Beef is one of the standout food commodity performers in terms of growth over the past two years, according to a major national survey of Organic trends released on Friday.

The survey, measuring changes between 2010 and 2012, was commissioned by Biological Farmers of Australia, with independent research by Swinburne University of Technology, Mobium Group and the ABS agricultural census.

It found that Organic beef turnover in Australia had more than doubled in size over the past two years, growing in sales by 111 percent to $72.7 million. This accounted for about one quarter of all Organic food production value in Australia.

While the strong growth was partly explained by the benefits accrued from two big seasons across Eastern Australia, making Organic beef compliance easier, it was also heavily influenced by growing demand, report authors said. 

The growth since 2010 reflected the emergence of a number of serious competitors in the marketplace with good, solid supply chains of up to 30-40 producers, authors suggested.

“What the last report back in 2010 showed was that there was latent, unsatisfied demand for Organic beef. We think that is now being filled with higher production,” BFA director Dr Andrew Monk said.

“But there’s still a lot of blue sky that we can grow into, safely, without over-inflating the market.” 

Among other proteins, lamb was another strong performer, growing by 64pc to $18.6 million over the past two years. Organic poultry sales growth was slower, increasing by 15pc to $17.8m. Dairy products rose 63pc, while fruit and veg both declined in value.

While Australia has the largest land area certified to Organic food production in the world (16.9 million hectares, mostly devoted to beef), Uruguay in South America is regarded as the world’s largest producer of Organic beef.

Among other highlights, the report noted that Fast food chain Hungry Jack’s started purchasing and promoting Organic beef menu items in 2011, reflecting how ‘mainstream’ the sector had become.

The merger earlier this year (red Beef Central’s report here) of Cleaver’s Organic Meats and Sanger Australia’s The Organic Meat Company was testament to the consolidation going on within the organic marketplace. The union brought together the largest Organic beef exporter with the largest single domestic organic beef supplier to the major supermarkets.

On top of sustained demand from domestic (in particular supermarket) end-users, export markets for Organic beef had also expanded, the report said.

Even with an elevated value for the Australian dollar, there appeared to be increasing beef export opportunities in market destinations such as the US, Northeast and Southeast Asia, as well as regions such as the United Arab Emirates, it noted.

“NOP certification for the US market remained a key add-on certification for many medium to larger-scale certified Organic beef producers, particularly in Queensland, which also by no coincidence has the largest number of Certified Organic abattoirs.”

In total, Queensland accounts for almost 70pc of Organic cattle by value, followed by NSW and South Australia.

Smaller-scale operators, and states without critical mass, cite ongoing challenges with getting livestock to market at a reasonable price, even if there is choice of abattoirs and down-stream processors. Most major retailers source Organic beef from centralised supply chain systems in NSW and Queensland.

Butchers in Victoria, Tasmania and South Australia are often supplied with non-certified meat (product that would otherwise be Organic if it wasn’t for the lack of regional certified abattoirs).

 

Broader Organic industry growing…

In comment about the organics industry in general, the report said Organics was one of Australia’s top five growth industries, driven largely by greater accessibility and expansion into ‘mainstream’ consumption.

Supermarkets were fast embracing organics, with three out of four organic food products now bought at supermarket outlets, rather than speciality stores or markets. More than one in 20 Australians now regularly shopped for Organics and two thirds had bought Organic in the past year.

While the Global Economic Crisis had had a negative impact on Organic food sales in the UK, this had not occurred in the US, which had continued to grow in the past three or four years, Dr Monk said. Australia, as a less mature Organic market, had not been significantly affected by the GFC.

Some of the report’s key findings:

• Organics (all commodities, not just beef) is now worth $1.27 billion to Australia and is predicted to grow by up to 15pc each year. This growth exceeds global growth trends, which are 2-11pc.
• Farm gate sales of organic products have risen by 34pc since 2010.
• Total farm-gate value of certified organic products in Australia in 2011 was estimated to be $300 million, and total farm turnover, $432m – up 16pc in two years.
• Fresh fruit and vegetables (60pc of consumers claimed to purchase in the past year) are the most commonly bought Organic products, followed by cooking ingredients (45pc), canned goods and bread (39pc), red meat (35pc) and dairy products (34pc).
• The Australian organic industry continues to command a relatively small percentage of total market value (sectoral range estimates of 0.8–1.2pc) compared with 2-3pc in more ‘mature’ overseas markets, suggesting there is still substantial growth prospects ahead.
• Retailer-owned private labels are increasingly entering the market. Coles, Woolworths and ALDI in recent years have launched their own organic product lines, such as extended shelf life fresh milks.
• A further 13pc of consumers estimate they spend between 10-20pc of their average household total food budget on organic products, with the remainder spending 10pc or less.
• Four of the five top perceived benefits continue to revolve around what organic food ‘does not contain’: these include ‘chemical-free’ (79pc); ‘additive-free’ (77pc); ‘hormone/antibiotic-free’ meat (64pc); and ‘non-GMO’ (62pc).
• 5pc of organic shopping is done either online or via direct methods such as home delivery. 
• 36pc of Australian adults say they would reject a product claiming to be organic if it wasn’t certified.
• Organic exports have remained generally suppressed in comparison with figures from the early 2000s, with the exception of successful examples in meat and dairy. Exports are estimated at 10pc of overall industry value.
• Queensland remains with the most organic certified area of Australian states and is the state with the single most certified area of land in the world, along with the highest value of organic agricultural production. NSW accounts for the highest number of individual certified organic businesses.
• The organic industry is continuing to mature and the average size of organic farms has increased, highlighting a trend towards professional farming on a larger scale (albeit still under conventional farm enterprise average size for most sectors). This also highlights the expansion of some long-term organic farming families who have purchased additional land and/or farm units to cater for increased demand.
• While one in five Australians said price was not a consideration when buying Organic, four-in five still said it was.

BFA’s Dr Andrew Monk said importantly, three previously-noted top barriers to buying organic products – price, ease of access/availability and trust in the product being organic – had all been reported as being lesser barriers for consumers than in 2010.

“Trust in organic certification and consumer awareness of standards and certification have increased considerably,” he said. “There has been a significant increase in recognition of Australia’s main certification logo, Australian Certified Organic, up a further 25pc from the 2010 report.”

The challenge for the organic industry was to manage the further squeezing of margins while remaining financially viable and able to invest in innovation and business development to keep up with changing consumer demand of specifications.

Prices had rationalised to points that have seen new product ranges born or new consumers enter the market.

However the organic supply chain remained a fragile and easily-disturbed channel and one where short-term gains for retailers and consumers on lower prices could lead to longer-term bottlenecks arising from a lack of willing suppliers (either farmers or processors) to fill the demand at rationalised prices.

“The ideal balance is pricing that keeps sufficient numbers of farmers and processors in business while supplying and satisfying the requisite number of consumers willing to pay a price they deem good value, even if that price is above conventional food prices.”

 

 

• See this morning's companio story on Organic beef producers, the O'Leary family from Dubbo.