PART II - THE POTENTIAL CONTRIBUTION OF ORGANIC AGRICULTURE

5.0 - Organic Farming and the Sustainability of NZ Agriculture

"Sustainability" in general terms refers to the ability of a system to endure. In the case of agriculture, this means the ability to continue to produce, within socio-economic and bio-physical constraints. Another component is typically added to this definition: the absence of unacceptable effects on other people or the environment. This is a central part of the definition of sustainable management in the Resource Management Act 1991 and of the philosophy underpinning the entire Act.

In consideration of these principles, Government adopted the following definition in the position paper Sustainable Agriculture:

Sustainable agriculture is the use of systems and practices which maintain or enhance:

  1. the ability of people and communities to provide for their social and cultural well-being;
  2. the economic viability of agriculture;
  3. the natural resource base of agriculture;
  4. other ecosystems influenced by agricultural activities; and
  5. the quality and safety of food and fibre.

The first three points of the definition relate to the durability of the production system itself; the fourth point to the effects on the environment; the last point relates both to effects on people (food safety) and to a prerequisite for economic viability (product quality). Where these criteria cannot be met, systems and communities may need to change.

As indicated in section 4 of this paper, organic farming aims to create a farming system which is sustainable, ie which maintains the resource base so that production can be continued indefinitely. Organic farming also aims to avoid adverse impacts on the environment. Further objectives are to produce healthy crops and animals under conditions which reduce infection by pests and diseases and to produce safe food which contributes to human health. Organic farming contributes to these four components of sustainability through its emphasis on biological processes for the maintenance of soil fertility and plant and animal health. The degree to which organic farming achieves these goals varies between different soil, climatic and enterprise types and according to the managerial skills, philosophy and aims of the farmers.

The question of whether or not organic farming is a sustainable system depends on how sustainability is defined as well as on the particular organic system. MAF sees sustainability as a long-term goal which will evolve as community values change and new information and farming practices become available. MAF views organic farming as one of a number of possible systems that can move NZ farming practices towards the goal of sustainability. Organic farming is an attempt to establish guiding principles and production practices for a type of sustainable agriculture. It one of the few approaches to have achieved global recognition and significant legislative backing.

It should be noted that, if organic matter is transported off the farm as produce, the elements which have been exported must be eventually be replaced for the system to be sustainable. Organic farms may import organic material from off-farm to replace nutrient loss through product sales. Providing macronutrients such as phosphorus by way of organic fertilizers is not a sustainable practice for large-scale farming but industry standards acknowledge this requirement and allow the use of some fertilisers eg natural ractive phosphate rocks. Some submissions uggested that adoption of organic farming by a large number of farmers might eventually result in a lack of available inputs to recycle because the majority of products are exported.

Some writers, such as MacRae et al. (1990) , have pointed out that most organic farmers are only part of the way along a continuum between input dependant farming and sustainable systems. They assert that to achieve an environmentally sustainable system involves redesign of the whole farming system rather than just substituting some practices for others. New Zealand industry standards ensure that organic farmers are a considerable way along this continuum. Furthermore, most New Zealand farming systems are more sustainable than many Northern hemisphere systems.

Other writers and scientists view sustainability differently, eg Fisher, (1989) [Pesticides: issues and options for New Zealand, A discussion document prepared for the Ministry for the Environment May 1989] points out that a system using some chemical inputs can be more economically sustainable than a strictly organic system. Such a system may be more acceptable to conventional farmers as it would involve less risk. In MAF's view, different circumstances and problems will require different solutions. In some cases, wholesale change may be necessary, but in most cases, specific responses to identified issues are more likely to be appropriate. MAF seeks to encourage a renewal of the broader idea of farming, away from emphasis on production and profit, to include a longterm visions of the health of the farm, the invironment and the community.

5.1 - Ways that organic farming contributes to sustainability

The ability of communities to provide for their social and cultural well-being depends to a large extent on having sufficient income. The extent to which organic farming provides this income depends on how successful it is in maintaining basic farm resources, in particular the soil, in a condition that ensures sufficient ongoing production. Income is also dependent on having markets which provide a viable return for the produce.

Organic farming seeks to improve and maintain soil fertility and reduce soil erosion and degradation through biological processes and management practices rather than chemical inputs. A report analysing some of the environmental impacts of organic agriculture has been prepared for MAF Policy. Some of the report's findings are incorporated in this text and the executive summary is included as Appendix V. Some of the methods practiced by organic farmers are also used by some conventional farmers. Specific practices that improve enhanced sustainability include:

  1. the recycling of nutrients, such as through mixed animal and cropping systems; use of animal and green manures and other wastes, composting which results in waste minimisation and reduction of pressure on land fills; mixed cropping; crop rotation; nitrogen fixation;
  2. addition of organic matter, maintenance of vegetation cover and careful cultivation. These practices tend to improve and maintain soil fertility and structure, resulting in less nutrient loss; less breakdown of clays through saturation with inorganic ions; less erosion; better water retention; and less environmental pollution such as contamination of groundwater by nitrates and pesticides or eutrophication of lakes;
  3. adopting a system which suits the climate and soil type eg appropriate stocking rate;
  4. planting a wide range of species for biological diversity, and use of trees and appropriate revegetation;
  5. biological plant protection methods which are self perpetuating or are produced from renewable resources, in contrast to conventional plant protection methods which lead to destruction of many beneficial organisms, growing of crops in unsuitable places, and development of pest resistance to chemicals;
  6. biological protection of harvested and stored products e.g. dry heat treatment (some current methods of post harvest disinfestation use imported highly volatile chemicals, some of which are ozone depleting);
  7. reduced cost of inputs;
  8. non-use of most agricultural chemicals, resulting in a lower risk of unforeseen disasters such as widespread environmental damage and disturbance of the ecological balance; and
  9. changing attitudes of other farmers, e.g. towards impacts on the environment, and encouraging more sustainable methods in conventional agriculture, such as organic fertilisers and biological pest control.

A degree of sustainability is ensured by the organic certification systems privately operated by BPCC and BDFGA. Only farms that have systems in place that promote proper recycling of nutrients through biological processes are certified as organic or bio-dynamic. It is these processes, in addition to the exclusion of non-organic inputs, that makes a system organic.

5.2 - Evidence of sustainability

The sustainability of a system can only be measured over a long time period. Consequently, although there is considerable qualitative evidence on existing organic farms, little quantitative data is available, particularly for NZ. Studies in Europe and the US have indicated that organic systems do maintain soil structure and productivity over long periods. Reganold (1989) [ Reganold,J.P., R.I Papendick, J.F.Parr Sustainable Agriculture. Scientific American 262 No 6 pp112-120 June 1990.] compared the soil characteristics of two neighbouring farms, one conventional and one which had been organic since 1909, in the state of Washington, USA. He found the soil on the organic farm to have more organic matter, more nutrients, more microbes, and better structure, resulting in less erosion and therefore substantially more topsoil remaining. Wheat production on the organic farm was slightly below the paired conventional farm, but above the regional average for similar conventional farms.

Reganold et al (1993) [ Reganold, J.P., A.S.Palmer, J C Lockhart, A.N. MacGregor Soil quality and financial performance of biodynamic and conventional farms in New Zealand. Science and Growing Today May 1993.] compared some paired conventional and biodynamic farms in New Zealand. They found that: "The biodynamic farms proved in most enterprises to have soils of higher biological and physical quality; significantly greater organic matter content and microbial activity, more earthworms, better soil structure, lower bulk density, easier penetrability, and thicker topsoil." For example, the biodynamically farmed soil was found to average 175 earthworms per square metre compared with 21 on the conventionally farmed soil. Reganold stated that the most likely reason for this difference is that earthworms are particularly affected by pesticides. Earthworms improve soil structure and assist nutrient recycling (Lampkin 1990) [ Lampkin,N. Organic Farming. p502f Farming Press Books, Ipswich,UK (1990).] .

