DEMANDING MORE SUPPLY

The appetite for many organic commodities and ingredients is already exceeding the supply, forcing product makers to carefully guard relationships with their growers. Domestic growers, meanwhile, are pulling all they can from the ground, and embarking on the expensive, three-year conversion process required for organic production.With Wal-Mart Stores now muscling into the movement, something's got

The appetite for many organic commodities and ingredients is already exceeding the supply, forcing product makers to carefully guard relationships with their growers. Domestic growers, meanwhile, are pulling all they can from the ground, and embarking on the expensive, three-year conversion process required for organic production.

With Wal-Mart Stores now muscling into the movement, something's got to give, and experts say that change will most likely come in at least one of three forms: increased importation of organics; an improved stateside farm transition program, possibly including a U.S. Department of Agriculture "transitional" label; or a relaxation of standards.

"My sense is that this is going to lead to an acceleration of the global trade in organics," said Bob Scowcroft, executive director of the Organic Farming Research Foundation, noting that companies including Trader Joe's already source many organic ingredients from China for their private-label brands (see related story on Page 8).

To ramp up domestic production, many organic farmers and suppliers are hoping that the USDA will help incentivize organic transition with legislation in the 2007 Farm Bill. The Organic Trade Association, for example, is working on a rider that would, among other goals, establish organic production targets and create an organic affairs office within the USDA.

Another possibility is a "transitional organic" label, which would allow products to be marketed as a type of second-tier, less expensive organic item during the three-year farm conversion period. This label might also help foster long-term contracts between conventional growers who wish to become organic, and manufacturers or retail buyers, such as Wal-Mart.

A USDA transitional label is an idea that most industry advocates once supported, although it is widely agreed that the agency has made implementation a much more formidable challenge by waiting until now to consider it. Oversubsidizing or providing too generous incentives for transition at this point could potentially lead to a spike in production and a crash in the premium demanded for some organic commodities, hurting existing farms and suppliers.

"It would also require significant new resources for a program that is just beginning to settle into a routine, and there would be major concerns about enforcement [of standards]," said Tom Hutcheson, associate policy director for the OTA.

Regardless, with Wal-Mart now embracing the organics category, a new tipping point has clearly been reached, and the industry is in for a bumpy future short of a shift in public policy or innovation within the private sector.

"Demand is just going to keep increasing," said Ronnie Cummins, executive director of the Organic Consumer's Association. "Companies like Wal-Mart could really make a difference by signing long-term supply contracts with domestic farmers and ranchers that are working to become organic. Otherwise, we're heading down a road of increased imports and relaxed standards, because there just isn't enough supply."