Organic dairy sales limited by feed, drought issues

Organic dairy sales limited by feed, drought issuesOrganic dairy product sales rose 8% in 2013, but a shortage of organic feed and drought issues continued to put supply pressure on the market, according to an annual summary from the Organic Trade Association (OTA).

OTA's Organic Industry Survey was conducted and produced by Nutrition Business Journal. More than 200 companies responded to the survey, conducted from Jan. 27 through April 4. Companies gave data on revenues reported, sales growth, revenue by product and sales channel breakdowns.

The $4.9 billion organic dairy category is the second largest organic food sector. The 8% increase in 2013 follows a 7% increase in 2012.

Based on USDA monthly summaries, organic dairy represents about 4.5% of total packaged fluid dairy sales.

Despite ongoing growth, dairy joined organic beverages as the only two organic sectors that did not post double-digit growth last year, OTA reported.

Organic beverages recorded the slowest growth in 2013, with a rate of 5%, a drop from the 7% growth in 2012. This was in large part due to the continued slide of soymilk sales, the largest segment of the organic beverage category.

Similar supply issues have constrained the growth of the organic meat, fish and poultry category, which rose 11% in 2013, with price increases a major factor in category growth.

The $4.8 billion organic packaged and prepared foods category remains the third largest after produce and dairy. If its growth continues to outpace dairy, it is likely to move into the second spot in 2015.

Overall, U.S. sales of organic products jumped to $35.1 billion in 2013, up 11.5% from the previous year's $31.5 billion, and the fastest growth rate in five years, according to OTA's latest survey of the organic industry. Survey respondents expect a similar to slightly higher growth rate over the next two years.

Organic food sales in 2013, at $32.3 billion, accounted for roughly 92% of the total organic sales. Organic foods account for roughly 4% of total food sales.

Non-food organic products – including flowers, fiber, household products and pet food – are currently a very small part of the total organic market, but are making quick in-roads. Sales of non-food organic products, at almost $2.8 billion, have jumped nearly eight-fold since 2002, and have almost doubled in market share.

A niche industry in the huge food sector just a decade ago, consumer purchases of organic food first broke through the $30 billion mark in 2012 and now account for more than 4% of the $760 billion annual food sales in the United States. More telling, the growth rate of organic food sales, which has averaged almost 10% every year since 2010, has dwarfed the average annual growth of just over 3% in total food sales during that same period.

A product breakdown of the organic food sector shows that the fruit and vegetable category continue to lead the sector with $11.6 billion in sales, up 15%. With more than 10% of the fruits and vegetables sold in the United States now organic, the $1.5 billion in new sales of organic fruits and vegetable represented 46% of the organic sector's $3.3 billion in new dollars.

The relatively small organic condiments category posted the strongest growth, at 17%, to reach sales of $830 million. Also showing double-digit growth were the organic snack food sector, up 15% to $1.7 billion; organic bread and grain sales up 12% to $3.8 billion; organic meat, poultry and fish sales up 11% to $675 million, and the rapidly expanding organic packaged and prepared food sector up 10% to $4.8 billion.

But as demand for organic grows, the industry is facing some critical challenges.

Farmland in the United States is not being converted to organic at the pace needed to meet the growing demand for organic, OTA said. Supplies of organic feed and organic grain have been tight and costly, which could limit growth especially in the organic dairy and meat sectors.

There is also a lingering confusion among consumers about just what organic means. The message of the organic can be lost next to the presence of "natural" products and the long debate around GMOs.

For information on how to purchase the full report, go to

The Organic Trade Association (OTA) is the membership-based business association for organic agriculture and products in North America. OTA is the leading voice for the organic trade in the United States, representing over 6,500 organic businesses across 49 states. Its members include growers, shippers, processors, certifiers, farmers' associations, distributors, importers, exporters, consultants, retailers and others. OTA's Board of Directors is democratically elected by its members. OTA's mission is to promote and protect the growth of organic trade to benefit the environment, farmers, the public and the economy.