Various other comparisons and experiments are underway in New Zealand. Lincoln University experimental horticultural blocks and blocks at Levin Horticultural Institute indicate that soil fertility can be maintained through an organic system, although some elements need replenishment. Experiments at the Crop and Food Research Centre at Lincoln by Goh and Nguyen (1991) [ Goh, K.M., M.L.Nguyen Fertiliser needs for sustainable agriculture. Sustainable Land Management Conference 1991 To be amplified .] have suggested that soil nutrient reserve and plant residues play a major role in replenishing the pool of readily-available nutrients present in the soil. The value of mixed-herb leys for animal management are being examined. In particular, introduction of various herb species and grazing regimes at Flock House and Winchmore Research Stations are being shown to reduce animal parasite infestation [ MAF Technology agroecology programme annual reports.] . Some results from establishing floriferous understoreys in orchard management have been demonstrated (Daly and Thomas, 1992) [ Daly M.J. and W.P. Thomas Organic apple production: Understorey management, some preliminary findings after the conversion from conventional to organic management. IFOAM conference proceedings, Sao Paulo, 1992.] . Initial results have included a fourfold increase in earthworm numbers, and a large increase in insect population including beneficial insects such as mite predators.

The knowledge gained by practising organic farmers and the reported viability of their farms will be useful in assessing the value of organic methods. Further experiments and on-farm research are needed to provide more information.

Certification standards are necessarily a compromise to enable sufficient production for economic sustainability and to enable phytosanitary standards to be met. Only those inputs which cause minimal interference to the biological processes and minimal residue effects on food are allowed. Some presently allowed remedies are compromise solutions. For example, copper sulphate, which is used for control of plant pests, can cause russeting of apples and build-up of copper residues in the soil. However, standards are continually evolving as new technology and knowledge becomes available. Technological innovation will increase the availability of viable alternative practices and thus sustainability.

5.3 - Environmental effects

Organic farmers aim to minimise adverse effects of farming on soil and vegetation resources and on the environment in general, through adopting enterprises and management techniques appropriate to the particular topography, soil and climate types (Manhire 1993) [ Manhire,J. Analysis of the environmental outcome from organic agriculture. unpublished departmental report 1993.] . For example, practices such as trampling of waterlogged pasture and continuous high input monoculture are avoided and greater species and spatial biological diversity is encouraged. Organic farming generally has fewer off-farm impacts on other eco-systems than conventional farming. There tends to be less run-off of nutrients and pesticides and less pesticide spraydrift. Organic standards aim to reduce the risk of environmental contamination caused by runoff of soluble fertilisers as well as to decrease the levels of erosion, by appropriate landuse. However, not all environmental effects are specifically addressed by organic production standards. Organic farming does not necessarily contribute to the sustainable use of all non-renewable resources involved in farming, such as fossil fuels.

5.4 - Financial sustainability

MAF considers financial sustainability an important component of sustainability. In some assessments in Europe, organic farms have been found to be equally or more profitable than comparable conventional farms (Lampkin 1990). The study of NZ farms by Reganold et al (1993) found that biodynamic farms were just as often financially viable as their neighbouring conventional farms and representative conventional farms. Some biodynamic farms had greater and some lower gross margins than conventional counterparts. Gross margins showed less annual variation on biodynamic farms than on conventional farms. Organic farmers generally spend less on external inputs.

Some farms growing organic peas for Wattie Frozen Foods in 1992/93 obtained greater gross margins than those growing peas conventionally. The 30% premium obtained more than compensated for the average half a tonne/ha lower yield. On average, however, economic returns can be expected to be similar or slightly lower than from conventional farms (Lampkin, 1990).

Proponents of organic farming submit that it is more viable economically than conventional farming when all costs and benefits are taken into account. For example, nutrient runoff causes excessive plant growth in waterways, which decreases the value of lakes, rivers and estuaries for a variety of users. If costs such as these were charged against farmers, it is argued, it would be seen that organic farming provides greater economic benefit to society. This calculation cannot be done because the off-farm impacts have not been quantified, but there is little doubt that the economic viability of organic farming is understated, and that of conventional farming overstated, by not counting these benefits and costs. MAF supports policies which encourage farmers to take all costs and benefits into account. MAF also supports the development of techniques for landusers to monitor the condition of the resource base.

In addition, organic farming is likely to contribute to financial sustainability through avoiding trade restrictions from countries demanding greater environmental awareness by producers, and through producing high quality produce for a particular market. Organic farmers avoid the problem of build-up of resistance of pests to pesticides. However, it can be more difficult for organic produce to meet phytosanitary requirements. There is also the danger that badly managed organic farms could act as reservoirs for pests and diseases.

