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Why Organic Farming needs handholding?

Organic Farming is in some way the reborn avatar of the age-old traditional farming practiced around the world. When nitrogen fertilizers were introduced way back in 1913, there was no such distinction in farming techniques. Since then a lot has changed for the farming technologies. Under the guise of getting higher yields, crop protection industry has been able to promote and push a huge amount of fertilizers and pesticides to the farmers. Today a lot more nitrogen is flowing in river waters into the oceans. The soil has lost much of its fertility. There is a need to rebuild the ecology. Organic Farming aims at rebuilding the life and diversity on the planet. Organic is regenerative in nature, thus intrinsically linked to soil health.

In agriculture ecosystems, biodiversity is important for recycling nutrients. Some bugs and insects help doing this. Organic farming creates and supports biodiversity and takes care of the overall surrounding ecology. While conventional farming is a relatively straight forward low-cost option, the chemicals in pesticides pollute air and water and destroy the biodiversity by killing good bugs along with bad bugs. Organic farming encourages crop rotation so that the soil gets time to recoup the lost nutrients, while conventional farming draws out same nutrients year after year. Deficiencies of certain nutrients create conducive environment for certain pests to permanently stay in the soil. Conventional farming has boosted the yields but worked as a destructive force for the environment.

Organic farming, that started as a movement, almost 80 years ago, has now come up to be an industry of USD 100 Billion. Today it is the fastest growing agri-business sector. Organic farming which started in Europe, has now grown much beyond Europe into every other continent. During 2019, USA retailed over USD 50 Billion worth Organic products. Concerns for health and wellness are encouraging more and more consumers to switch over to organic foods. It is encouraging to see the consumer demand growing @5%. However, the Organic production in USA is not keeping pace with it, drawing higher imports year after year.

Organic Farming has been gaining ground in the developing countries even on the background of many uncertainties and challenges. The biggest uncertainty is the premium it will get over the conventionally grown product. There are many factors influencing consumer behavior. Although the market price levels influence consumer demand, it is the relative price of organic vis-à-vis conventional that is important for consumer decision. The market price ultimately defines the margin for the organic farmers.

There are many factors influencing the production costs. The first and the foremost is the cost of certification. This issue gets multiplied when farmers need to supply products to multiple market with multiple certification costs. The problem gets acute when farm sizes are small. Organic product exporters in developing countries must decipher the maze of import regulation before quoting and confirming the order. Much of the time and energy is spent on getting the clarity on the various aspects of customs regulations. Further the exporter incurs the cost of meeting Sanitary and Phyto Sanitary requirements.

EU and US have strong organic farming sector. these are also growing markets for organic produce. These countries have ambitious plans for organic farming and strongly believe that Government has a role to play in promoting the sector. European Commission and USDA provide support to organic farmers in the form of subsidy. The positive result of such subsidy is noticeable in rapid conversion of conventional farming to organic farming.

In EU, organic farmers receive more subsidies under agri-environment and animal welfare subsidies than conventional growers. As per EU data published, in the year 2016, 56 % of EU organic land was granted this support, receiving on average EUR 139/ha and EUR 75/ha national co-financing. They also receive greater support to encourage agriculture in areas with natural handicaps.

While the subsidy has a positive impact of promoting Organic farming locally, it creates a huge entry barrier for organic import from developing countries. On the contrary the developing countries by and large do not provide any such subsidies. Thus, an excessive local support for organic movement in developed countries creates a barrier for international trade of Organic products.

“Organic Farming has been gaining ground in the developing countries even on the background of many uncertainties and challenges. The biggest uncertainty is the premium it will get over the conventionally grown product.”

- Sanjeev Shinde, International Agri Trader, Abidjan, Ivory Coast

Another mute point is the taxes levied on fertilizers and pesticides, e.g. EU levies 33% tax on herbicides, fungicides and 53% on insecticides. These taxes create level playing field in EU for farm gate costing of organic vis-à-vis conventional. In contrast, in developing countries, there are no such taxes. Moreover, developing countries are not known for any exclusive support for Organic farming. Rather they support entire agriculture sector by levying no taxes on fertilizers and pesticides. Not levying such taxes, reduces farm gate costing of conventional farming. This has an unintended negative effect on premiums of organic in their own domestic market. Thus organic farmers in developing countries, face huge uncertainty about the premium over conventionally grown products in their own country. Further, as the production volumes increase the premiums fall.

Organic farming techniques do not get faster and higher yields, rather organic farming improves soil fertility over a period. Thus, part of the reward is in the form of improving soil and biodiversity of the farm and does not reflect in the product costing of the farmer. When farmer is not owner of the land, this works as a disincentive for the farmer.

It may be a good idea for the customers to share the certification costs of suppliers particularly when they are a group of small farmers. Larger acreage of conventional farming land can be converted to organic by keeping the conversion costs low. Development of local market for organic products and providing financial support for conversion, levying taxes on pesticides and fertilizers would go a long way in building organic farming culture and community. After all, Organic farming is integral with improving soil fertility, building biodiversity, animal welfare, local employment, and community wellbeing.

Exporters in developing countries need to develop stronger marketing strategies, they must constantly balance between harmonizing with international trade requirements and local supply conditions. They need to create direct link with retailers in importing countries or create strategic partnerships. These are costly affairs to manage in absence of any support from Governments.

More importantly, organic movement needs synchronized global strategies at inter-governmental level. Each country building their own support scheme may prove to detriment of building a global supply chains for trade of organic products.

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Sanjeev Shinde

International Agri Trader, Abidjan, Ivory Coast