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October-December, 2006

Organic Agriculture
and Food Industry:
Trends, Challenges and Opportunities
K. Muthukumaran*

Production
Estimating area under organic agriculture in India
is a difficult task as there is no central agency
that collects and compiles this information.
However, according to National Program for
Organic Production (NPOP), APEDA, the total
area under certified organic cultivation in India
is around 2508826 ha, which includes wild herbs
collection from forest area of Madhya Pradesh
(MP) and Uttar Pradesh (UP) of 2432500 ha. The
current production of organic crops is around
14,000 tons (Garibay S V and Jyoti K, 2003). Out
of this production, tea and rice contribute around
24% each, and fruits and vegetables combine
makes 17%.

Table: Major products produced in India

by organic farming

Organic Agriculture in India

Type of Product

Products

Organic cultivation is particularly suitable for a

country like India with a huge population of small
farmers who still use traditional methods of farming
with few agricultural inputs. It is estimated that 65%
of the countrys cropped area is organic by default,
as the small farmers have no choice but to farm
without chemical fertilizers and pesticides as they
cannot afford. This default status coupled with Indias
inherent advantages, such as, its varied agro-climatic
regions, local self-sustaining agri-systems, sizeable
number of progressive farmers and ready availability
of inexpensive manpower translate into the potential
to cultivate a vast basket of products organically.

Commodity

Tea, Coffee, Rice, Wheat

Spices

Cardamom, Black pepper, White pepper,

Ginger, Turmeric, Vanilla, Tamarind, Clove,
Cinnamon, Nutmeg, Mace, Chili

Pulses

Red gram, Black gram

Fruits

Mango, Banana, Pineapple, Passion fruit,

Sugarcane, Orange, Cashew nut, Walnut

Vegetables

Okra, Brinjal, Garlic, Onion, Tomato,

Potato

Oil seeds

Mustard, Sesame, Castor, Sunflower

Others

Cotton, Herbal extracts

Source: Org-Marg, 2002 (Field Survey & Publication Organic and

Biodynamic farming, Govt. of India, Planning Commission)

*Chief General Manager, EXIM Bank, Chennai

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October-December, 2006

Export Market

Percentage share of organic products in India

Organic agricultural export market is one of the major drivers

of organic agriculture in India. India exports 31 organic
products. It is estimated that more than 85% of total organic
production, excluding wild herbs from UP and MP, is
exported. India is best known as an exporter of organic tea
and also has great export potential for many other products.
Other organic products for which India has a niche market
are spices and fruits. There is also good response for organic
rice, vegetable, coffee, cashew, oil seed, wheat and pulses.
Among the fruit crops bananas, mangos and oranges are the
most preferred organic products.
Indias organic export products include, tea, honey, cashew,
cotton, processed fruits, coffee, basmati rice, sesame, spices,
walnuts, pulses and wheat. Key organic items of export
importance are fruits and vegetables, sesame, basmati rice,
fruit pulp, fruit juices, spices, cashew, tea, coffee, cotton and
wheat. India has production advantages in most of these
products.

Source: APEDA 2003

Indias products and production areas

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October-December, 2006

Domestic Demand

Constraints and Challenges

The domestic market is nascent but has huge growth potential.

Presently the domestic market for organic products are
estimated at 1,200 tonnes and there are around 2-3 million
potential customers for organic agricultural produce and is
growing.

Though there is rising interest for organic agriculture in India

it is not growing at a pace to enhance its market attractiveness
so as to motivate larger section of farming community to
opt for organic agriculture. The flowchart below provides
some of the key factors limiting organic agriculture in India
in a nutshell.

Low levels of Market information

about organic produces

No designated agency at Central

State & local levels which reaches
farmers with information

No Quality Monitoring
Control Systems in place
Existence of spurious & low
quality brands in market

Low Quality of bio-inputs

Conventional Agri-inputs
considered more effective than
Bio-inputs

Disincentive for traders given

the low penetration of bioinputs market

Non-availability of bio-inputs

Limited Shelf life of bio-inputs

Relatively longtime period needed
for bio inputs to be effective
Time lag & high costs of
conversion of Conventional to
organic farming

Limited
Penetration of
Organic
Agriculture in
India

Subsistence farming by large number

of small & marginal farmers
High Costs involved certification &
limited no. of certifying agencies

