Organic Products and Markets

2010/05/14

Heinz W. Kuhlmann

Representative of NürnbergMesse in Japan

The demand for natural and organic products is growing worldwide, and BioFach is expanding globally with trade fairs and events in seven countries. The most recent addition is BioFach India which will be held for the second time in December 2010 in Mumbai. After China which has recorded tremendous growth in recent years — not only as an exporter but also on the domestic market — India has also become a major supplier of organic raw materials and processed products.

In May the 4th BioFach China was successfully held in Shanghai with more domestic and international exhibitors and visitors. Natural and organic food and beverages took most space, but there were also more non-food products than in previous years. Market experts predict an increasing demand for natural cosmetics and body care products. Most foreign exhibitors were satisfied and some of them found already business partners during the event.

The global economic crisis and recession in some countries had only little negative impact on organic products. In major Western countries (where the price gap is not so big) consumers continued to buy natural and organic products. Japanese consumers, however, became more price-conscious and reluctant to buy expensive luxury goods. This had also some effect on organic food and non-food products, such as for example organic cotton. But the demand and market will probably grow again when in the foreseeable future a wider range of natural and organic products will be offered at lower prices.

Market and New Developments in Japan

The growth of organic agriculture and the demand for organic products in Japan are still moderate. Nevertheless, the Japanese market is (after China) still the largest in Asia and has a big potential, especially if natural non-food products are included. According to recent surveys and estimates the current total volume of domestic and imported organic products represents a value of over 150 billion Yen (approx. 1.3 billion US$). The market for so-called green food (grown with reduced agrochemicals and pesticides) is much larger and estimated at around 600 billion Yen These are impressive figures, even though they present only a fraction of the total market for conventional food and beverages.

Until now the demand and market for organic products in Japan has been increasing at a slower pace than in Western and some Asian countries. Major obstacles are a limited range and variety of available products in supermarkets and other shops and especially the comparatively high prices. With few exceptions organic products, whether from domestic production or imported, are 2-3 times more expensive than comparable conventional products. This is similar in other Asian countries and quite different from Europe and North America where the price gap is much smaller (20-30% and sometimes more, depending on the product) and organic products are affordable for people with an average income. This unfortunate situation will only change if and when major food companies and retailers go organic and offer a larger variety of organic products. There are already some indications that this will happen in the not too distant future. A major reason and motivation for both producers and consumers is the growing concern about safe food and reliable sources for raw materials.

Like elsewhere, Japanese consumers are concerned about food safety, and the government values a high ratio of self-sufficiency. Now that the self-sufficiency ratio has fallen below 40%, the central and local governments are looking for ways to boost the ratio. Increasing the yield by using even more agrochemicals is certainly not an acceptable solution and would cause further hazard to safe food. A better way is to encourage consumers to buy more domestically grown and produced goods which are used in traditional healthy Japanese food. This in turn leads to natural and organic products. Revitalizing domestic agriculture is an urgent national priority. Promoting full-fledged organic agriculture which provides safe, healthy and quality foods that secure a stable income for producers and sustainable food production should be the responsibility of Japanese agriculture. Nevertheless, Japan will always depend on a large share of imported food and must avoid international critic and problems resulting from unreasonable restrictions in food imports.

Organic JAS

A major reason for the current stagnation of the organic market in Japan is the general lack of awareness about organic products among Japanese consumers. Almost 10 years after its introduction Organic JAS is still not well and widely known. The scope of products which can carry the Organic JAS label has been widened and now also includes organic livestock products and animal feed, but not yet fish and marine products.

Organic JAS which was introduced in 2001 (when the first BioFach Japan was held) is based on EU standards. From the beginning Japan and the EU have held many meetings and negotiations about the equivalence status, and in May 2010 Japan has finally been added as the eighth country to the EU list of third countries whose organic certification and regulatory programs are deemed to be equivalent to the EU Organic Regulation. The other approved countries are: Australia, New Zealand, Argentina, Costa Rica, India, Israel and Switzerland.

Japan more or less accepts organic products which have been certified according EU regulations. However, such products are still subject to Organic JAS regulations, a process which is time-consuming and expensive, before they can be sold on the market.

