Why does organic food cost so much?

By Charmaine Wong, Yahoo7 Moneyhound Updated November 21, 2012, 9:00 am

Organics can be healthy for you, but not your wallet.

Three out of four organic purchases are from a major supermarket chains, showing that buying organic goods is becoming more popular.

Despite a recent report that shows organic produce is becoming more mainstream in Australia, it is debatable whether the higher prices of organic goods are worth their heftier price tag.

Price differences vary

The price difference between organic and non-organic goods vary depending on the type of food in question and whether it is bought from a farmer’s market, supermarket, or specialist health food store.

For example, a packet of imported organic biscuits of 250g, can cost as much as $12. Carrots from one major supermarket costs $1.88, but buying organic carrots from the same retailer costs more than triple this amount.

However, the price gap between these organic and non-organic can be much smaller. For example, one litre of full cream milk can cost between $1.25 and $2.75 for premium varieties, such as those that are lactose free. A litre of full cream organic milk costs $2.30, only $1.05 more than the cheapest non-organic variety.

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The reason for higher prices

Organic produce is often more expensive due to supply and demand says Andre Leu, Chair of the Organic Federation of Australia (OFA).

Leu says: “There is far more demand than supply. Retailers can essentially put higher prices on it.”
The high demands for organic products means retailers can increase the shelf price of these goods, knowing that they will be able to make a profit from them as consumers still want to buy these products.

The higher price of organic foods can also be due to the cost of its production. Leu suggests that the more expensive prices that are charged for organics is justified considering the amount of money farmers receive in return. He says the price farmers receive for their produce is below the cost of producing them.

“The price of products should reflect a fair income for farmers.”

However, unless consumers are buying directly from farmers, it can be difficult to know how much of this premium is going to the grower or the retailer.

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Are they better for you?

A recent Stanford University study has shown that there was no clear evidence that organic foods contain more nutrients. So for Australians who are looking for extra vitamins and minerals, it is arguable whether this can be found in certified organic produce.

However, a desire for more nutrients is only one of the main reasons why some Australians buy organic. This year’s Australian Market Report reveals that the majority of organic-buying consumers do so because of substances they want to avoid.

Holly Vyner of Biological Farmers of Australia says most organic purchases are to avoid chemicals and additives. She says the American studied nutritional benefits only, which is only one part of organic produce’ health benefits.

“It’s honestly not the priority of consumers of organics”, she said.

Another popular reason for buying organic food is for environmental reason. Some consumers make the choice to curb their ecological footprint as growing produce by traditional means can involve the use of synthetic materials.

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Price premiums could drop

If supply and demand contributes to the high cost of organic products then a growth in supply could make organic foods more affordable in the future.

The growing popularity of organic foods will “definitely drop the cost of production” according to general manager Vyner, but “I’ll say there’ll always be a premium for organic food.”

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