Why is organic food more expensive than conventional food?

Certified organic food. Certified organic products are generally more expensive than their conventional counterparts (for which prices have been declining) for a number of reasons:

• Organic food supply is limited as compared to demand;
• Production costs for organic foods are typically higher because of greater labour inputs per unit of output and because greater diversity of enterprises means economies of scale cannot be achieved;
• Post-harvest handling of relatively small quantities of organic foods results in higher costs because of the mandatory segregation of organic and conventional produce, especially for processing and transportation;
• Marketing and the distribution chain for organic products is relatively inefficient and costs are higher because of relatively small volumes.

As demand for organic food and products is increasing, technological innovations and economies of scale should reduce costs of production, processing, distribution and marketing for organic produce.

Prices of organic foods include not only the cost of the food production itself, but also a range of other factors that are not captured in the price of conventional food, such as:

• Environmental enhancement and protection (and avoidance of future expenses to mitigate pollution). For example, higher prices of organic cash crops compensate for low financial returns of rotational periods which are necessary to build soil fertility;
• Higher standards for animal welfare;
• Avoidance of health risks to farmers due to inappropriate handling of pesticides (and avoidance of future medical expenses);
• Rural development by generating additional farm employment and assuring a fair and sufficient income to producers.

Non-certified organic food. In many developing countries, there are agricultural systems that fully meet the requirements of organic agriculture but which are not certified.

Non-certified organic agriculture refers to organic agricultural practices by intent and not by default; this excludes non-sustainable systems which do not use synthetic inputs but which degrade soils due to lack of soil building practices. It is difficult to quantify the extent of these agricultural systems as they exist outside the certification and formal market systems.

The produce of these systems is usually consumed by households or sold locally (e.g. urban and village markets) at the same price as their conventional counterparts.

Although the uncertified produce does not benefit from price premiums, some cases have been documented where non-certified organic agriculture increases productivity of the total farm agro-ecosystem, and saves on purchasing external inputs.

In developed countries, non-certified organic food is often sold directly to consumers through local community support programmes such as box schemes, farmers markets and at the farm gate.

These allow the producer to know exactly what the consumer wants, while the consumer knows where the produce comes from and in the case of box schemes, saves on transport costs through delivery of produce to their homes.

In developed countries, non-certified organic produce usually carries a higher price than its conventional counterpart, in accordance with the specific consumer willingness to pay.