Many organic farmers also believe that their system is more sustainable than conventional systems in other ways, eg that organic food products maintain human health. This belief is shared by a particular consumer group. The issue of food safety and quality is discussed later in this paper.

MAF has concluded that organic farming can make a substantial contribution towards sustainability, at least in many situations. The degree of long-term sustainability of organic farming is hard to assess, but in many cases it is more sustainable than conventional methods in terms of physical productivity of the soil and elimination of off-farm impacts. Many organic farmers have also demonstrated financial viability. Other systems may prove to be more sustainable and be better able to overcome such problems as phytosanitary requirements for export, but organic methods can make an important contribution to the sustainability of NZ agriculture.

6.0 - Marketing opportunities for Organic Products and Contribution to Market Access and to Increased Export Earnings

Maintaining or increasing producer incomes and export earnings from agriculture will depend on NZ's ability to supply products that meet consumer demand. In recent years there has been a marked trend in consumer awareness and concern, particularly in Europe, North America and Japan, about the wellbeing of the environment, human health and animal welfare. There is increased concern that many modern farming practices result in degradation and pollution of the environment and pose health risks through contamination of food by chemical additives and sprays.

Consumers want more information about food origin and production methods. For a growing number of consumers, organically and biodynamically produced food meets their concerns about residues and other environmental issues. Some consumers are committed to buying certified organic produce and will pay premium prices. Several governments have responded to this demand and have legislated definitions or standards for organically grown products. However a larger number of consumers are less committed to organic products. Such consumers could buy products from a range of production systems. Market growth will depend largely on how much of the market for environmentally friendly, low residue products is supplied by organic products. Whatever the future growth, there are opportunities now for New Zealand farmers to supply export markets as well as the domestic market.

There have been many consumer surveys and estimates of demand for organic food. The NZ Trade Development Board set up a working group to investigate this literature. The group concluded that much of the available data is incompatible between markets or unreliable. However the group also concluded that the export markets for organic products are growing.

Estimates indicate that consumption of organic food and beverages has increased quickly in recent years. The estimated total retail sales value in 1990 of organically grown products is NZ$1.5 - 6 billion worldwide. Estimated value of international trade is $75 - 300 million of which NZ's share is about $3million. The TDB group concluded that NZ's organic exports could increase to anywhere between $8m and 125m by the year 2000 depending on rate of market growth and growth in NZ's market share. The volume of NZ exports will depend on how well production difficulties are overcome; whether markets are actively developed; and growth in supply in importing countries, particularly Europe.

The TDB report identified particular products and markets that had greatest potential for New Zealand to supply, taking into account the production difficulties. Horticultural, processed and beverage product exports to USA, Japan and Europe show greatest promise.

The area under organic farming in Europe has increased from 100,000 ha in 1987 to 250,000 ha in 1992 but is still very small and insufficient to meet demand. Demand is already increasing in other countries such as Japan, where marketers report that food quality is of great importance and organic food is perceived to have better taste than other food. The rapid increase in demand and lack of supply provide significant opportunities for New Zealand farmers, if this supply is not met by increased supply within Europe. Lampkin (1991) [0 Lampkin,L. Submission on MAF's Proposed Policy on Organic Agriculture, 1991.] has pointed out that New Zealand has the advantage that its farming systems are more readily adaptable to organic farming than many European systems. New Zealand also has the advantage of less air pollution than in Europe.

There is growing recognition that if New Zealand is to maintain even its present level of export earnings from agricultural products, it must respond to this change in demand by moving towards a more environmentally sustainable way of farming and produce food containing little or no chemical residues. Organic farming also provides an opportunity for market differentiation to cater for a specific niche market. Developing "environmental value added" products is an alternative to increasing yields in order to maintain incomes.

However, perceptions of the potential returns to NZ from export of organic products by marketers and marketing institutions vary. Some consider that the demand for organic products will remain small and possibly be short-lived. They believe that market research and development resources should be concentrated on the major part of consumer demand. This demand will trend towards products produced with less chemical inputs and in a more environmentally sustainable way, but not to the extreme of organic or biodynamic products.