Several divisions and sections within the Ministry of Agriculture, Forestry and Fisheries (MAFF) and associated outside organizations are dealing with food safety, organic products and related subjects. The government has approved a budget to conduct an extensive survey about the organic production and market in Japan. MAFF has started this year a project for the promotion of organic agriculture and products. In an effort to bring farmers/producers and buyers together, this project includes a group pavilion at BioFach Japan where both sides can meet.

Some organic products which can be certified and sold in other countries are not yet covered by Organic JAS. Among them are, for example, fish and marine products and many so-called “organic wild collection” products. Organic wine, sake and other alcoholic beverages cannot carry the label “Organic JAS” for tax reasons, even though the ingredients, such as rice or grapes, can be certified. The EU has published guidelines for organic or eco wine as orientation for consumers.

There are several indicators that Japan will make progress with organic products. IFOAM Japan in cooperation with a team of experts has conducted an extensive survey about the Japanese organic market. The results were published this summer (in Japanese).

In the global context Japan is ready for organics. The future of organic products mainly depends on the choice of consumers. The IFOAM report illustrates opinions and preferences of the consumers, the degree of cooperation on the organic market between agriculture, trade and industry on one hand and the administration, research institutes and private enterprises on the other hand. Furthermore, a broad clarification of the focuses of the food chain is intended. This Organic Market Research Project originated to gather suggestions for political measures to enlarge the organic market and to possibly develop a social movement.

Natural — Organic – Non-Food Products

In many countries, especially in Asia including Japan, producers and consumers cannot or do not distinguish clearly between natural an organic products. The following somewhat simplified definition gets to the point: All organic products are natural (and traceable), but in addition to being natural they must also be certified. Natural products without proper certification cannot be sold as “organic” as stipulated by legal regulations in most countries where organic products are produced and sold.

Many retailers in Japan and other Asian countries offer a wide mix of natural and organic products in their shops. This can be confusing for consumers unless they are aware and knowledgeable about certification and required organic label which are attached to real organic products.

Nevertheless, there is a close relationship between natural and organic products. Both are based on similar concepts, such as:

● Made of natural ingredients without (or reduced) chemicals.

● Traditional, nutritious, healthy and safe food.

● Friendly to the environment and sustainable.

In view of the above, many governments and private organizations promote and support so-called “eco” and “green” products and there is a huge market for such products, much larger than for 100% organic products.

Trade fair organizers, such as NürnbergMesse, have taken these facts and trends into account and integrate them into their events. All BioFach events globally adhere to the strict admission criteria for organic products. However, in order to attract more buyers (for organic and natural products) NürnbergMesse Group also organizes parallel events for natural products and non-food products:

BioFach plus Vivaness in Germany

BioFach Japan with Natural Eco Plaza

BioFach America Latina plus Expo Sustentat in Brazil

BioFach America is held in cooperation with the organizers of Natural Products Expo

BioFach China is held in collaboration with Green Food China.

In Japan most consumers think about organic products — even if they can clearly distinguish between natural and organic — mainly in terms of food and beverages. However, there are many other natural products, such as cosmetics and body care products, remedies and supplements, detergents, textiles, building materials, furniture, paper and toys, which all contribute to a natural and healthy lifestyle. Many of these products cannot be certified in the same way as food, but they must meet strict criteria to be admitted to BioFach and Vivaness.

Strong Growth for Organic Cotton

Many consumers perceive cotton as a “natural fiber” and are not aware that huge amounts of chemical fertilizers are used on cotton fields which not only results in inferior products but also causes much damage to the environment. In recent years various studies and consumer movements, such as LOHAS, have revealed these facts and the demand for real natural and certified organic cotton has increased.

In Japan there is an increasing demand for organic cotton even though these products are considerably more expensive than those made of conventional cotton. Parents are concerned about allergies of their children which can be caused by cheap conventional cotton, chemical detergents and body care products. Foreign and Japanese companies are benefiting from this trend and can anticipate a growing business. This is also reflected by a growing number of exhibitors at all BioFach events, including BFJ 2009, and BioFach 2010/11 in Germany with special zones for organic cotton and other natural textiles.

BioFach Japan presents a large variety of natural and certified organic food and other products. Most exhibits at Natural Eco Plaza are natural food and non-food products for daily life while in the other BFJ sections domestic and imported raw materials, processed food, natural cosmetics and textiles (all meeting the BioFach/Vivaness standards) are exhibited.

