Just how much of a premium will you pay for organic food?

If you're in the organic livestock or bakery industry, this is the million dollar question these days. With rising prices of corn, soybeans, and wheat, some organic enterprises are feeling the crunch of unforeseen market prices: $10 per corn bushel and $20 per soybean and wheat bushel was unheard of until recently.

The current situation is grand for the organic grain producers reaping record prices, but disastrous for buyers whose profit margins are thinning. Not only must these buyers charge more for their eggs, meat, and bread, they fear consumer rejection due to sticker shock. And higher food prices often don't make up for the increased feed costs.

The price of organic feed has even forced some dairy producers to leave organic production altogether, citing feed costs more than double conventional prices.

And it's no surprise that current prices have also slowed the transition of land into organic production. The incentive isn't as high to leave conventional corn production, for example, now that prices are exceptionally high for conventional grain, too.

Some shoppers might balk at higher organic food prices, reaching instead for conventional counterparts of their favorite organic brands. But the reasons behind high organic food prices are not black and white given the circumstances of the market, such as more land dedicated to biofuel production. Organic livestock producers who are paying unprecedented feed prices can't afford to simply absorb higher costs. Sharing these costs with consumers is the only way to ensure they receive a fair price and survive this unusual market.

To be sure, not all organic producers will feel the crunch. Those that rely on a shorter supply chain will become even more attractive as fuel costs continue to rise. And those who raise grass-fed livestock rather than grain-fed are immune to these higher feed costs, so local producers not dependent on grain will be charging prices on par with conventional, sourced-from-afar food.

Even state and federal government agencies are acknowledging the benefits of local food purchases. Get this: they're encouraging institutions (like schools and hospitals) to consider geography and not just price when making food contract decisions.

Now that's a sign of the times.

Source: The New York Times

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Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved.