JUSTIFICACION Y PLANTEAMIENTO DEL PROBLEMA.

Agricultural and Food Marketing, Faculty of Organic Agricultural Sciences, The University of Kassel

Introduction

In analysing the European market of organic products, the main problem is that no official statistics exist about production, consumption and international trade. The following contribution is based on data collected within the research project Organic Marketing Initiatives and Rural Development (OMIaRD) financed by the EU within the Fifth Framework Research and Technical Development Programme. Data on production, consumption, foreign trade, farmer and consumer prices were collected by national experts for all EU countries plus the four non-EU- members Czech Republic, Norway, Slovenia and Switzerland for the years 2000 and 2001. All data presented in this contribution are preliminary data, because the data evaluation has not yet been completed.1

Organic land area and livestock production

Before analysing the production from organic livestock it is useful to look at the development of the organic area as a percentage of the total utilisable agricultural area (UAA). Figure 1 shows that there was a remarkable growth of the share of the organic area between 1993 and 2001 in all countries surveyed, however with very different growth rates. The EU average for the organic area of 3.4 percent of the UAA in 2001 has been far exceeded in Switzerland, Austria, Italy, and the three Scandinavian EU member states, Finland, Denmark and Sweden.

Table 1 shows that the organic animal production in the EU is at a comparatively low level with around 2 percent of the total production for beef and milk, between 1 and 2 percent for sheep and goat meat and eggs, and 0.3 percent for pork and poultry. The figures from the milk column display Austria and Denmark with an organic percentage of more than 10 percent, these two nations stand for half of the total organic milk production in the EU, even though they are comparatively small countries, but with a large organic sector. While the clear leader in organic beef production is Germany standing for 30 percent of the organic beef production in the EU, the highest share of organic beef production of the total beef production was measured again in Austria with nearly 10 percent. Organic sheep and goat meat production reached double-digit percentages of total production in Austria and Finland. However, in these countries, conventional production is at a low level and sheep are mainly used for landscape conservation in environmentally less favoured areas.

1 _{If any reader of this contribution knows statistical data for countries where no data (nd) is listed or if a reader has different statistical data, the}

Figure 1: Development of organic area as a percentage of total UAA between 1993 and 2001

Source: Hamm and Gronefeld (2003)

Table 1: Organic share of total production in 2001

Country Milk Beef

(incl. veal)

Sheep and goat

meat

Pork Poultry Eggs

AT (8.7) 12.7 9.6 25.0 0.5 0.5 3.3 BE (1.6) 1.2 1.0 2.2 0.1 0.3 0.5 DE (3.7) 1.5 3.2 6.5 0.4 0.7 1.6 DK (6.6) 10.4 4.4 6.7 0.3 1.5 10.0 ES (1.7) 0.1 2.2 2.1 0.0 0.0 0.0 FI (6.7) 1.0 0.8 15.7 0.5 0.1 2.7 FR (1.4) 1.0 2.2 1.4 0.2 0.4 2.1 GR (0.8) 0.5 1.2 1.1 0.1 0.0 0.1 IE (0.7) 0.1 0.9 0.4 0.0 nd 0.4 IT (7.8) 1.9 1.6 0.0 0.2 0.1 0.7 LU (1.6) 0.5 0.4 5.9 0.6 9.2 2.3 NL (1.9) 1.0 0.3 1.4 0.1 0.1 0.4 PT (1.8) 0.1 0.2 0.2 0.1 0.0 0.0 SE (6.5) 4.0 2.8 4.8 0.6 0.2 3.0 UK (4.3) 1.5 0.7 0.8 0.4 0.2 1.6 EU (3.4) 1.9 2.2 1.6 0.3 0.3 1.3 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% AT IT FI DK SE UK DE ES NL PT BE LU FR GR IE EU CZ SI CH NO 1993 2001 EU countries Acces- sion EFTA EU av.

Organic pork and poultry production is at a very low level in all surveyed countries apart from organic poultry production in Luxemburg where one huge farm is responsible for the high organic share of poultry production. The main reasons for the low percentages of organic pork and poultry production of the total production are relatively high costs of production due to strict regulations for organic husbandry and high costs for organic cereals and oilcakes, so that high consumer price premiums for organic pork and poultry clearly limit the demand. Even though these arguments are the same for eggs, the organic share of the total production is much higher for eggs in all surveyed countries, except Luxemburg. The main reason for the higher organic percentage of eggs lies on the demand side. Demand for organic eggs and the willingness of consumers to pay high price premiums for organic eggs is much higher than for meat. Apart from this, high percentages of organic egg production is taking place in small holdings where the additional costs of the organic production are not as high and from where most of the eggs are sold directly to consumers.