Fair Trade

LOHAS buyers are willing and usually can afford to pay more for quality, and also for products from developing countries which are offered by Fair Trade organizations. The international fair trade criteria cover basic ecological aspects for all products. Organic cultivation is specifically encouraged, even though not required, by an additional price mark-up. This gives producers an incentive for conversion, and the share of organic products in the TransFair range is growing continuously.

Having a fair-trade label does not automatically mean that the products can be sold as “organic”. In order to use the term “organic” and respective labels, the projects and products must go through organic inspection procedure.

Fair Trade and BioFach have much in common, and there is a close cooperation. Some of these products, for example coffee, tea, chocolate, organic cotton and products from wild collection are also exhibited at BioFach.

Fair Trade Certification

FLO standards and certification are designed to strengthen the position of smallholders organized into cooperatives as well as workers in plantations. Contracted farmers selling to a company can increasingly participate in FLO Fairtrade and the opening up to a broader variety of producer setups is under investigation.

There are several Fair Trade standards and labels in the market. The most widely used Fair Trade standard and certification system is the one under the Fairtrade Labelling Organization International FLO. The FLO standards address social, socio-economic and environmental aspects.

When market prices fall below the Fairtrade minimum price, this can be a financial burden for buyers, and sometimes may even restrict access to certain markets. However the whole point of Fairtrade is to provide producers with a safety net for exactly those situations. As different minimum prices are defined for different regions, there is also a certain risk that those with high prices are not competitive in the Fairtrade market

Costs for FLO producer certification are usually covered by the producer organisation or the exporter. The FLO Producer Certification Fund offers a grant to small producer organisations, who are applying for Fair Trade certification but lack sufficient financial resources to pay the certification fee. Brands and retailers who want to use the FLO Fairtrade label pay a license fee to the national label initiative of the respective market (e.g. TransFair in Germany, Max Havelaar in France, Switzerland and the Netherlands, Fair trade Foundation in the UK). The national label initiative in turn raises awareness amongst consumers about Fairtrade and Fairtrade products. In many consuming countries, the FLO label has reached very high consumer recognition, e.g. 86% in the UK.

In Japan Fairtrade is not well known yet but the awareness is growing. The market volume for Fairtrade products reached about 13.5 million Euro in 2009 which means less than 10 Cent per capita consumption, compared with 3.3 Euro in Germany and 23 Euro in the leading country Switzerland.

LOHAS

The LOHAS (Lifestyles of Health and Sustainability) movement which started in the United States has now also spread to Europe, Japan and other countries. The LOHAS movement is loosely organized in numerous chapter and groups. Therefore, it is quite difficult to estimate the actual number of people associated with LOHAS and to obtain information about their goals and activities. According to several surveys well over 30% of Japanese adults recognize the word and are probably LOHAS consumers. In Japan there are many LOHAS groups, clubs and publications.

LOHAS companies practice responsible capital and services using economic practices. LOHAS business owners and industries around the world meet at LOHAS conferences and events to observe trends and share ideas. LOHAS consumers are interested in and buy various products matching the concept of this movement.

LOHAS market sectors are: sustainable economy, healthy lifestyles, alternative healthcare, personal development and ecological lifestyles. In combination these sectors attract a large number of consumers and generate a big business volume.

The LOHAS boom in Japan also increases the awareness and benefits of natural and organic products among consumers and provides good business opportunities. Organic and natural products make up a large portion of the LOHAS market. LOHAS people are mainstream consumers and often have substantial influence in their companies, groups and neighborhood. Traditional Japanese values, such as profound respect for nature, traditions and craftmanship, coupled with their high-quality food and health-conscious orientation, all match with LOHAS values and therefore present a promising breeding ground for further market growth.

Like FairTrade LOHAS is closely connected with BioFach. In Japan several LOHAS groups, in particular LOHAS Business Alliance (LBA), are supporting BioFach Japan.

In November 2010 a LOHAS EXPO will be held in Korea.

The International Organic Market

The main organic markets are in the US and the European Union. The Japanese market is much smaller but has a good growth potential. Emerging economies like India and China are big exporters, but as yet are rather small consumers of organic products. Brazil and South Africa have better developed local markets for organic products, especially in their cities. However, these countries import very little; the consumption is mainly based on local production. Whereas the US and European Union are big producers, they are also big importers of organic products. Some of these products need to come from tropical countries, like coffee, tea and tropical fruits. But most organic imports are due to the fact that increase in national production is not sufficient to match market growth. In most European countries and in the US, the number of organic farms is presently not growing very much. Especially European farmers find it difficult to compete with imports. This is a chance for developing country producers.

Market trends

In 2009, approximately 1.5 million organic farms cultivated over 35 million ha organically managed land worldwide. The global market volume for organic food & drink sales that year is estimated at 50 billion US$. The market has tripled in value over eight years. In 2009 there was only a limited slowing down of growth due to the global recession. Some companies have suffered but structural long-term growth is expected to continue spurred on by the interest in more sustainable production.

The volume of organic imports from developing countries is growing steadily. This is true for the big commodities like coffee, cocoa, cotton, tea and cereals, but also for fruits and fruit juices, vegetables, oil seeds and aromatic plants. With large retailers expanding their organic product lines, another important tendency is the demand for larger volumes per supplier.

Market demand for products in conversion to organic production is rather limited. Most clients clearly prefer organic products to in-conversion products. In-conversion fresh produce is more marketable than storable products or ingredients destined for the processing industry. Products which are in short supply in full organic quality are sometimes sourced in in-conversion quality, albeit with a lower price-premium.

Market channels

Organic products are sold in various types of outlets: in supermarkets, in specialized shops, in open markets, in direct deliveries to clients, and on farms. The market is supplied by a myriad of importers, wholesalers, processors, packers and distributors. The tendency is that an increasing share of organic food is marketed through supermarkets. You can make a distinction between organic retailers who only work with organic products, and companies that have organic products alongside conventional products.

There are now organic versions of most food products. A supermarket like Tesco in the UK has above 1,000 organic product items; Coop in Switzerland has around 2,000, including textiles. The most popular of these amongst consumers are the fresh foods, like fruits and vegetables, bread and dairy. There is also a wide variety of processed foods. Processing is almost always done where the market is. The food processing industry is therefore another interesting market channel for organic farmers and producers of raw materials.

What price can you expect?

When prospecting for markets, most businesses are looking for attractive prices. However, doing business is much more than achieving the best possible price. In the organic sector, and certainly in the Fair Trade sector, you need to have a wider perspective. What the market means for you depends to a large extent on who your buyer is. Looking for a market means finding the buyer(s) that fit you, and the other way around. Buyer and seller should fit together.

Generally speaking, prices for organic products relate to world market prices. Market prices for organic products fluctuate with the change in supply and demand. There is no fixed organic premium in the market. On average, you can expect a 5-15% organic premium for storable produce, and 10- 25% organic premium for fresh produce. At times of oversupply it can come close to zero, while at times of shortage or for speciality products it can be as high as 50%. On the other hand, price setting for value added, or semi-manufactured products is not affected very much by international prices; it is dominated by the specific organic market. The general tendency is for the organic premiums to go down. Remember, the organic premium often includes the quality premium. This is what you get when selling the product – what you pay to the farmer is a different issue.

Relevance of the fair trade market

With a turnover of 2.9 billion Euro in 2008, the market for Fair Trade products is approx. 10 times smaller than for organic products. However, growth of this market segment has been faster than in organics. Only a limited number of products are currently available as Fair Trade, whereas nearly every food product nowadays has an organic version. About 30-40 % of all Fair Trade products are also certified organic. The Fair Trade organic market is a subset of the organic one, i.e. the Fair Trade certification is usually added to an existing organic product. The big difference is the guaranteed minimum price in Fair Trade. While Fair Trade certification usually improves your market position, the minimum price may also limit your market, as the product becomes more expensive.

Usually, only a part of the production from Fair Trade certified producers can be sold under Fair Trade conditions. The remaining is sold in the conventional market. If your production is certified organic, you are normally able to sell most of your product as organic, as long as the quality is fine.

