SUPPLY AND DEMAND OF ORGANIC FOOD

Supply and Demand of Organic Food

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Executive Summary

Organic foods are one of the segments that showed tremendous growth in the world, particularly US. This segment grows at a rate of 20 percent per year. The market of North America and Latin America plays a vital role in fulfilling the demand of Organic products, especially in the fruit and vegetable markets. In the next 5 to 10 years, there is an enormous growth is expected in the organic market of fruits and vegetables, approximately growth rate between 10 - 30 percent. The reason of this immense growth in organic fruit and vegetable demand is the increasing awareness among consumers about organic products, and value-added supply chain distribution network. Additionally, organic products on the export received a premium of about 10 to 50 percent.

Nowadays, every food product comes in organic form, but the demand is so high as compared to the supply. The main risk and uncertainty associated with organic products are due to its seasonal production, which increase the gap between supply and demand of these products, mainly because of the unavailability of timely information regarding quantity and price of organic food products, limited channels of distribution, and high prices of organic food products over non-organic products. However, initiatives had taken such as forward integration in the supply chain that eliminated non-value added transaction cost within the system. Furthermore, government took initiatives of doubling the size of US organic acreage, and restructured the market of organic products in United States.

Supply and Demand of Organic Food

Introduction

One of the most growing segments of agriculture is of organic foods. Organic foods are grown without the use of artificial or synthetic chemicals. Every year the market of organic foods is increasing at the rate of 20 percent a year. This trend of increase is particularly very high in United States of America. The healthy growth was witnessed in the segment of organic foods, particularly in the market of North America. The North American market also became leader in organic foods market and left behind the European market. However, there was an immense growth in the organic market of US; but the market was unable to fulfill the demand, and resulted in less supply as compared to the demand. The foremost source of organic fruits, seeds, vegetables, nuts, meat and ingredients are Latin America, and this market is also showing massive growth. The reasons of this rapid increase in this segment are because of the growing consumer awareness about organic foods, and the wide-spread distribution network. Nowadays, Organic foods are easily available in food retailers under private labels. In 2011, this segment of agriculture expands at the highest growth rates. Although, inflation hits the food market, and the prices of organic foods increased drastically, as a result, large producers of organic food locked their supply of organic ingredients (Hall et al., 2006).

Discussion

The appetite of US for organic food is so big that supply cannot cope up ...