Organic Food – A Luxury Good?

Vegetables

Lovely organic vegetables, but will anybody be buying them in a period of falling real incomes?

It seems we like our organic food, but only when incomes are rising.

During the period of strong economic growth in the mid naughties, sales of organic food grew by up to 30% a year. However, last year demand fell by 9%. The main reason is primarily economic. The fall in demand for organic food occurred during a period of falling real incomes. This suggests that the demand for organic food is highly income elastic. (Independent Rise of Organic food curtailed by recession)

A definition of a luxury good is a good with an income elasticity of demand of greater than one. – i.e. a change in income causes a bigger % change in demand.

In the west, when incomes are falling we don’t tend to cut back on buying food. But, we can switch from expensive organic food to cheaper alternatives. This makes an easy way to reduce our weekly food bill.

Implications for Organic Farmers

Unfortunately, this makes it difficult for farmers. To gain an organic certificate requires a significant time period to prove you haven’t used chemicals. The mid naughties created an incentive for farmers to increase production of organic food because of the rising demand. However, by the time supply has increased, the demand has now fallen. This could lead to a surplus of organic food. Therefore organic farmers could face falling demand and falling prices which means they can’t justify the extra cost of farming organically.

You could make a case for government subsidising organic farming because of the positive externalities associated with using less chemicals in the production of food. But, with a government cutting spending, this is unlikely to occur.

Related

By on April 5th, 2011

9 thoughts on “Organic Food – A Luxury Good?

  1. Buying organic should not be seen as a luxury. Organic products provide consumers with the choice to avoid toxic and persistent pesticides, GMOs, synthetic dyes, and other ingredients which have been linked to such health problems as ADHD, Parkinson’s disease, asthma and cancer. At the same time, mounting evidence shows that organic foods are rich in nutrients, such as iron, magnesium, and vitamin C, which are critical to maintaining good health.

    It is also worth noting that organic reflects the true costs of food production. By contrast, when people buy non-organic products, there are hidden costs for which everyone will pay indirectly. These are called ag “externalities,” and they include damage to water sources, damage to soil resources, damage to wildlife and ecosystem biodiversity, and damage to human health from such things as exposure to pesticides.

    Finally, it is important to note that, thanks to the growth of private label products, farmers’ markets, manufacturers’ coupons, and customer loyalty programs, buying organic is easie…r and more affordable than ever. In fact, organic foods sometimes are comparably priced, or even lower, than conventional counterparts, and offer greater value, as illustrated by the price comparisons featured in the Organic Trade Association’s Savvy Organic Shopper blog (http://www.organicitsworthit.org/blog).

    Given these facts, it is clear that choosing organic is not a luxury. Rather, it is an increasingly affordable way to support your health, the health of your family, and the health of the planet.

    Organic. It’s worth it.

  2. Organic products provide consumers with the choice to avoid toxic and persistent pesticides, and they are rich in nutrients,such as iron, magnesium, and vitamin C, which are critical to maintaining good health.
    such as iron, magnesium, and vitamin C, which are critical to maintaining good health.

  3. Prices of organic foods include not only the cost of the food production itself, but also a range other benefits that are not costed in the price of conventional food such as:
    • Environmental enhancement and protection
    • Ensuring soil health
    • Water conservation
    • Enhancing Biodiversity, ensuring a vast germplasm for future generation
    • Avoidance of health risks to farmers due to inappropriate handling of pesticides
    • Consumer benefit in long term by avoiding pesticides residue intake
    • Bringing sustainability and profitability to the small farm holdings, stemming rural urban migration

  4. Many people today are fond of carbohydrates, but it’s worthwhile to know that there are some healthy, waist friendly low carb organic foods. We can use them to fulfill our calorie needs and as healthier options to daily meals.

  5. Organic living doesn’t have to mean expensive living, or more expensive food. If you’re clever with your purchases and go for special offers or reduced items nearing their sell-by date in supermarkets, you can fill your basket with organic items and still pay less than conventionally produced foods. Also it’s a question of priorities: I would rather eat organic meat twice a week, rather than non-organic meat every day. Choosing organic is an informed choice: knowing that the food I’m feeding my family is pesticide and GMO free, has a better taste and higher content of trace minerals if not vitamins than the alternatives.

    I would prefer to cut corners in expenditure terms anywhere other than food. My family is on a very tight budget at the moment, so rather than ditch the organic foods (which many people suggest I do) I still buy in season organic food, but no longer buy new clothes for myself. Second-hand clothing is now the norm in our family. It’s a question of priorities really.

  6. Pingback: Health Benefits of Organic Food | Gourmet Foods For Folk's who enjoy Food!
  7. How can people say that with a straight face?

    How the heck am I supposed to be clever when organic chicken breast is 8.99 a lb and regular is 3.29? Why should we have to go vegetarian in order to stay on budget?

    Hearing people blame regular families as not being good shoppers or just unclever is soo dehumanizing darnit. How out of touch are they?

Leave a Reply

Your email address will not be published. Required fields are marked *