As an organic supplier you have to realize that most of your consumers expect you to be also somewhat Fair Trade. As a result many of the buyers of organic products also want them to be certified Fair Trade. If your organic buyers indicate that they want Fair Trade, make sure that they know what it means, and that they are ready to pay the minimum price plus a Fair Trade premium. In general it is advisable to follow Fair Trade principles within your business, and use that in your negotiations with your buyers, whether you get formally certified or not. Working towards Fair Trade already makes your business more attractive to farmers as well as to clients.

■ The Organic Market in the Asia-Pacific Region

Australia Bases Equivalence on Credible Organic Systems

Background

No country produces all the organic products that they need. In Australia around 60% of the organic products sold in retail shops are either fully imported or a composite of imported and domestic products. Australia, like most countries, needs to source organic products from around the world and this is particularly true for processed products that need to combine multiple ingredients. Many of the current national compliance regulations for the importation of organic products make it uneconomical for processors to go through the extra time and expenses to get the products recertified so that they comply with their national organic regulations. This becomes even more difficult if the processor or producer wants to export these products to multiple markets with different regulatory compliance regimes.

Fear of Imported Products

Many countries have a fear of imported products, believing that they out-compete the domestic products, cause a loss of domestic production and force local farmers and processors out of business. While this can be true in some conventional industries there is no evidence of imported organic products replacing domestically produced products.

Imports can grow the domestic market by supplying the products that consumers want, that are not being produced domestically. As the market for these products grow, a new domestic market can emerge based on import replacement.

Imported Organic Products must come from Credible Systems

The critical issue for Australia is that all imported organic products come from credible organic systems. What is meant by “credible organic systems”?

There is a need to accept that there will be variations in organic standards to reflect the differences in the production environment in different countries and regions of the world. Just as Australia developed a standard that differed from the EU regulation, US NOP, JAS, Codex, etc. because of the unique Australian requirements, the Australian organic sector needed to accept that this applies to all countries. Every country and/or region has to develop standards that reflect and meet the needs of their producers. The Australian organic sector’s main concern is not about the minor differences in standards. The concern is that the products come from a credible system. This includes both the standard and the certification regime to that standard. Australian consumers and importers do not really care about the minute differences between the organic regulatory systems of world’s major markets — Europe, USA, Canada, Switzerland and Japan etc. The products from these systems are seen as credible and equally reliable as the Australian standard and certification system.

New Zealand’s Organic Exports are Known

New Zealand is a rare example of a country that tracks organic export data. Organic exports constitute about one third of New Zealand’s organic market activity. A census of organic producers and exporters was conducted with multiple follow-up contacts. While in 1997 the organic export market was worth 32 million NZ$ (18 million euros) it rose to between120 to 130 million NZ$ (72 million euros) in 2007, and to 170 to 180 million NZ$ (94 million euros to 100 euros) in 2009. Fresh fruit and vegetables account for 50% of organic exports; and this is made up of 48 % apples, 48 % kiwifruit, other types of fruit, and minimal exports of fresh vegetables. Main export destinations in 2009 were Europe (37 %), North America (22 %), Australia (19 %), Japan (9 %), Korea (8 %) and China (1 %). In relation to the largest category — fresh fruit — approximately 60 % of apple exports are to the EU, and 40 % to North America. Over 50 % of organic kiwi exports are to Europe, 30 % to Japan and the balance mainly to North America. Other notable export categories are dairy (16%), processed products (12%), beverages (10%), and meat/wool (6%).

New Zealand gains equivalence with Taiwan

In November 2009, the New Zealand Food Safety Authority (NZFSA) announced that New Zealand’s Official Organic Assurance Programme (OOAP) has gained equivalence to the new Taiwanese organic regulations. A few new requirements were added for some products that can be found in Appendix 4 of the current version of Technical Rules (version 7). Among others, producers of organic meat must now not sell, label or represent any animal treated with antibiotics as organic. Conventional dairy animals for milk production treated with antibiotics, however, can be converted to organic by being under continuous organic management for one year prior to milk and milk products from the animal being sold as organic. Exporters are also required to obtain an export certificate from their third party agency (TPA) for each consignment of organic product to Taiwan.