Share of organic products sold as organic

A very important indicator for the success of the organic sector of a nation is the share of organic products that is sold as organic, normally with price premiums for the organic origin. If a greater amount of the organic production must be sold as conventional, normally for conventional prices, this lowers the profitability of organic farms. Table 2 shows that there are sales problems for organic sheep and goat meat, milk and beef in most of the European countries, while clearly more than 90 percent of the EU production of organic pork, poultry and eggs were sold as organic in 2001. The commonness of all organic animal products with sales problems is that their production is based on grassland.

Table 2:Share of sales sold as organic in 2001

Country Milk Beef

(incl. veal)

Sheep and goat meat

Pork Poultry Eggs

AT 54 60 30 97 92 83 BE 100 75 85 100 95 100 DE 82 70 60 97 100 95 DK 31 33 60 75 100 100 ES 60 20 20 90 90 80 FI 100 65 90 75 34 90 FR 87 100 100 100 100 100 GR 40 50 92 100 100 90 IE 100 50 90 100 nd 100 IT 100 60 nd 97 95 100 LU 65 100 50 100 100 100 NL 100 100 90 100 100 100 PT 30 80 80 90 100 100 SE 75 90 100 100 100 100 UK 65 95 80 85 100 90 EU 68 69 54 94 99 97

Organic land use, subsidy structure and imbalances in livestock production

Looking at the organic land use in the EU (see Figure 2), it is obvious that EU-wide a much higher percentage of grassland was converted to organic than arable land. While the total UAA in the EU consists of only 33 percent of grassland and 56 percent of arable land the relation between grassland and arable land for the organic area is nearly opposite: 57 percent grassland and 30 percent arable land. Obviously, it was more attractive for farmers in grassland regions to convert their farms to organic agriculture than for farmers with a high percentage of arable land. This leads to the question of the EU support scheme for organic agriculture by paying area-based premiums for the conversion to and the maintenance of organic agriculture.

Figure 2: Organic land use in 2001

Source: Hamm and Gronefeld (2003)

In several EU countries (Finland, Ireland, Italy, Luxemburg and Portugal) the premiums for conversion are equal for arable land and grassland, although it is known that the costs of conversion are much higher for arable land than for grassland. There are even two EU countries, Denmark and Spain, which have higher payment rates for a conversion of grassland than for

0 10 20 30 40 50 60 70 80 90 100 B U L A I F S N D D I E F P G EU EU

arable land. Only in France and Sweden are the area-based premiums for a conversion of arable land more than double as high as for grassland, whereas in all countries not mentioned above the premium for arable land is much lower than 50 percent compared with grassland.

The sales problems for grassland-based organic products have even led to significant re- conversions of farms from organic to conventional in the last few years, especially in Austria, but also in some parts of Germany. It is to be expected that farmers in other European countries with greater sales problems for organic milk and beef will follow, so in Denmark, Sweden and the UK. On the other hand, there are several EU countries reporting that the demand for organic pork, poultry or eggs was higher in 2001 and 2002 than supply (including imports), so for pork in Austria, Belgium, Germany, Spain, Finland, Greece, Luxemburg, Portugal and Sweden, for poultry in Germany, Greece, Luxemburg, Portugal and Sweden and for eggs in Spain, Portugal, Sweden and the United Kingdom. It should also be mentioned that there were some EU countries with a supply deficit for milk (Spain, Finland, France, Greece), for beef (Spain, Finland, Greece, Luxemburg) and sheep and goat meat (Spain, Greece, Portugal). Obviously, trade between EU countries was not able to remedy these supply deficits, although there are some countries with a supply surplus and sales problems at the same time. The reasons could be due to a lack of market transparency or to high transport costs for small amounts of organic products. It is also remarkable that there are a lot of countries expecting supply deficits for animal products in future, above all for pork. Supply deficits were also foreseen for animal feed, especially for leguminous fodder crops and feed mixture.

International trade for organic animal products in total is on a very low level compared with organic plant products. The only animal product group of significance is milk and milk products where Austria, Germany, Denmark and the Netherlands are the main exporting countries while France and Italy are the main importing countries. Main beef exporters are Germany and Austria, main beef importers are the UK, Italy, France, the Netherlands and Belgium. Of the non-EU- member countries, the Czech Republic and Argentina supply some EU countries with beef. Foreign trade for sheep and goat meat as well as for pork, poultry and eggs is on a very low level with amounts of much less than 10,000 tons for all surveyed countries together.

Share of food consumption and sales

Table 3 reports the figures for the organic share of total food consumption for animal products. Due to sales problems of organic products and a different (compared with the conventional trade) share of foreign trade these data are quite different from the production share in many countries. The organic share of total food consumption is highest for beef with 1.7 percent. Organic beef was one of the winners from the BSE-crisis in 2000 and 2001 which has strongly pushed demand for organic products in many countries, while the demand for conventional beef sharply declined at the same time. Combining both developments, the share of organic beef on total beef consumption has increased by 50 percent and more in many countries.2 A comparably high share for organic beef 2001 was registered in Austria and Germany.

