Out west in Washington State, Stemilt is rapidly expanding the acreage producing organic apples. Its supply of organic apples will be up 55% in 2017, compared to the 2016 crop. Honeycrisp volume will rise 250%, and fuji volume will be up 90%.

Today, about 30% of Stemilt’s extensive apple acreage is managed organically. Virtually all of it could be grown organically, and will be if and when the market demands it.

Expansion of organic fruit production in Washington State is driven by growing demand for organic fresh fruit from Pacific Rim and Middle Eastern countries. Stemilt has been a pioneer over many years in opening channels of trade in Japan, China, and South Korea. These countries place high value on quality and food safety, and regard fruit from the western U.S. as the best in the world. Plus, they are willing to pay a premium for quality.

Organic fruit prices in Pacific Rim countries are often 3-X or more compared to prices in the U.S.

Stemilt’s growers have kept pace with export demand by steadily increasing acres in transition to organic, in step with projected growth in export demand.

Like organic apple sales, organic chicken sales are surging. Sales in the U.S. reached $750 million in 2016, up 78% since 2015. Organic chicken is number three on the list of organic food sales in the U.S., behind apples ($1.4 billion) and eggs $816 million).

Still, organic chicken represents just 2.8% of total chicken sales, far below the market penetration of organic apples (approximately 12%). Demand for organic chicken exceeds supply, and will likely continue to do so for years.

Why has the apple industry supported growth in organic production and sought out foreign markets, sustaining a generally healthy balance between domestic organic supply and total organic demand, while the organic chicken industry has not?

A big part of the answer is obvious. Most of the pounds gained by broiler chickens come from corn in their feed. The supply of organic corn in the U.S. has seriously lagged behind demand. Despite 38% growth in organic corn production in 2016, organic corn represents less than 1% of U.S. corn production.

Anyone who has been around an apple block or the back of a John Deere tractor knows it is far more challenging to grow organic apples than organic corn, so why has the organic apple supply kept pace with demand and corn farmers have, for the most part, sat on the sidelines, despite sizable price premiums?

Too bad no one really knows. Part of the reticence in the Midwest to growing organic corn and soybeans is embedded in the scale and nature of the technology now common on most conventional corn-soybean farms.

For each full-time worker on a corn-soybean farm, several hundred to 1,000 acres of corn and soybeans are planted, sprayed, and harvested using large-scale, highly specialized equipment. Crop genetics — mostly GMO and herbicide-resistant — are an integral part of the system. Roundup Ready (RR) crops simplified what was previously the most challenging aspect of growing corn and soybeans in the Midwest — weed management.

Once RR technology made weed control simple and compatible with large-scale machinery, the acreage a single worker could cover about doubled. But as average farm and equipment size rose, the ability of farmers to do anything other than grow RR corn and soybeans diminished. And the thought of growing corn and beans organically, as the saying goes, forget about it.

One last, big difference exists between the organic apple and organic chicken industries.

At the current scale of organic apple production in the U.S., most players along the supply chain capture most of the efficiencies and economies of scale enjoyed by conventional growers, shippers, handlers. Economies of scale narrow the price differential between organic and conventional crops, and open up a larger segment of the domestic market, which is clearly now, and will remain price conscious.

The organic chicken industry is far too small to capture economies of scale, and is further constrained by the lack of a reliable supply of organic chicken feed, especially corn. This is why the price premium for organic chicken is much greater than for organic apples.

The conventional wisdom in the food industry is that changes in demand and price premiums will drive shifts in supply. This rule of thumb seems true to form in the organic apple industry, but not along the organic chicken supply chain. Figuring out why, and how to overcome constraints, will be an ongoing topic of discussion.

Sources: Megan Durisin, “Americans are Devouring Organic Chickens as Sales Rise,” Bloomberg, September 20, 2017

Ashley Nickle, “Stemilt offering more organic apples across varieties,” The Packer, September 20, 2017.