Sources: New Zealand Organic Report 2010 and The Organic Standard

China — India – Korea

India has a long tradition in nature-friendly agriculture which links to organic farming. During the past 2-3 years India has increased the certified organic land area to over 150,000 hectares, and many new projects are in progress. In support of the organic movement the Indian government has has declared several states as “organic states”. With international support the Indian authorities have managed to acquire both, the USDA equivalence for the NOP (National Organic Program) and the EU third country listing, in the same year. Therefore, India is well prepared for exporting organic raw materials and processed food to major markets. India is also one of the fastest growing economies in the world resulting in higher incomes and purchasing power for consumers.

China is still far ahead in organic production and infrastructure as well as domestic consumption. Many large supermarkets and other retailers in major cities carry a wide selection of organic products. Like in Japan and other Asian countries most organic products are much more expensive than domestic or imported conventional products, but nevertheless find many buyers. China is still a major producer and exporter of organic raw materials and to a lesser degree of processed products, but the domestic market is also growing continously. It is difficult to obtain exact figures, but estimates indicate that the domestic market volume for organic products has already surpassed Japan. The official Organic Food Development Center (OFDC) estimtes domestic sales of organic products at around US$ 500 million. Organic certification organizations estimate that the production will increase by 30-50% in the coming years and that exports of organic products could rise to 5% of total food exports by 2020.

Korea has a strong organic movement and growing market, supported by the government and other organizations. In recognition of the efforts and progress, the next IFOAM Word Congress will be held in September 2011 in Korea.

The Organic Trade Association (OTA) lauded a decision by the Korean Ministry of Food, Agriculture, Forestry and Fisheries (MIFAFF) to extend its current organic labeling regulations for imports until Dec. 31, 2012, thus allowing continued access by U.S. organic companies to export organic food products to Korea.

“This is wonderful news, particularly given the current economic climate. With this extension, the U.S. organic sector can expect uninterrupted trade with Korea equaling about $55 million in U.S. organic exports to Korea per year,” said Christine Bushway OTA’s Executive Director and CEO, adding, “Equally important, this extended time frame gives the U.S. organic industry the confidence to expand its product lines and sales strategies for the first time since 2008.” She noted that the decision also contributes to the goals of President Obama’s initiative to increase U.S. agricultural exports.

The Korean decision came about as a result of public-private efforts by USDA’s Foreign Agricultural Service (FAS), U.S. Embassy staff and OTA representatives in concert with the Korean organic industry and Korean organic regulators. FAS officials have noted that the extension allows for negotiation of MIFAFF recognition of the National Organic Program as equivalent to the Korean Organic Regulation while keeping the Korean market open for U.S. organic exports.

OTA, in partnership with Sustainable Strategies, works closely with FAS and U.S. trade negotiation teams to ensure that organic products are considered in trade negotiations, and offers an International Trade Forum for its members. In addition, OTA manages the Organic Export Program, an international marketing program funded by the USDA Market Access Program to promote U.S. organic products to the world market, and an online Export Directory listing companies that export.

ASEAN Region

ASEAN — a region with 10 countries and almost 600 million people — offers a great potential for natural and organic raw materials and processed products, mainly for export. But in some countries the domestic demand and market are also growing. A major obstacle for small organic farmers and producers are (expensive) certification and the different regulations and standards in export markets. These problems are addressed by GOMA.

Pacific Organic Standard Found Equivalent to EU

The International Organic Accreditation Service (IOAS) has assessed the Pacific Organic Standard and found it, after some corrective actions, is to be equivalent to the standards requirements of the European Union regulations EC 834(2007) and EC 889(2008).

This means that, according to the IOAS, the Pacific Organic Standard is suitable for use by conformity assessment bodies in the Pacific region as a standard for the certification of operators who may wish to export products to the European Union.

Source: The Organic Standard, June 2010

■ GOMA — Global Organic Market Access

Government and private sector participants from 12 countries in East, South-East and South Asia, meeting at a workshop in Shanghai during BioFach China from 27-29 May 2010, have declared their intent to move forward on concrete measures to reduce and avoid barriers to trade of organic products in their Region. Commitments were made on three approaches to facilitating trade within the Region and beyond; these are harmonization of standards, equivalence of standards and conformity assessment systems, and cooperation among the Region’s certification and accreditation bodies.