2 _{However latest data from consumer panels in some countries show that in 2002 and 2003 the demand for} conventional beef turned upwards again and there has been no more growth for the demand of organic beef.

Table 3: Organic share of total consumption in 2001

Country Milk Beef

(incl. veal) Sheep and goat meat Pork Poultry Eggs

AT 6.0 6.6 4.8 0.5 0.3 1.9 BE 1.5 1.4 0.3 0.3 0.4 1.0 DE 1.2 3.4 1.5 0.3 0.5 1.6 DK 10.1 1.8 0.9 0.7 2.4 8.8 ES 0.0 Nd 0.4 nd 0.0 0.0 FI 1.0 0.5 5.8 0.4 0.0 2.6 FR 0.7 2.2 0.8 0.2 0.4 1.6 GR 0.2 0.3 0.9 0.0 0.0 0.1 IE 0.1 1.6 1.3 0.0 nd 0.4 IT 1.3 1.0 0.0 0.1 0.1 0.7 LU 1.6 0.6 0.5 0.5 1.0 5.2 NL 1.6 0.7 1.1 0.3 0.3 0.6 PT 0.0 0.1 nd 0.0 0.0 0.1 SE 2.8 2.1 1.9 0.5 0.2 3.0 UK 1.0 0.8 0.5 0.3 0.3 1.4 EU 1.2 1.7 0.7 0.3 0.3 1.3

The share of organic consumption of total food consumption for eggs and milk, which was between 1 and 1.5 percent in the EU in 2001, reached comparably high percentages in Denmark with 10 percent for milk and nearly 9 percent for eggs. The organic consumption share of sheep and goat meat differs strongly between the EU countries. In countries where the total consumption of sheep meat is very low, as in Austria, Finland and Sweden, the organic share is relatively high, whereas in EU countries with a high consumption of sheep meat, e.g. the UK, Spain or France, the organic share is relatively low. The organic share of total food consumption for pork is very low in all EU countries; in no country was a share of at least 1 percent registered. With regard to poultry a consumption share of 1 percent or more was only reached in Denmark and Luxemburg. Supply deficits and high consumer prices have limited the demand for pork and poultry in many countries.

Figure 3 shows the organic share of total food sales in 2001. The data about total food sales contain all organic products, not only the above mentioned product groups, but also plant products, beverages, sweets etc. In Europe there have been two clear leaders in organic food sales in 2001, Switzerland and Denmark reporting 3.7 and 3.5 respectively of the total national food sales. Austria, Germany, Sweden and the Netherlands have also organic shares above the EU average of 1.1 percent, while the Mediterranean countries Spain, Greece and Portugal have organic market shares much below 0.5 percent. In these countries, the domestic organic markets are in their infancy and a lot of organic products are exported to Northern and Central European countries.

Figure 3: Organic share of total food sales in 2001

Source: Hamm and Gronefeld (2003)

Conclusions

As mentioned before the data evaluation and analysis has not yet been completed. It has to be analysed whether the main influence factors on the amount of organic demand are still the same in 2001 as in our analysis for the year 2000 (Hamm et al., 2002). In our previous study the demand for organic products was positively influenced by a high share of total organic food sales through general food shops (conventional supermarkets), by a high share of consumers knowing a common or national label for organic food products, and by low consumer price premiums for organic products over conventional products.

However, some conclusions for the further development of the organic market for animal products can be drawn from the first results of our analysis. There are a number of marketing problems limiting the further market development:

• unbalanced developments of supply and demand in many countries, especially for the grassland-based animal products milk and beef,

• a very low market transparency so that important market signals are not reaching market actors in time

• quick changes in market situations because of the small volatile markets and because of food scandals in the conventional and in the organic sector with huge influences on the short-term development of demand.

0 0.5 1 1.5 2 2.5 3 3.5 4 DK AT DE SE NL BE FI LU UK FR IT IE ES GR PT EU CH CZ

Required actions to overcome the marketing problems and to support the further development of the organic animal sector are:

(1)constitution of a European market information system for organic products with up-to- date market data (esp. producer and consumer prices) and data allowing short and medium-term forecasts about the development of production (esp. data about the production of newly converted farms)

(2)adaptation of support policy for conversion of farms to the market situation by the amount of area-based subsidies (for grassland, arable land, horticultural land) and by a new support policy for the cereal-based animal production (e.g. credits for rebuilding of housing units)

(3)more research in all areas of organic animal production and marketing of their products References

Hamm, U., Gronefeld, F. and Halpin, D. (2002): Analysis of the European market for organic food. Organic marketing initiatives and rural development vol. 1, School of Management and Business, University of Wales, Aberystwyth, UK.