Limited positive government

interventions & high negative
subsidies

Price premiums reach more for

Intermediaries than producers

No easy quality
assurance mechanisms
Lack of adequate
transportation facilities

Low levels of networking among

farmers and other stakeholders

Subsidies to commercial inputs

disincentiviaing bio-inputs
Limited financial outlays for
bio-inputs by government

No & limited Storage facilities

Under developed infrastructure
& marketing channels for
green outputs

Limited R & D efforts &

investments on Bio inputs

No strategic attention for

greening agriculture & No
coordinated effort at Centre &
State Level

Small farm holdings

Formal associations of traders,
farmers & others are
not paying adequate attention
Mostly geographically dispersed
organic farmers; Small numbers
with organic produces

Among the constraints listed above, current high levels of transaction costs for getting farms certified as organic is a major
deterrent for enhancing organic production in the country. The certification process is very lengthy and complex and the
cost of certification (refer Table in the next page) is also unaffordable for small farmer.

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Table: Cost of inspection and certification

Category

Details

Fees (Rs)

Small farmers and

cooperatives

Travel and inspection report

preparationCertification

12,000/day
5,000 flat fee
5,000/certificate

Estate manufactures and

exporters

Travel and inspection report

preparation Certification

19,200/day
5,000 flat fee
5,000/certificate

Large and medium sized

processors

Travel and inspection report

preparation Certification

16,800/day
5,000 flat fee
5,000/certificate

Source: Org-Marg, 2002

Markets of Organic Food

The organic food industry has been growing remarkably for
the past several years. Against the 2-3% growth in the
conventional food industry, the organic food industry has
been experiencing an annual growth between 17% and 22%
over the past several years. Global retail organic food sales,
valued at USD 25 billion in 2003,
are currently worth USD 31 billion
and growing at over 20% per
annum. The same is estimated to
increase to USD 102 billion by
2020. Organic agriculture is now
practiced in approximately 110
countries and its share of
agricultural land and farm
continues to grow.
The major markets for organic food products are in the United
States, the European Union (Germany, France, Italy, Belgium
and the United Kingdom), and Japan. The annual market
size of natural and organic products in the US is estimated to
be anywhere between USD 16.3 29.7 billion. In 2005,
retail sales of organic food and beverages were approximately
USD 12.8 billion. Growth rate estimates up to 2010 range
between 9% and 16% per annum. A part of the US demand
is met from imports. In 2002, the import of organic foods
into the US was about USD 1.5 billion. The EU organic market
grew rapidly through 1990s by a range 20% and 40% per
annum, but currently the growth has slowed down because
the number of regular organic consumers has stabilized.
Retails sales grew from USD 10.5 billion in 2002 to USD 12

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billion in 2004, at a growth rate of 5% per annum. Germany

is the second largest market for organic food and drink in the
EU, which accounts for almost 30% of total organic sales
valued at USD 3.7 billion in 2003, followed by the UK, which
achieved estimated retail sales of USD 1.6 billion. Italy and
France organic markets, each valued at approximately USD
1.5 billion. The French and the UK
markets have grown on an average
of more than 40% annually since
2001.
Among the more significant
countries producing organic
products in Asia are China,
Ukraine, India, Indonesia and Israel
(mainly dried and fresh fruits and
vegetables and nuts). Japan is the
largest consumer of organic
products in Asia. The market was estimated at USD 350-450
million in 2003 and is growing at 20% per annum. The
Japanese organic market is characterized as one with high
demand, strong purchasing power, and low domestic supply
of organic products. On the supply side, the value of Chinese
exports grew from less than USD 1 million in 1990s to about
USD 142 million in 2003. By 2003, more than 1,000 Chinese
companies and farms were certified organic.

Challenges and Opportunities

Markets in developed countries are evolving to demand highly
processed organic products as well as raw commodities.
Supply competition is inevitable. As production is
widespread, most of the raw commodities are now available

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in organic form. In Europe, markets are increasing for readyto-eat meals, frozen foods, baby food, snacks and beverages.
Ingredients needed for organic food processing include juices,
fruit powders, dried fruit, meat, flavourings, essential oils,
herbs and spices and nuts. In Japan, organic consumer goods,
which are in growing demand, include fresh produce, frozen
foods, juice, baked goods, baby food, chicken, sauces and
ready meals. New Zealand has emerged as a significant
supplier of organic foods lately.