The Workshop decided to create a regional working group to create and oversee a plan for moving forward on the three approaches. One of the first activities will be to lay the groundwork for development of a harmonized regional standard, which could be adopted by several or all of the Region’s countries as a harmonized standard and/or serve as the basis for equivalence of organic standards within the Region. The working group will also indentify specific bilateral and multilateral opportunities for countries assess equivalence with one another using two Tools that were developed from past FAO/IFOAM/UNCTAD cooperation.

An initial meeting of the working group will be held in Mumbai at BioFach India/India Organic in December 2010. The IFOAM Organic World Congress in Korea in September 2011 was identified as the target date for announcing complete achievement or substantial progress on the harmonized standard, equivalence agreements and cooperation among conformity assessment bodies.

STATEMENT OF INTENT

Harmonization and Equivalence for Organic Agriculture in Asia

We, the participants coming from 12 countries* in East, South-East and South Asia, met from 27 -29 May in Shanghai, People’s Republic of China, for a Workshop on Harmonization and Equivalence for Organic Agriculture in Asia. The Workshop was convened under the auspices of the FAO/IFOAM/UNCTAD Global Organic Market Access project in order to discuss organic trade development in Asia through equivalence, harmonization and other forms of regional cooperation.

RECOGNIZING THAT:

● Organic agriculture contributes to the achievement of the UN Millennium Development Goals and in particular to food security, rural livelihoods and environmental sustainability, including adaptation and mitigation of climate change – as reported by the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), the Asia Development Bank and others.

● The organic sector in East, South-East and South Asia (hereafter referred to as the “Region”) is growing dramatically in terms of production, domestic markets and international trade. Although initially driven by exports to the EU and USA, markets for organic products in the Region are expected to continue to grow due to domestic and international demand, as well as intra-regional trade. Imports play an important role in the development of domestic organic markets and value-added processed products.

● The organic sector in the Region includes seven national regulations, several national and private standards, 154 domestic certification bodies and some 50 foreign certification bodies. With a diverse mix of scenarios – from highly developed regulatory frameworks to non-regulated developing markets, including government certification programs, as well as international and local certification bodies operating to national requirements and/or private standards – solutions should be inclusive to facilitate recognition of organic trade throughout the Region and beyond.

● It is critical to facilitate organic trade and prevent potential technical barriers to trade in the Region. The Asia organic market, including exports and imports, could avoid constricting the future growth of the sector through recognition of the various organic claims.

WE SEEK TO:

● Facilitate organic trade in the Region, with a view to enhance organic production and commercialization, especially by smallholders.

● Develop a framework for cooperation on organic labeling claims in the Region, which:

(i) is suitable to address various degrees of sector development and regulation in organic production, in accordance with domestic laws and specific circumstance;

(ii) allows participation of countries with non-regulated markets;

(iii) reduces duplication and cost of certification;

(iv) does not compromise prior agreements and the ability to access external markets;

(v) does not unduly marginalize poor farmers (grower group production base);

(vi) addresses imports from outside the Region (e.g. from the EU and USA) and within the Region, based on equivalence and harmonization of regulations and public-private cooperation on certification;

(vii) uses the tools and recommendations of the International Task Force on Harmonization and Equivalence in Organic Agriculture, i.e. EquiTool and IROCB.

WE THEREFORE AGREE TO:

● Create an open-ended public-private network for transferring knowledge and paving the way towards a framework for regional cooperation on organic labeling and trade;

● Establish a regional working group of interested parties to spearhead the development and implementation of harmonization, equivalency and cooperation arrangements. More specifically:

(i) Develop a regional organic standard through a public-private consultative process. This Asian Organic Standard will include production, processing and labeling and will be based on core international norms and regional minimum requirements. A sub-working group (composed of the participants from Bhutan, China, India, Malaysia, Philippines and Thailand), supported by GOMA, is being established to identify technical, protocol and funding requirements for consideration by the regional working group, which will meet at BioFach India/India Organic, in December 2010.

(ii) Countries are encouraged to recognize equally credible organic systems, and to initiate multi-lateral and/or bilateral discussions on equivalency using EquiTool and IROCB. Indonesia and Philippines are considering to test EquiTool in assessing their systems’ equivalency. It is recommended to promote the recognition of IROCB as a sector-specific adaptation of the future ISO 17065.

