Rapid growth in this sector helps spur USDA national standards proposal.

It took years of effort, but the USDA is about to settle this long-standing question once and for all: What is organic?

The government's proposed National Organic Standards leave no doubt about the answer (see sidebar). And the sweeping regulations cover organic production from the farm gate to the final processor and packager, including product labels.

"It will be the most comprehensive, strictest organic rule in the world," says Secretary of Agriculture Dan Glickman. "The need for these standards rose out of the exponential growth of organic agriculture. It is a sector that is here to stay - growing from $78 million in 1980 to about $6 billion today, with continuing growth of 20% each year. And whereas most other sectors of agriculture are losing farmers, the number of organic farmers is increasing by 12% per year. All of this is happening in response to increasing consumer demand."

A booming market. That is an understatement. And there are many examples - from producers and retailers - that underscore the broad acceptance of organic products in the marketplace.

On the producer side, the Coulee Region Organic Produce Pool (CROPP), based in LaFarge, WI, exemplifies success in this booming market. In 1988 seven area farmers banded together to market organic vegetables and dairy products under their own "Organic Valley" label. Four years later the group was selected to be the original supplier of organic milk to Horizon Organic, a fledgling organic milk marketer based in Longmont, CO.

Today the seven-member cooperative has grown to include 160 farm families in 10 states, and the Organic Valley label appears on dairy, beef, pork and poultry products. Sales hit $20 million last year and the cooperative expects to post $27 million in sales this year.

Horizon Organic is another example of near exponential growth. In 1992 when it sourced milk solely from CROPP, the private company posted $500,000 in sales. By the time Inc. magazine put Horizon Organic on its list of fastest growing companies in 1997 (it was ranked 66th out of 500), sales topped $29 million. In 1998 officers took the company public and posted more than $49 million in sales. Last year the company's sales figures hit $84.8 million, with its products available nationwide at 10,000 stores.

Like most organic products, Horizon's products first found shelf space in tiny "boutique" health food stores like Whole Foods Market, which began with a single store in Austin, TX, and Wild Oats, which opened its first store in Boulder, CO. Both retailers are now megachains with staggering sales totals. Whole Foods, which now boasts 100 stores in 20 states, racked up sales of $749 million in 1995; $946 million in 1996; $1.1 billion in 1997; $1.4 billion in 1998; and $1.6 billion last year.

Wild Oats posted similar percentage increases: In 1996 sales were $192 million, rising to $721 million last year. Both chains are now publicly owned companies.

Certainly, health food companies are no longer alone in this burgeoning market sector. General Mills introduced Sunrise cereal last year, which is produced from organically grown corn and wheat, and recently purchased Small Planet Foods, a leading producer of organic food products based in Sedro-Woolley, WA. Small Planet had $60 million in sales last year.

Why target the organic market? General Mills spokesperson Pam Becker says the company's reasoning is a no-brainer.

"Organic foods are a fit with our strategic growth," Becker says. "Demand has been growing 20% per year, and the fact is there are a lot of consumers who care and they want a choice. So we are answering that demand. In fact, we are test marketing organic flour right now."

Paving the way. To help farmers tap this growing market, some progressive states are helping them get certified. In Minnesota, farmers can apply for cost-share money to pay for the required inspections.

"Last fall we began reimbursing organic farmers for two-thirds of the inspection costs," says Prescott Bergh, organic production coordinator for the Minnesota Department of Agriculture. "We had 187 applicants for the program, and my best guess is that currently there are 300 to 400 organic farmers in the state.

"We looked at what Europe is doing, and found out that they are about 15 years ahead of us. Many European countries have a stated goal that they want 10% of their acreage organic, and they are helping farmers get there. We are headed in the same direction."

According to Agriculture Secretary Glickman, the U.S. government is stepping up to the table to encourage organic farmers. He says the budget proposal includes $5 million in research money for organic agriculture; a pilot organic crop insurance program is being initiated; and a cooperative agreement with the University of California-Davis will investigate placing organic products in a USDA marketing order program.

With the new National Organic Program, Glickman says, "We are smoothing the way for even more growth in organic agriculture and furthering the development of another new market for farmers. [The program] also will help organic farmers more easily export their products because our trading partners will know exactly what they are getting."

For more information, visit www.ams.usda.gov/nop/.

Global sales. To be sure, the international market is ripe. Consider what the U.S. Foreign Agricultural Service (FAS) has to say about international supply and demand.

Japan. The FAS predicts sales of organic products will hit $3 billion for 1999. An FAS report states, "This is an untapped opportunity for U.S. exporters. Due to the difficulty of growing organic foods in Japan coupled with rising demand, imports of organics [to Japan] could rise dramatically in the near future. Imports account for less than four percent of current sales."

New Zealand. New Zealand's organic producers and processors have formed the Organic Products Exporters Group (OPEG). The group currently exports $15.9 million worth of organic products but plans to increase exports to $35.7 million by 2001. Japan, the United States and European countries now take nearly all exported organic products. New target markets include Malaysia, Singapore and Taiwan.

Taiwan. Taiwan's annual imports of organic foods are valued at about $9.7 million. The FAS expects annual sales of organic products to hit $19.4 million in the next three years. At this time, 40% of Taiwan's imported organic products come from Germany.

Germany. The governments of Germany and other European Union countries have subsidized organic production since 1989. Farmers receive $44/acre to convert to organic production. Total organic food sales are estimated at $2 billion, and the FAS reports that "strong competition for U.S. suppliers is arising from China."

Argentina. According to an FAS report about Argentina, the country "is in a privileged position to develop organic agriculture due to its diverse climates and ecological conditions for various crops, and its extensive production systems, which have traditionally used small quantities of agrochemicals and which do not require significant changes for the conversion from traditional to organic agriculture. Approximately 85% of Argentina's organic production is exported, estimated at $20 million."

The USDA's proposed standards affect every aspect of organic food production, beginning at the farm and progressing to processors, manufacturers and packagers. Farmers must be certified by annual inspections, and before qualifying, they must have an approved farm plan. The entire proposal consists of 650 pages, but here are the basics:

Crop standards * Land that is to be planted to an organic crop must have had no prohibitive substances applied to it during the preceding three years. * An approved farm plan must include crop rotation. * Genetically engineered organisms are not allowed, and sewage sludge cannot be applied. * Soil fertility and crop nutrients must be managed with tillage and cultivation, supplemented with manure, crop waste and allowed synthetic materials. * Pests, weeds and diseases must be controlled primarily with physical, mechanical and biological controls. When necessary, a biological, botanical or allowed synthetic substance can be used.

Livestock standards * Food animals must be raised on an organic operation from birth. * Producers must feed 100% organically produced feeds to livestock but can provide additional vitamin and mineral supplements. * Hormones and antibiotics are prohibited. * Preventive management practices, including the use of vaccines, can be used to keep animals healthy. Producers are prohibited from withholding treatment from a sick or injured animal, but animals treated with a prohibited medication must be removed from the organic herd. * All organically raised animals must have access to the outdoors, including pasture for ruminants. They can be temporarily confined only for health and safety reasons, or to protect soil or water quality.