Factors keeping the cost of organic foods high include the lack of government subsidies and higher costs for labor, fertilizer and transportation. Organic farmers have also struggled to keep up with the growing demand for certified organic foods.
Government Subsidies for Conventional Farms
The U.S. government hands out billions of dollars in agricultural subsidies every year to conventional farmers. The controversial Farm Bill is routinely reauthorized by Congress every five to seven years. The subsidies included in the bill help farmers offset production costs and insure potential losses while guaranteeing the availability of staple crops such as corn and soybeans. With the 2014 renewal of the Farm Bill, officially called The Agricultural Act of 2014, organic and sustainable farmers receive funding for production and research but not nearly as much as conventional farmers.
Without the use of cheap chemical pesticides, organic farmers must tend to their crops much more extensively than conventional farmers. Most organic crops are weeded by hand and those hands need to be paid fair wages.
Synthetic growth hormones, common in conventional agriculture, cannot be used to grow organic food. Organic food takes longer to grow and the product is normally smaller than comparable conventional food. Output is therefore limited and economies of scale are much more difficult to achieve for organic farmers relative to larger scale, production-minded conventional farms.
To meet United States Department of Agriculture (USDA) organic certification standards, organic farmers cannot use inexpensive synthetic fertilizers. Conventional farmers typically use sewage sludge and chemical fertilizers, which are cheap and easy to transport. Organic farmers use composted natural materials or manure for fertilization, which is more expensive and difficult to transport.
Higher Costs for Livestock
Any fee d given to organic livestock must be 100% certified organic, substantially raising feed costs for organic livestock farmers. The abundance of inexpensive corn-based feed helps keep costs low for conventional livestock farmers.
The living conditions for organic livestock also significantly raise costs for organic farmers. Livestock must be raised on certified organic land with year-round access to the outdoors, shade and indoor shelter. The lack of hormones and antibiotics protecting against disease also decreases the yield of organic livestock farmers. USDA requirements regulating feed, living conditions and the health of organic livestock are strict and specific and can be difficult to follow. As a result, not all animals are guaranteed to be certified organic, resulting in more losses for farmers.
Supply and Demand
The demand for organic food has skyrocketed, and there is simply not enough product to go around. According to the USDA, the sales of organic food were over $35 billion in 2014, a rise of 11% over the previous year. This exploding demand in the market has led to a dramatic increase in the number of certified organic farmers, increasing supply and helping lower costs to consumers.
Large Retailers Go all in
Some of the most profitable grocery stores in the United States have jumped in to the expanding market. With Walmart and Kroger offering a wide variety of organics, the industry is expected to see dramatic changes. Larger farms are capitalizing on the sudden availability of retail shelf space by ramping up organic production, increasing the supply to the market.
Organics Are Here to Stay
Once seen as just a fad, organic foods have become mainstream as health-conscious consumers demand their food be produced more responsibly. Consumers are more informed than ever and want to feel good about the food on their tables by holding food producers more accountable. In many markets around the country, it is already possible to find certified organic food that is cheaper than conventional products. Most economists believe the trend of falling prices for organic foods will continue as long as the food continues flying off the shelves.