Other marketing institutions such as the Apple and Pear and Kiwifruit Marketing Boards, and also several private businesses, consider the market for organic products to be a valuable niche market attracting considerable premiums, with the main problem the ability to obtain sufficient supply. Wattie Frozen Foods is a notable market leader in this respect. Wattie is investing in research and development to increase supply of organically grown vegetables for processing for export markets.

Many conventional farmers consider that organic farming is just for lifestylers, but some submissions showed that the perception is changing. This change in perception is also occurring in Australia [1 Australian Organic News Vol 1 No 6 p6.] . Some New Zealand farmers are finding that organic farming can be a viable, market based option. The size of European and US markets relative to the total food production by New Zealand means considerable market opportunities, even if markets remain relatively small.

There is also scope for developing the domestic market for organic produce. At present organic produce is mainly sold through specialist shops and cooperatives. Submissions reported that some organic produce is sold by auction, undifferentiated from conventional produce. However, submissions did not cite the lack of domestic marketing channels and consumer consumption as a particular problem. Development of the domestic market would improve the supply base from which to develop exports.

7.0 - Constraints to the further development of organic farming

Supply constraints The small number of organic farmers cannot supply sufficient, regular product to enable much further development of markets. Large scale retailers, such as supermarkets, require regular, guaranteed large quantities. It takes several years (usually 3 - 5) to convert to fully certified organic farming, so NZ farmers will have to convert soon if they are to benefit from the market opportunities that already exist.

Technological Constraints Although existing organic farmers have considerable experience, mainly based on practices and research from Europe, new technologies could enhance the environmental sustainability and financial viability of organic methods. Many techniques need further testing and adaptation for the range of NZ conditions. New technologies are also needed to meet phytosanitary and storage requirements for export of fresh produce. Conventional farming has tended to become increasingly reliant on a reduced range of varieties, and some modern varieties have low resistance to pests and diseases.

Conversion Constraints The perceived risk involved in converting from conventional to organic farming is a major constraint at present. More information as well as a change in the way of thinking is needed. Organic farming requires a greater awareness and understanding of biological and ecological processes and interactions, and a longer term approach to making the system work without depending on chemical remedies. Although a farm may attain organic certification within 2 - 3 years, it may take longer for soil biological processes to fully develop (Springett). There are risks of lower yields, especially during the transition period. However, some established organic farmers have indicated in submissions that they achieve satisfactory production and consider these constraints are more perceived than real. Management ability is likely to have the greatest effect on yields during transition. Organic farming suffers from a lack of social acceptability in rural communities, as it has been associated with "lifestyle" rather than commercial farming. This has created a further constraint to conversion.

Institutional constraints Government departments and many marketing institutions lack knowledge about organic farming and its potential contribution to sustainability. Organic farming is also seen by some as a threat to conventional farming and products, because any claims that organic products are "safer" or higher quality implies that conventional produce is less satisfactory. Some present structures are not conducive to different approaches and products. For instance the new science funding structure in New Zealand does not encourage the multidisciplinary, systems approach needed for organic farming research.

Lack of information and education Many submissions cited a lack of information for farmers about organic methods and potential returns. Few farm consultants can provide advice on organic agriculture. Few schools teach ecological practises in agriculture and horticulture, although an increasing number of tertiary institutions are including ecological and organic options and information is increasingly available.

Market access constraints To supply export markets, producers must meet overseas certification requirements, including overcoming the difficulties of fulfilling phytosanitary and storage requirements. They must also establish a regular, reliable and sufficiently large supply. The same phytosanitary requirements by importing countries apply to organic as to conventional produce. For instance, major importing countries have strict requirements for freedom from codling moth for apples and greedy scale for kiwifruit. The Apple and Pear and the Kiwifruit Marketing Boards have had difficulty in sourcing organic fruit which meets phytosanitary requirements. Export of processed products overcomes most of these problems and may provide the best opportunities for export of organic produce.

There is uncertainty of the future demand for organic products by farmers, marketers and processors. For products for which statutory or voluntary marketing and processing arrangements exist, submissions have pointed to a reluctance by some of the institutions involved to accommodate or assist the marketing of organic products. This is probably because of a perception that supply is too small and unreliable and future demand uncertain and that differentiation of organic products would threaten the acceptability of conventional products. Some institutions are now actively marketing organic produce, as discussed below.

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