Organic sales are up during the pandemic, but long-term challenges loom

Dive Brief:

  • Organic produce sales jumped 22% in March, compared to 1.8% in January and February, outpacing the growth of conventional produce sales, according to a new report by the Organic Produce Network and Category Partners. Growth in organic foods overall also received a boost. 
  • Despite the surge, a new report from Mercaris emailed to Food Dive found the year ahead is full of serious risks to the organic market because of threats to consumer income, livestock processing and imports. The short-term impact in consumer demand for food from the grocery store creates opportunity to boost the organic market’s footprint, but the economic repercussions of the coronavirus could create long-term challenges, the report said.
  • Ryan Koory, director of economics at Mercaris, said in a release the global spread of the coronavirus has generated several risks for organic commodity markets. “With the potential to impact trade, labor, consumer demand and the greater global economy, its ripple effects will likely be widespread and long lasting,” he said.

Dive Insight:

As consumers stockpile food during the outbreak, retail sales for several products like organic have jumped significantly. But as the impact from the pandemic worsens and the financial hardships facing some families intensifies, the organic boom could bust. 

Millions of Americans have been laid off as a result of the outbreak, hurting the U.S. economy and limiting what consumers can spend. Since organic is a premium good and production costs more, these products are typically more expensive than conventional options. When times are harder financially, sales for premium goods can drop, the Mercaris report said. If consumers have less money to buy premium products and are left to pick between conventional and organic, they will likely choose the option that helps them save money and feed their families.

Organic foods have become increasingly popular in recent years as consumers turn to more clean label and fresher products. 

According to Nielsen figures reported by the Organic Trade Association in 2016, 82% of U.S. households surveyed reported buying some organic products. Last year, a research report from Rabobank​ found retail organic food sales in the U.S. reached $47.9 billion in 2018. While new sales records were expected to continue for the foreseeable future, growth had already started to moderate. The ongoing pandemic could slow that even more. 

Mercaris, which is a market data service and online trading platform for organic, non-GMO and certified agricultural commodities, also said in the report there could be challenges with production and the supply chain for organic foods. The report found ​U.S. organic commodity imports may need to change because of port closures and potential global currency fluctuations through 2021.​

Producers of organic grains and other food products are largely safe from short-term disruptions due to the pandemic because most crops have already been planted for the 2020 growing season, Mercaris​ said.

But organic producers also may have issues with the closure of livestock processing facilities and labor shortages. Many meat processing plants have already closed temporarily or indefinitely as the coronavirus has hit workers, and some companies have warned of potential shortages as a result. 

Despite the pandemic’s short-term boost to organic sales, the outbreak may end up doing more harm than good for this category. Organic producers, farmers and analysts will need to keep a close watch on the impacts to the market not only during the outbreak, but long after.

“Taking stock of these risks is crucial as we look to understand the market in the year to come and navigate this unprecedented event,” Koory said.

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