Organic Meat: Key Emerging Markets

Market research reports reveal high market growth for the
organic meat sector as consumers fear for food safety raises
demand for organic meats. The BSE scare caused the
Canadian market for organic meat products to expand by
35% in 2003. Similar growth was expected for the US market
from 2004 as organic meat production steps up and as more
volume goes into the retail trade. Organic poultry was the
most
widely
available organic
meat in 2003
with organic beef
and pork rarely
found in retailers.
Currently the
organic meat is
less than 1% of
the overall USD 175 billion US beef market. However,
interests on organic meat are high among the consumers in
US with the Organic Trade Association, in Greenfield,
Massachusetts, projected a 175 % annual growth rate for
organic meat by 2005.
The organic poultry segment dominates the North American
organic meat products market. Relatively short production
cycle, integrated production system, and low price premium
are responsible
for the trend. Organic beef in
comparison is rarely found in
retailers because of small-scale
production,
inadequate
distribution infrastructure, and the
success of competing products like
natural beef. The European organic
meat products market has been
growing at over 20% a year since late
1990s and has lately slowed down to 10%.
The market is becoming increasingly
competitive as many countries are

October-December, 2006

suffering from oversupplies. Organic meats are mostly

marketed under supermarket private labels, which account
for over 80% of fresh cut sales. Brands are more evident on
organic processed meats.

Organic Citrus and Citrus Juices: World Market

Review
Citrus products labelled as organic are those certified as
having been produced through clearly defined organic
production methods.

Fresh Organic Citrus

Production : World production of certified organic citrus in
approximately 30 countries was about 600,000 metric tons
in 2001 accounting for 0.6% of total citrus production.
Organic citrus is produced in a majority of citrus producing
countries in the Americas, the Caribbean, the Mediterranean
rim, Africa and
Asia. The largest
producing
countries are, by
decreasing order
of importance:
Italy, the United
States, Brazil,
Costa
Rica,
Greece and Spain.
Markets : The European Union (EU) market for both certified
organic fruit and vegetables was estimated at US$ 1.7 billion
in 2002, with fresh organic citrus representing 5-7% of all
fresh fruit and vegetables sales and 37% of all organic fruit
sold. However, consumption of fresh organic citrus in the
EU is still relatively low compared with overall fresh fruit
use. Some of the constraints responsible for this trend and
need to be addressed are poor fruit quality, packaging, short
shelf life of organic citrus and inefficiencies in the marketing
chain.
Survey of main markets within the EU reveals that selected
EU countries imported approximately 48-50,000 tonnes of
fresh organic citrus in 2000-01 with Germany, France, the
UK and Austria being major importers. Austria and Denmark
have the highest per capita consumption of organic products
in general. The fresh citrus import market in the Netherlands
is unique because this country is a key entry point, reexporting imported citrus to other EU countries, partially due
to less complicated organic import procedures than other
EU countries.

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Table - Estimated net imports of fresh organic

citrus in selected EU countries (2000-01)
Importing
Country

Exporting
Country

Metric
tonnes

Austria

Spain, Greece, Israel

7-8,000

Belgium

500 - 1.000

Denmark

Spain, Italy

2,000

France

Italy, Spain, Israel,

South Arica

9,000

Germany

Italy, Spain

13,000

Netherlands

7,000

Sweden

Spain, Italy

500-1,000

UK

Italy, Spain

8,000

Finland

Spain, Italy

500

Ireland
Luxembourg

500

Total

Organic Citrus Juice

48-50,000

Fresh fruit and vegetables are the leading organic food

category in the United States retail food market. Organic
oranges are among the most consumed organic fruit, together
with apples and bananas. The US is a major citrus producer.
Production in 2001-02 was 14.7 million tonnes, however, a
very small share of the citrus harvest is grown organically.
The US imports small quantities of organic citrus mainly from
Mexico (oranges and limes), Honduras (lemons), Guatemala,
Brazil (oranges) and South Africa (oranges and grapefruit).
In general sale of fresh organic fruit and vegetables is very
small in Japanese markets. Japan produces small quantities
of organic mandarins. The lack of domestic supply of organic
citrus is compounded by tough Japanese organic Agricultural
Standard (JAS), phytosanitary restrictions and high ad valorem
tariffs on imports of fresh citrus, currently about 0.1-0.2% of
the total citrus market.
Prices : Fresh organic
citrus prices in EU vary
with
seasonal
availability of fruit,
market location and
type of retail outlet.
Prices of imported citrus
are generally higher
during the off-season for
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EU citrus production. On an average, fresh organic citrus

sells for 65% higher than conventionally grown citrus,
however, premiums range from 17% in Greece to 144% in
Finland. Organic citrus is also cheaper in countries where a
substantial share of organic produce is sold in supermarkets
rather than smaller health food stores. In the US, the premium
for organic versus conventional fresh produce generally ranges
from 11% to 121% in the conventional stores and from 50 to
167% in the natural food market.

