Organic producers must plan carefully to maintain growth

Published on Monday 4 August 2008 20:27

ORGANIC foods are in vogue, but this important sector is facing serious problems that will require careful planning, according to a leading analyst.

James Trebble, of Devon-based Mole Valley Feed Solutions, said: "Rising protein and energy costs will more than eliminate any benefits from recent falls in grain prices and lead to higher feed costs. To maintain profit margins, farm gate prices would need to increase, in the case of milk to around 40p per litre. This is less likely in the current 'post-credit-crunch' economy, which means that to maintain margins producers will have to optimise production costs and output."

Demand for a wide range of organic produce has been increasing strongly, but Trebble warned a change was looming. He said: "The signs are that sales growth is slowing. Sales of organic eggs have fallen with consumers migrating to cheaper free-range products.

"The market for organic pig meat is, at best, holding steady with home-produced supplies under pressure from imports, and although sales of dairy products are increasing, growth is slower than previously."

Trebble said he was cautiously optimistic for the organic sector, though he noted:

"From a feed perspective, organic proteins have escalated significantly in price and, at times, been difficult to obtain. Last year's protein bean harvest was a disaster.

"Compounding the problem is that Third World countries now realise the value of their commodities and will be looking to realise high values. China has also imposed export taxes on some feed commodities, further increasing costs."

There are relatively few organic arable farmers in the UK and this makes it difficult for their counterparts in the livestock sector, who are forbidden to use conventionally grown cereals and proteins.

This leaves the organic livestock farmer highly vulnerable if he relies on imports and that is not helped by the weakness of sterling against the euro. There could be a significant short-term fall in UK organic livestock production unless consumers show a willingness to pay a premium.