Fay writes*
The popularity of organic food has significantly increased over the past years. Many farmers have noticed the resulting business opportunities and shifted to organic production. With the amount of suppliers, competition has also increased, making the average organic food price drop. Nevertheless, due to lower crop yields, higher uncertainty and labour costs, the price of organically produced food is still 63% higher than that of food originating from conventional production.
Consequently, organic food is mostly consumed by citizens belonging to the higher socio-economic classes of the Dutch society, or by hipsters. Research has found that the most important factors incentivising these groups are the perceived health and environmental benefits accompanying organic consumption and production (Hughner et al., 2007). This same research finds that there are many consumers who share these concerns, but are reluctant to buy organic food because of its higher price.
The idea about perceived health benefits originates from the fact that organic production does not use chemical pesticides. Chemical pesticides used in conventional food production could have a long term negative impact on the health of consumers, due to the continuous intake of small proportions, or on that of farmers because of direct exposure. However, the debate about the health consequences of pesticide exposure is still 
ongoing. In addition, no evidence supporting the nutritional advantages or disadvantages has been found (Forman and Silverstein, 2012). Even though the perceived health benefits might not be as convincing, strong evidence has been found for the negative environmental consequences of conventional farming. For instance, the chemical pesticides that are used are harmful to biodiversity. Also, more water and energy is used during conventional food production, which significantly contributes to climate change (Forman and Silverstein, 2012). Furthermore, it has been estimated that due to soil degradation, agricultural land will only be productive for 60 more years . Organic production is not as damaging to the environment, as it does not make use of chemical pesticides, requires less energy and water and causes less soil depletion (Forman and Silverstein, 2012).
To reduce the negative environmental impacts of food production, organically produced food should be the norm rather than the exception. Because the prices of organic food are still higher than of conventionally produced food, a large group of consumers who actually want to consume responsibly refrain from doing so. In order to make organic food accessible for all, prices thus have to be driven down further. Making use of consumer preferences, increasing the supply of organic food can realize this. When more organically producing farmers enter the market, competition increases, decreasing the price. By making organic food accessible through the supply side of the market, the proportion of land that is farmed organically increases. This contributes to a transition to a less harmful food production system. All in all, it would be interesting to see which policy measures could be implemented to increase the organic food supply.
Bottom line: Organic food should be the norm rather than an exception, as it has a less harmful impact on biodiversity, soil quality and the climate. However, organic food is expensive, making people who want to consume responsibly reluctant to do so. An increase in the supply of organic food can decrease its price, which makes organic food accessible to all. It would be interesting to research what policy changes could generate such a supply increase.
* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).
Fay, love the topic you chose, especially since I feel part of that consumer base that perceives the added health benefits of organic foods over that of non-organic. However, even though I believe it is better, I’ve seen a report that shows that organic farming is in some aspects more resource intensive than conventional farms. It is highly dependent on what kind of crop they farm and where that farm is. Here is the link to a summary of that report if you’d like to seee it: https://ourworldindata.org/is-organic-agriculture-better-for-the-environment
Just something to bear in mind, especially for a cost benefit analysis. I hope what you find is good news for my conscience, and that report is not accurate/represents the reality in the Netherlands. So at least the local organic foods are more environmentally friendly.
Hey Patrick!
Thank you! I am personally very interested in the ongoing debate about whether organic food is better for our environment or not. I will also try to incorporate this aspect in my cost benefit analysis. Maybe I’ll find that organic production is only the case for some types of food, or that in terms of costs conventional production is actually better for our environment. I’ll tell you about my findings, so you’ll get a better idea whether your beliefs are valid ;). I will definitely read the paper, thanks again!
Heyy 🙂
Super interesting topic!
Firstly, I want to reply to what Patrick wrote. Because it’s true that it is often argued that organic agriculture is less sustainable (it uses more land per crop i.e. or organically held chicken or cows live longer and therefore they produce more GHG emissions or ammonia, which has negative impacts on the environment).