The bulk of organic citrus juice consists of orange juice. Juice

volumes of other organic citrus products such as organic
grapefruit juice (e.g. in Cuba, Israel and the United States)
and lemon juice (Argentina, Spain) have been very low so
far. Orange juice is marketed in two main forms: frozen
concentrated (FCOJ) and not-from-concentrate (NFC), with
recent sales for NFC increasing more than that of FCOJ.
Markets : The main markets for all organic fruit and vegetable
juices combined are the UK, Germany, Italy, France and
Scandinavian countries with retail sales increasing more than
20% per year since 1998. The present EU market for organic
juice in general is only 0.57% of the total EU juice market.
Organic citrus juice accounts for only 0.3% of total citrus
juice consumption. Brazil is the largest supplier of FCOJ for
the EU, followed by the USA, Cuba, Israel and Costa Rica.
Highly competitive in the conventionally produced FCOJ
market, Brazil is expected to maintain this lead in the organic
FCOJ market.
The US is the largest market for orange juice
in the world. The bulk of US orange juice
is produced in Florida, where production
is split almost equally between FCOJ and
NFC juice. In addition to its domestic
supply, the US imports organic citrus
juices, mainly from Mexico and
Brazil. The tariff on concentrated
citrus juice imports ranges
between 34 and 38% in ad
valorem equivalent. The tariff on
non-concentrated citrus juice is
much lower (below 5% in ad
valorem equivalent). Japan is the
third largest market for citrus
juices after the US and the EU.
Japan consumed over 635,000

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tonnes of citrus juices in 2000, 70% of which was imported.

Japan imports organic FCOJ from Brazil and organic NFC
juice from the US.

Market Prospects
Fresh Organic Citrus
The EU market for fresh organic oranges, tangerines and
lemons is dominated by Italy and Spain. However, with the
two countries remaining the main supplier of organic citrus
in the EU, other marketing opportunities will fall to those
with preferential trade agreements with the EU, with fruit
available from May to September when EU local production
is low or absent. There are also opportunities for exporting
organic grapefruit and limes which are short in supply. There
are more opportunities for fresh citrus exports to the US and
Japan. Although the US produces organic citrus, demand may
exceed supply and its import tariffs on fresh citrus are very
low. The Japanese market for fresh organic citrus also offers
interesting prospects if exporters can meet the new JAS organic
regulations and the tough phytosanitary requirements. Given
its large population with a relatively high per capita income
and focus on health concerns, conservative estimates predict
Japans organic market for fresh organic citrus fruit could grow
to mature market potential of 3-5% of the total citrus market
by 2010.

Organic Citrus Juice

The market for organic citrus juices is presently extremely
small. FAO has projected the volume of organic citrus juice
consumption in the world until 2010 using 2 different growth
scenarios. Based on the observation of past growth for other
organic product categories, the first scenario assumes the
market for organic orange to grow up to 40% and then
gradually decreases to 10% in 2010. In the second scenario
consumption grows at 20% annually until 2006. Then, annual
growth decreases gradually to reach 10% in 2010.
Brazil is the largest supplier of fresh citrus organic juices
(FCOJ) and is expected to retain its lead in the organic FCOJ
market. For other developing countries located near the main
markets, producing citrus juices and exporting organic NFC
juice, may be a better option. Distance to markets matters
more for NFC juice than for FCOJ due to the higher
transportation costs of NFC. Due to the relatively high tariffs
on orange juice, countries, which enjoy preferential trade
agreements with the major markets, will have a comparative
advantage. However, for exporters seeking to supply organic
citrus and citrus juices to the developed countries major

October-December, 2006

considerations should include (i) ability to meet specific

requirements of the target market (phytosanitory
requirements, quantity and quality, packaging, consistency,
and scheduling deliveries), (ii) profit margins in terms of
production costs and various price premium scenarios, (iii)
targeted market tariffs and preferential market access
agreements, and (iv) target market acceptance of organic
certification.

