Organic Poultry Gaining in Specialty Market Competition
Catherine
Greene and Lydia
Oberholtzer
Eggs and poultry are now among
the fastest growing organic food products in the
U.S., despite high feed costs and other challenges
in production and marketing. Industry analysts estimate
that organic poultry and egg sales reached $161
million each in 2005. Although organic poultry and
egg sales are still under 1 percent of total sales,
organic egg sales are expected to rise nearly 40
percent and poultry sales to more than triple by
the end of the decade.
According to national surveys,
concerns regarding health issues, the environment,
and animal welfare are driving a growing number
of consumers to seek organic poultry and eggs. While
eco-labels for poultry and eggs—such as free
range, natural, cage-free, and no antibiotics—have
proliferated for years, only the organic label is
regulated by USDA and addresses the range of concerns
cited by consumers.
Although certified organic poultry
nearly quadrupled in the U.S. between 2000 and 2005,
to over 13 million certified birds, supply still
trails demand. The result has been very high price
premiums for organic poultry and eggs. Analysis
of prices paid for organic poultry or eggs by the
“first receiver” (such as a retailer,
distributor, or manufacturer) between 2004 and mid-2006
showed average price premiums of 200 percent for
organic broilers and 278 percent for organic eggs.
Between July 2004 and June 2006, prices for organic
broilers and eggs held steady at an average of $2.17
per pound and $2.34 per dozen.
One possible reason why organic
prices have remained unchanged at such high levels
is the existence of formal or informal contracts
between poultry and egg companies and first receivers.
Given the tight supply and growing consumer demand,
first receivers are likely willing to pay high prices
to secure a steady supply.
Another reason for the high price
premiums is the higher production costs. The primary
difference between organic and conventional is the
expense of organic feed, which can cost 50-100 percent
or more than conventional feed, and account for
up to 70 percent of the cost of raising organic
chickens. Other factors behind the high premiums
may be smaller flock sizes, higher costs for replacement
pullets, and the longer production cycles in some
organic poultry systems.
At least in the near term, price
premiums will remain high as production struggles
to catch up with demand. High costs and shortages
of organic feed grains, along with a lack of processing
capacity, are limiting the short-term expansion
of the organic poultry and egg sector.
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