However, this is only when you look at the short-term I think. Because in the long term conventional agriculture (if you use pesticides and monocultures) ruins the land, and then there will be nothing sustainable about it anymore. I watched this really interesting documentary the other day (Queen of the Sun) about the bees for example. Here it was explained how bees (that are essential to all agriculture because without them growing food becomes very hard) die, because of the abundant pesticide use. But also because of big scale farming, because they are for example needed 3 weeks a year, to pollinate say almond trees, but then they stop blossoming and the bees have nowhere to go anymore and they die.
While with organic agriculture – you make sure you mix your crops and have more of a natural ecosystem, which means that they can stay there throughout the entire year.
I just wanted to share this small example, because I think it shows how organic agriculture can be a very good solution to so many environmental problems, but we do need to think more long-term 😉
Hey Marieke,
Thank you! I very much like that the discussion I try to add to with my paper is already taking place here. I am excited to watch the documentary, and see if I can use it for my paper.
I think it is interesting that you choose to focus on increasing the supply to decrease the price. I had never heard of that in context of organic farming. However, is the higher price of organic food not also the result of higher production costs (organic farming has lower yields than conventional farming)? In other words, I wonder to what extent the price will actually decrease by increasing supply.
Hence, what is the benefit of your approach over taxing non-organic food/subsidizing organic food or aiming to change people’s preferences by highlighting the negative environmental externalities/impacts? Maybe comparing those different policies could be interesting for a cost-benefit analysis.
Hey Jasmijn,
Thank you for your comment:)
I am really happy with your comment, the points you made and questions you asked really forced me to think about my topic again and get everything straight. I summarised my thoughts below, I hope they answer your questions.
First, I have chosen to decrease the price by increasing supply, because this way tackles two problems in my opinion. First, I am basically trying to change the preferences of suppliers, which will make the supply increase not the quantity supply. Quantity supply would increase due to a price change of the good, so due to a direct subsidy on the good. Even though more organic food is supplied the amount of suppliers is not affected. I believe that in order to cause environmental benefits the share of agricultural land used for organic production needs to increase.
You could say that I try to include, creating awareness into this measure.
You are right that this could potentially be achieved through taxing non- organic food. However, I believe that this will especially have an impact on small scale farmers, while it should actually target the bigger ones. I think a subsidy is a more positive measure that could help people out and therefore I want to explore this option in my paper.
The reason I do not aim to change peoples preferences is because there is already a lot of awareness and a large group of people who want to buy responsibly, but cannot do so because of the price. So further changing the preferences would in my opinion not be the most effective measure to take.
Secondly, it is true that part of the reason behind the high price of organic food is the higher production costs. However, a lot of excessive profits are still made in this market. Adding competition will result in more economic efficiency. You are right that in the long run these higher production costs will be an issue. But in the long run, when ideally organic food has become the norm, organic ways of increasing production could be developed.
Hi Fay,
Several folks have noted both the higher production costs associated with organics and the resource intensity questions that often plague it.
I have a different question about how we can induce supply. But first some background.
If you talk to farmers who have considered going organic, or who have gone organic, there is one part of certification that they rant about the most. As a part of becoming certified, you have to forego the use of pesticides (etc) on the land in question for 3(ish?) years. This means that for 3 years, you forego the production benefits from non-organic production, but you also don’t get the price benefits from being organic yet. This is very expensive and represents a huge barrier to entry for potential new suppliers.
IO 101 tells us that barriers to entry induce monopoly rents — exactly the issue you discuss.
My question then — is there evidence that those three years are accomplishing anything? I realize you couldn’t stop using pesticides one day, and be organic the next day. But what if it was only a year? That would tremendously reduce the costs to farmers of switching over, while potentially minimally changing the ‘organicness’ of the produce we consume. Has anyone actually done a cost-benefit looking at this? Or is there just some organic certification rule which someone made up?