Key Developments and New Opportunities

Organic farming has been identified as a major spearhead in
the Tenth Five Year Plan (2002-2007) and is expected to be
one of the focus areas to boost agricultural growth in the
Eleventh Five-Year Plan (2007-12) of the Indian government.
In a recent development, Indian organic certifying bodies
will be soon receiving European Commission (EC)
equivalence status exempting Indian organic products from
further certification by European agencies, which likely to
bring down the cost of organic exports and will also result in
savings of Rs.500-1,000 per hectare for certification.
Indian government has designated six organizations to
accredit certifying agencies (international or domestic)
undertaking inspection and certification of organic products.
These are APEDA, the Tea Board, the Spices Board, the Coffee
Board, the Coconut Development Board, and the Directorate
of Cashew and Cocoa. National organic standards have been
established under NPOP. Currently, 11 accredited certifying
agencies are functional in India. IMO (Switzerland),
ECOCERT (Germany), SKAL (The Netherlands), SGS
(Switzerland), and Lacon (Germany) are some of the
International ones. Indocert, based in Kerala, is among the
accredited domestic agencies.
The burgeoning European and US organic markets provide
enormous scope for Indian exporters. US retail sale for organic
product has grown 20-24% per year for the past 12 years
and the same growth trends are expected to continue for
future. Europe is the second largest market of organic
produces in the world and consumes around half of the world
organic produce. European market for organic food is
estimated to be around US$ 9 billion and expected annual
growth rate is of around 20%, depending on the markets.
Japan is the largest organic food market in Asia. Retail sales
of organic food and beverage is around US$ 2.5-3.0 billion
(2003). Of this, imports are estimated to be to the tune of
around US$ 360 million. Though the organic food market is
not more than 0.5% of total food market of Japan but
according to the Japanese Integrated Market Institute, import
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October-December, 2006

of organic products is likely to grow by 40%. Other global

markets for organic products are Saudi Arabia, UAE and South
Africa.
The matrix below reveals that India has demonstrated
capabilities of exporting some key agricultural commodities
to most of the major global markets, where there is a

considerable demand for organically produced commodities

attracting price premiums ranging from 10-100%. The matrix
thus, showcases window of opportunities in these markets
for Indian exporters and producers of organic agricultural
commodities, which are yet to be exploited to maximum
potential.

Conventional agricultural products & their export market

and prospective market for Indian organic products
Existing conventional export
market for Indian producers
for particular product
Prospective market for
Indian organic products.

Organic - A Primer -Continued from page 12

The IFOAM Basic Standards are a set of standards for

standards. They are established through a democratic and
international process and reflect the current state of the art
for organic production and processing. They are best seen
as a work in progress to lead the continued development
of organic practices worldwide. They provide a framework
for national and regional standard-setting and certification
bodies to develop detailed certification standards that are
responsive to local conditions.
Legislated standards are established at the national level,
and vary from country to country. In recent years, many
countries have legislated organic production, including the
EU nations (1990s), Japan (2001), and the US (2002). Nongovernmental national and international associations also
have their own production standards. In countries where
production is regulated, these agencies must be accredited
by the government. Since 1993 when EU Council
Regulation 2092/91 became effective, organic food
production has been strictly regulated in the UK.

commercial use of the term organic. Farmers and food

processors must comply with the NOP in order to use the
word.

Organic Certification
Organic certification is a certification process for producers
of organic food and other organic agricultural products. In
general, any business directly involved in food production
can be certified, including seed suppliers, farmers, food
processors, retailers and restaurants. Requirements vary from
country to country, and generally involve a set of production
standards for growing, storage, processing, packaging and
shipping that include:
A

A
A

avoidance of synthetic chemical inputs (e.g. fertilizer,

pesticides, antibiotics, food additives, etc) and
genetically modified organisms;
use of farmland that has been free from chemicals for
a number of years (often, three or more);
keeping detailed written production and sales records
(audit trail);
maintaining strict physical separation of organic
products from non-certified products;
undergoing periodic on-site inspections.

In India, standards for organic agriculture were announced

in May 2001, and the National Programme on Organic
Production (NPOP) is administered under the Ministry of
Commerce. (http://: www.apeda.com/organic/quality.html)

In 2002, the United States Department of Agriculture

(USDA) established production standards, under the
National Organic Program (NOP), which regulate the

Certified organic producers are also subject to the same

agricultural, food safety and other government regulations
that apply to non-certified producers.

Continued on Page 41

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