Posted by: J Nyman | May 4, 2008

Complacency About Pricing Can’t Be Sustained

Is the organic and sustainable food movement complacent about pricing?

Over breakfast, John and I were discussing organic milk. How we got onto that topic, I don’t know. Maybe it was the carton in front of us. However it came about, our conversation hasn’t yet left me. What has caught my attention was something that John read in a newspaper he found at the bottom of our firewood box. I’m trying not to dwell on the fact that we’re still lighting morning fires in May.

This article, possibly a year or more old, left John with a sense that there was soon going to be an oversupply of organic milk in Ontario. (Having looked into it a bit, there doesn’t seem to be consensus on this.) From this jumping off point, we started to speculate what would happen to the price premium and allowance for organic dairy farms to ship more milk than other producers.

(A basic overview of the Milk Quota system: Farmers purchase units of quota that allows them to ship milk from one cow per unit of quota and be guaranteed a steady price for the milk. Quota currently costs around $30,000.00 CDN per unit. Organic farmers get to ship more milk per unit of quota than conventional, giving them more return on investment.)

Presumably, if there were no supply shortage for organic milk, the price would go down for the consumer and the premiums that the dairy farmers are getting would disappear. In theory, organic milk would cost the same as conventional milk. As someone who buys organic milk, this would seem strange in a ‘Yeah! The Grocery Bill Fairy has been here!’ kind of way. I’m not sure the organic milk producers, who spent the time and energy to struggle through a long and expensive learning curve, would feel the same.

While I don’t know if this will happen anytime soon, it did bring up the idea that organic producers in general seem to be complacent about price. If they are concerned about the future of pricing, I’ve never heard tell. I have heard some not-certified, sustainable, ethical farmers getting vocal about the true cost of food, but rarely.

And why should they worry? Organic farmers are getting a premium over conventional farmers for everything from soup to nuts. Sustainable farmers generally are, as well. And, while part of the premium they get goes into more costly production in many cases, at least some of the extra cost is a result of an unbalanced supply and demand. There isn’t enough to go around, so the price goes up.

This is precisely why we should be concerned.

To think that once supply of ‘alternative food’ (I’m lumping certified organic with sustainable ethical production under that label) catches up with demand, the prices are going to level out somewhere near to conventional produce should strike fear into the hearts of anyone affected. Sure, in the entire food industry, it doesn’t seem likely to balance out in the near (or possibly distant) future. That’s not the issue. The problem is that the current price for conventionally produced food doesn’t represent the cost of production that the farmer bears. This is why so many farmers work full time off the farm. Their full time on-farm job doesn’t make enough to pay even minimum wage.

So, if producing food alternative food is often more expensive for the farmer, you’d think there would be widespread panic at the thought of prices going down to a level that can’t sustain those who are there now. As a producer of non-certified, more organic every year, ethical food, I’m forever putting energy into educating people about the true cost of food. I’m frequently telling people that a wheat farmer makes $0.14 per loaf of bread.

Sure, alternative producers are getting a premium price compared to conventional food prices but try comparing the cost of alternative food against the cost of producing it. Suddenly, what looked like a tidy income for the farmer looks pretty meager.

And look further to the bargain basement food in our grocery stores. Somebody want to speculate on what kind of corners have to be cut to get prices that low? Anyone want to consider the health and animal welfare results of drastically cutting corners on food production? (Think about what has to happen in to production phase of cheap clothes and the level of quality that results and you’ll have a fair parallel, I’d say.)

So, yes, I’d say the alternative food producers are somewhat complacent. To be happy with prices inflated by a supply and demand discrepancy is like driving in the dark with your lights off. You might be cruising along now but you won’t see the ‘Bridge Out’ sign until you’re in the drink.

At some point, supply of good clean food will match demand. Ideally, by then, consumers will be aware that, though they thought they were paying premium will realize that what they were really doing was meeting cost of production. Including a wage for the farmer. Sounds reasonable to me.

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