Last week it was widely reported that Wal-mart has been making substantial moves into the organic food market:
Wal-Mart Stores Inc. is throwing its weight behind organic products, a move that experts say could have the same lasting effect on environmental practices that Wal-Mart has had on prices by forcing suppliers and competitors to keep up.
Response to this news has been predictably varied, but the inevitable effect, either positive and negative, will likely result from Wal-mart’s core business focus: lowering consumer prices. This sounds like welcome news, but “not everyone is acting in your best interest” as Jennifer from Cookin’ in the ‘Cuse warns.
Last August, the on-line magazine Grist asked the question: “why aren’t organics getting affordable”, despite the market enjoying substantial growth.
This is in part because of plain old economics. According to basic economic principles, in the short term, as demand grows, prices climb along with it; this small supply and growing demand is what’s now getting us, say, $4 quarts of milk. But in the long term, if the market continues to expand, consumption of organics should reach a higher plane where the cost per unit of processing, marketing, and distributing products is much lower. In other words, organic producers will build economies of scale. That price break, in turn, “could bring many more consumers into the market,” says Thomas Dobbs, a sustainable-agriculture economist at South Dakota State University. Trouble is, no one seems to know for sure when that will happen.
Wal-mart’s organic initiative could conceivably be the very catalyst driving the economies of scale, effecting the entire organic food market and agricultural “supply chain”. But this is precisely what is troubling those of us who are concerned not just with organic food as a consumer item, but with the sustainability of the entire agricultural food system. Here again “plain old economics” loses sight of the larger picture. According to Business Week:
Many farmers who have benefited from the strong demand and healthy margins for organic goods are fretting that the market’s newfound success also brings with it newfound risks. As large companies enter the market, from Kraft and Dean Foods to Wal-Mart, farmers worry that the corporatization of organic foods could have negative consequences.
Large corporations have taken sizeable steps into the organic market, even if it isn’t always obvious from the brands on store shelves. Silk, the best-selling branded soy milk, is a product from Dean Foods, the $10 billion behemoth that sells the most milk in the country. Cascadian Farms, which makes organic cereal, frozen fruits, and other products, is a brand of cereal giant General Mills. And Kraft owns Boca Burgers.
The farmers’ concerns go beyond simply pushing down prices. DeWilde and others fear that companies like Wal-Mart could try to lower the standards for what is classified as organic food and begin to import more supplies from China and other overseas markets. “Wal-Mart already sources a majority of its products from China, because it’s so cheap to produce anything there. Why not foods?” asks Ronnie Cummins, director of the Organic Consumers Assn., a nonprofit organization that promotes natural and organic food.
Clearly this is not just a “Wal-mart problem” but is a symptom of our entire food system that has been driving these economies of scale for decades.