
Not surprisingly, the midpoint size for farms growing field crops was larger, at 107 acres, with annual sales at $52,000. Revenue from organic agriculture is highly concentrated. In 1994-95, as indicated by Figure 1, over half of the value of organic production was represented by the 2% of growers who grossed over $500,000 each. At the other end of the spectrum, growers grossing $10,000 or less comprised two-thirds of all growers and only 5% of sales.
The top revenue-generators were all certified, while those with the lowest sales frequently were not. This indicates that certification may be an important marketing tool for full-time growers with large sales volumes and little direct contact with consumers, and less important for part-time growers or those selling their product through direct marketing channels. It also may indicate that certification procedures and fees are a barrier for growers with low farm incomes. These patterns suggest an industry with a predominance of very small part-time growers but also a substantial number of full-time growers.
PATTERNS OF ENTRY AND EXITAlthough the total number of registered farms changed very little from the first year of the program to the second (2% decrease), the numbers of new farms entering and leaving the program during that time were significant. Almost one-third of the original growers dropped out of the program in the second year, only to be replaced by almost as many new registrants. However, over 90% of the growers who registered in the second year continued in the third, and an additional 348 entered the program---resulting in a total of 1,372 registered farms in 1994-95 and a net increase of 215 growers over three years.Various factors likely contributed to these entry and exit patterns. First, there was some incentive to register early in the organic program because only a one-year transition period was necessary at that time to change a farming operation from conventional to organic practices; a three-year transition period was planned for a later date. In addition, media attention directed to the perceived positive attributes of organic farming (pesticide use reduction, enhanced food and farmworker safety, environmental protection) influenced both consumer awareness and grower registration. Some growers undoubtedly registered at the program's inception hoping to secure the higher prices that organic products often command. These prospective higher prices combined with potential on- and off-farm benefits provided an attractive farming option. Although it is true that organically produced crops often command higher market prices, successful organic farming also requires development of new management skills and a significant level of commitment over time. There are a number of acknowledged challenges to farming organically, including lack of available information on organic production methods. Because organic growers are prohibited from using many conventional inputs such as synthetic fertilizers and pesticides, the relative level of production risk for organic farming may be higher---especially during the transition years. The transition from conventional to organic can be particularly challenging for pest management, with some growers citing substantial crop losses. Thus, costs of production for some organic crops may be higher than for their conventional counterparts. Also, annual crop growers have cited problems in finding suitable crops for their rotation schemes, and perennial crop growers in particular grapple with the dilemma of crop diversification in what are essentially monocropped systems. Marketing is a separate challenge for organic food and fiber crop producers because markets may not have been well developed nor have the requisite grower/buyer relationships been adequately established. These challenges would have contributed to the grower attrition rates shown in the analysis.
REGISTERED HANDLERSDuring 1992-95 the total number of registered handlers of organic products decreased 9%, while handler sales value increased 56%. The Central Coast/Bay Area region had over one-third of the state's handlers and about one-half of the total sales. The South Coast had another one-third of all handlers and accounted for over one-fourth of all sales. Fruit, nut and vegetable crops combined generated the highest revenues for handlers in all three years of the analysis, representing between 80% and 92% of the totals. Field crops claimed essentially all of the remaining sales.
IMPACTS OF NEW REGULATIONSCurrent production and market indicators suggest that organic agriculture will continue to experience substantial growth. Perhaps more critically important to the organic industry at present, however, is the proposed rule of the USDA's National Organic Program. Developed in response to the requirements of the Organic Foods Production Act of 1990, this proposal would set national standards and regulations for organically produced agricultural products---including certification of producers by accredited certification agencies. Published in the Federal Register on December 16, 1997 for public comment, the proposed rule has generated intense discussion, particularly on three key issues: whether to allow the use in organic production of (1) genetically modified organisms, (2) irradiation and (3) sewage sludge. (So much so that the public comment period was extended from March 16 to April 30, 1998.)Of particular importance to organic producers and certification agencies is the issue of certification. The proposed rule states that producers with annual sales at or above $5,000 must be certified each year by an accredited certification agency. Fees would apply for both accreditation of agencies and certification of growers. These fees have important implications for growers with low sales and for certifiers without a large grower base from which to derive income. In 1994-95, only about one-fifth of organic growers in California with annual sales of $10,000 or less, and one-half of growers with sales of $25,000 or less, were certified. In contrast, all organic growers grossing above $500,000 per year were certified. It therefore appears that, under the existing system, many small growers do not see the benefit of certification relative to the expenses associated with the certification process. Thus, for growers who gross over $5,000 annually but nonetheless operate on a modest scale, the new federal requirement could prove a significant deterrent. These growers may respond to the certification requirement by dropping out of organic production altogether, or by forgoing certified organic production in a legal sense and instead marketing with another form of labeling related to production methods. Likewise, some certification agencies may cease to operate. Others may pass most accreditation costs on to their producers. New certification agencies, perhaps catering to very small growers, may emerge. At this time, however, it is not clear how much attrition or entry of either growers or certification agencies might result from the impending federal law because it has not yet been finalized.
CONCLUSIONThe registration data for the first three years of the organic program in California reveal considerable growth in terms of number of farms, acreage and farmgate sales. Farmer exit and entry patterns indicate substantial turnover in the organic sector, although it continues to grow. (In fact, CDFA estimates the current---1998---number of growers and handlers at 2,300, impressively higher than the 1994-95 number of 1,561.)Implementation of the federal law, which will require certification of commodities marketed as organic, will undoubtedly serve as another catalyst of change. The evolution of the organic sector has broad implications for such nation-wide issues as food safety, viability of rural communities, resource conservation and environmental quality.
* The full report, published by the Center, is Statistical Review of California's Organic Agriculture, 1992-1995, by Laura Tourte and Karen Klonsky. Tourte is a research associate and Klonsky is a specialist, both with Cooperative Extension, Department of Agricultural and Resource Economics, UC Davis. Click Here to Return to UC Agricultural Issues Center Home Page PDF
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