(iii) Promote further cooperation among accreditation and certification bodies. Certification bodies (CBs) recommended that sub-contracting and re-certification be recognized as good practices for CB-to-CB collaboration. Certification Alliance, which already undertakes recognition of competence among eight certification bodies, will seek to harmonize public and private organic standards with others by using EquiTool, before the Organic World Congress in September 2011.

●Request GOMA to undertake two comparative studies on organic standards and certification requirements in the Region.

ADOPTED: 29th May 2010

Workshop participants came from Bhutan, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, Philippines, Thailand and Vietnam.

Main sources for this article:

■ BioFach China 2010 Conference

■ Bio-Markt.Info

■ GOMA: Newsletters and Web Sites

■ IFOAM: The Organic Business Guide

■ IFOAM Japan: Report on the Organic Market in Japan

■ Organic Monitor

Conclusions and Outlook

Organic Agriculture in the World

The demand for organic products was not much affected by the global economic crisis.

Organic agriculture is continuously growing. According to recent surveys presented at BioFach 2010 in Nuremberg and Shanghai in well over 120 countries more than 35 million hectares are managed organically by an estimated 1.5 million producers. The true figures would be more than double taking into account that the majority of farmers using organic methods are not yet certified. In addition to organic farmland, there are over 65 million hectares of registered areas for organic wild collection projects, mainly in Europe, Africa and Asia. The total collection area is probably much larger because not all regions and projects have been surveyed and identified.

The countries with the largest organic areas are Australia, China, Argentina and the USA. With the support of the government and international organizations the organic agriculture and production in India is rapidly increasing and serves as a base for BioFach India.

Due to many new EU member states and growing demand, organic farming in Europe showed a steep increase. The leading countries are still Italy, Spain and Germany, but there is also much growth in Eastern Europe, especially in Ukraine. In Japan not much has changed and the estimated organic farmland is still somewhere between 5,000 to 6,000 hectares.

The International Organic Market

The European market for organic food and beverages is the largest in the world, followed by North America. Both markets continue to grow and represent over 80% of global revenues.

Raw materials and increasingly also processed goods are imported in large volumes from Australia, Africa, Asia and Latin America.

The consumer demand for natural and organic products is increasing all over the word, and the retail sales volume is estimated at 50 billion US-Dollars. It is difficult to obtain exact figures because consumers and retailers in many countries (especially in Asia) do not distinguish clearly between organic and natural products.

For most countries and markets it is difficult to obtain specific information and exact data about organic production, exports and imports. New Zealand is a rare example of a country that tracks organic export data.

Because of high retail prices and low incomes for the majority of the population the markets for organic products are only growing slowly in developing countries. However, there are also some exceptions in Asia, in particular in the Middle East, Japan, Korea, Taiwan, Singapore and major cities in China including Hong Kong.

In Japan (and other Asian countries) most consumers think about organic products — even if they can clearly distinguish between natural and organic — mainly in terms of consumables. However, there are many other non-food natural products, such as cosmetics and body care products, remedies and supplements as well as natural textiles, such as organic cotton.

Market and New Developments in Japan

Japanese people have a strong interest and long tradition in consuming natural, healthy and nowadays in particular “safe” food. Therefore, there is a potentially huge market for such products. However, the awareness for certified organic products is still rather low and the retail prices of most items are too high for the ordinary housewife. Other obstacles are a rather limited range of organic products which are available in specialized shops and (to an even lesser degree) at major super markets and retailers.

However, there are several indicators that Japan will make progress with organic products.

IFOAM Japan in cooperation with a team of experts has conducted an extensive survey about the Japanese organic market. The results were published this summer (in Japanese).

The Japanese Ministry of Agriculture, Forestry and Fisheries has started this year a project for the promotion of organic agriculture and products. In an effort to bring farmers/producers and buyers together, this project includes a group pavilion at BioFach Japan where both sides can meet.

Japan has been added to the EU list of third countries whose organic certification and regulatory programs are deemed to be equivalent to the EU Organic Regulation.

The Organic Market in the Asia-Pacific Region

Participants from 12 countries in Asia, meeting at the GOMA (Global Organic Market Access) workshop during BioFach China in May 2010, have declared their intent to move forward on concrete measures to reduce and avoid barriers to the trade of organic products in their region.