Organic foods are foods that are basically grown with lesser chemicals and artificial ingredients and are produced according to certain set standards by government (John and Paul, 2006). In the US selling food that are organic labeled is regulated by the US Department of Agriculture (USDA). Standards of organic foods vary in different countries. Organizations regulating organic products can limit the use of certain fertilizers or the use of a type of pesticide in farming. In the United States, there are four categories of organic labeling; 100% organic, organic, made with organic ingredients, and less than 70% organic ingredients.
Consumer demand for organically produced goods is continually increasing in US market. According to recent studies done, sale of organic food is increasing by 20% yearly (United States Department of Agriculture, 2017). The demand is expected to even grow bigger in the coming years. There are factors other than price that will cause a change in quantity demanded of a product. They are the factors that cause the shift in demand curve to the right or left and are referred to determinants of demand. They include; income, consumers’ preference, number of buyers, price of related good, and expectation of the future (Jain, 2006-2007). Rise in people’s income will lead to increase in the quantity demanded for organic products. Despite the fact that organic foods are considered more expensive more people prefers to take organic foods with a higher income. Many Americans prefers organic foods despite the price. Organic fruits and vegetables have for a long time continued to be largest consumed organic food in the USA with sales of about $14.4 billion. Organic dairy products and organic fresh juices and drinks saw a massive increase in there demand in the recent years. Consumers of organic food in the US are not only eating organic but they are making it more of being their lifestyle (Blair and Robert, 2012). Studies show that a lot of Americans like to snack. Many of them are snacking organically taking organic snack foods.
The increase of people preferring to take organic food in the US has led to large number of buyers of the product. In a case where buyers are many in the market, the demand of the product will always be high. According to Organic Trade Association, total organic product sales were as high as $43.3 billion in 2015. This demand increase has been due to the fact that consumers are increasingly seeking foods that are considered more natural and healthy.
The demand of organic foods has grown so fast that it has overpowered the supply (Scott Faber, 2017). The growth in the organic market has come with continued challenges in supplies. There are various factors that affect the quantity of a good or service to supply. Apart from price there are other determinants of supply which includes; numbers of sellers, prices of resources, taxes and subsidies, technology, suppliers expectations, prices of related products and price of joint products. In the past decades the number of farmers who produced organic food was less. They are still less compared to demand need. However, according to USDA’s Economic Resource Service, many about 10,000 American farmers have made transitions from producing inorganic foods to producing organic foods. This has boosts the supply of organic food in the country. Due to the fact that it is a system it is not easy but takes a while before it changes. Having inadequate sellers of organic products has made the US to increasingly import organic foods from other countries. Many organic foods imports are from European Countries where there are many farmers, about 140,000 farmers, producing organic foods (Scott Faber, 2017).
The US government is taking some steps in trying to increase the production of organic foods which has not been keeping pace with the demand. One of the major steps done by the government is the launching of a program that certifies farmlands that growers are in the process of changing to organic. The government is also helping by subsidizing the costs accompanied by the transitioning to organic farming. The government is also helping the farmers by providing improved machinery to enhance the growing of organic foods. Improvement of technology enables more efficient production of goods and services. Through all these government assistance, the production costs of producing organic foods by farmers is reduced and profits are increased. As a result supply is increased in the market.
According to the law of demand and supply of products, the supply and demand of a product is related to each other. The principle states that when there is high demand of good the prices tends to rise. On the other hand when there is high supply of a good price tends to fall (Jain, 2006-2007). There exists an inverse relationship between the supply and prices of products when demand is unchanged. The same inverse relationship holds for demand of goods. The higher the demand the higher the prices having supply unchanged. Supply and demand rises and falls until an equilibrium price is attained. For instance an organic food farmer sets the price of an organic fruit as $200. Most consumers are not willing to spend $200 for a fruit as a result the demand falls. In response the organic farmer reduces the price to $150 in order to balance the supply and demand for the organic fruit to attain an equilibrium price.
In conclusion, the demand for organic food in the United States is more than supply. Many people believe that organic foods have higher contents of nutrients and therefore are more beneficial healthy wise. This has made demand to be so high. The government has however put some measures to increase the supply of organic foods like importing and certification of farmlands switching to organic farming. The growing demands in organic foods are causing the increase in prices of organic food products in the market. The prices however will stabilize in the long run due to the law of supply and demand.
Blair, Robert. (2012). Organic Production and Food Quality: A Down to Earth Analysis. Wiley- Blackwell, Oxford, UK.
John, Paul. (2006). the farm as organism: The Foundational Idea of Organic Agriculture.
United States Department of Agriculture (2017). Economic research service.
Scott Faber (2017). Organic consumers association; Demand for organic food growing faster than domestic supply
Jain, T.R. (2006-2007). Microeconomic and basic mathematics. New Delhi: VK Publication