The New Horizon for Organics A Market Outlook

The New Horizon for Organics: A Market Outlook of the Effects of Wal-Mart on the International Organic Market Georgia Clark Parr Rosson Flynn Adcock Dwi Susanto Texas A&M University Texas Cooperative Extension Center for North American Studies

Wal-Mart • • Large, global retailer Market access as well as market control 45% of US consumers shop at Wal-Mart Conventional supermarkets account for half of all organic sales Wal-Mart aids companies in determining what will be in demand Aims for 10% mark-up on organics Creates business expansion and encourages mergers ‘Bidding war’ has begun amongst organic suppliers to meet Wal-Mart’s demand

Organic Supply and Demand • USDA certification program increased awareness, demand • Wal-Mart creates own market niche for organics and brings more awareness • US supply can not meet demand – 10% of consumption comes from imports • Long wait to gain certification • Large farms not yet established to cater to large retailers en masse

Average Price Premium for Organic Foods in the United States Price Premium Milk, Butter Fruit 50 -100% 0 -50% Vegetables 50 -150% Beef, Chicken 100 -150% Corn, Soybeans 100 -150% • Short-run: High demand low supply • Long-run: Lower prices due to supply and demand reaching equilibrium • Milk, butter, fruit, vegetables, and durable goods are all secure prospects for Wal-Mart • Beef and fragile goods are not a viable option • Organic canned goods, textiles will certainly be imported

Future of Organics • • Loosening Regulations Easier market access Large-scale production Incorporation of organic practices into farming, not total immersion • New technology, innovations, and products