Organic Farming Profits
Organic Demand Keeps Growing...
So you’re looking to get into business, preferably in a field that is not saturated and is still in its infancy with plenty of growth potential. Well, the field you might want to look into is the field itself… farming.
But I’m not talking your conventional agriculture. I’m talking organic farming. There is more than just organic foods growing in the fields of organic farms; there is profit potential growing in the field of organic farming.
Growing Demand for Organics
Perhaps the first thing an entrepreneur assesses when selecting a business activity to undertake is the demand for its products and services. Have you taken a good look at your local supermarket shelves lately? Larger and larger sections are being devoted to organic foods, and the stats are there to back that observation.
Still a relatively new field of business, it was only in 2002 that the USDA put into place national standards governing organic food cultivation. Since then, the number of certified organic farms, ranches, and processing facilities has mushroomed from about 7,200 in 2002 to 17,281 operations by 2011, an increase of 240%.
Most of the demand for organic foods in America is – you guessed – on the West Coast, where people tend to place a greater emphasis on health and fitness. According to AGMRC – Agricultural Marketing Resource Center:
“While there were organic farms or ranches in all 50 states, nearly 20 percent, or more than 2,700 of the operations, were in California. Other states with large numbers of certified and exempt organic operations were Wisconsin (1,222), Washington (887), New York (827) and Oregon (657).”
OK. So they are popular. But is there money in it? “A recent study by the Organic Trade Association (OTA) indicated that U.S. sales of organic products, both food and non-food, have grown from $1 billion in 1990 to $31.5 billion in 2011, increasing 9.5 percent in the last year … and industry experts are forecasting steady growth of 9 percent [per year] or higher,” AGMRC reports. Now that’s growth potential!
But there is a lot more to organic agriculture than just contaminant-free apples and lettuce, as The Organic Trade Association breaks down for us: “The organic food and beverage sector was valued at $29.22 billion, while the organic non-food sector reached $2.2 billion...The organic food sector grew by $2.5 billion during 2011, with the fruit and vegetable category contributing close to 50 percent of those new dollars. The fastest-growing sector was the meat, fish & poultry category, posting 13 percent growth over 2010 sales.”
Aside from the well known organic fruits and veggies, there are also organic juices and other beverages, plus the meats of the land and sea, whose 13% annual growth is well above the entire organic spectrum’s 9.5%.
Greater Potential in Non-Food Organics
But what are those “non-food” organics mentioned above? An entrepreneur might want to pay special attention to these, which may enjoy the greatest growth potential of all organics going forward, as AGMRC explains:
“Growth in the organic sector has highlighted issues that need to be addressed: shortages of organic raw materials such as organic grain and organic sugar… A shortage of affordable organic ingredients or products, such as corn and soybeans for livestock feed, left organic producers unable to meet market demand.”
This shortage of non-food organics – that is to say, items that are not intended for human consumption, but are intended as animal feed instead – will have a dramatic impact on that single fastest organic food sub-group mentioned above: the meats. What makes these meats organic is the organic feed the animals consume. Without organic feed, you really cannot have completely organic meats.
In fact, if the demand for organic feed were met, the organic meat sector would be growing by much more than 13% per year. Even the restaurant chain Chipotle (NYSE: CMG), well-known for its exclusive use of organically raised beef, has had to replace its menu choices with conventional beef due to the shortage of organically raised cattle. Imagine signing them as your buyer.
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The Saleability of Organics
Organic farmers are finding it no challenge at all to sell their organic crops. While some choose to set up their own stands by the roadside or at public markets, others enjoy the convenience of selling almost everything they grow to just one or two buyers.
As AGMRC outlines:
“In terms of sales outlets, the majority, or 82.6 percent, of organic sales were to wholesalers, including processors and distributors. Just 10.6 percent of sales were to retail operations, including supermarkets and natural food stores, and only 6.8 percent of sales were direct to consumers via farm stands, farmers’ markets and community supported agriculture.”
After all, defining a demand for your products is a fine start. But working out the logistics of filling that demand and delivering your goods can be a deal-breaker. Selling to just one or two wholesale buyers sure saves a lot of headaches and removes a good deal of the uncertainty.
But whichever way you go about it, as an organic farmer you will most likely enjoy riding a rising tide of demand into your retirement. The “foodies” are growing up on the stuff. And they will most likely pass it on to their kids, and so on.
“Foodies” are what Ohio, Illinois farmers Tom and Colleen Yucus call the health conscious next generation of consumers. “The movement really is with the younger people who are more health-conscious versus our generation that kind of believe whatever they hear,” Colleen categorized their niche market to Illinois Valley’s News Tribune. “The ‘foodies’ get into food and preparing it locally, making it a festive family affair with food,” added husband Tom.
Of all the products that the younger generations pick up with enthusiasm, most eventually get left behind as they grow. Sure, those iPods and cell phones are permanently fixed to their hands during their youth. But as they get older, they eventually push games and gadgets off to the side.
Not so with food. Food is more than just a fashion or lifestyle symbol. It becomes a personal taste that forms part of who people are, which they will most likely carry with them for their entire lives, passing it down to their children and ultimately perpetuating the demand.
And one more point about the profitability of organic agriculture versus other business opportunities: food is consumed, which means it needs to be replaced, which in turn means repeat business not just on an annual basis as with clothing or electronics, but on a weekly basis.
With organic farming, you will really have them eating out of your hand – over and over again.
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