Major Producers Paying Farmers to Go Organic

With consumer demand for organic foods now outpacing supply, major companies like Kellogg’s and General Mills are now taking the next logical step to meet that demand: paying farmers to go organic. The move makes perfect sense from a profit perspective; organic foods are now at a 47% premium, and their sales grew 11% last year (4 times the growth industry-wide). Experts say this growth would have been even greater, if there had been more organic food to actually sell.

Given enough time, supply should theoretically increase on its own, but the large up-front costs associated with organic certification are a major hurdle for current conventional farmers. Inspection fees for the federally regulated organic label are paid by growers, who also have to cover the higher labor costs associated with organic farming methods when they abandon synthetic pesticides. Yields are also lower, which makes the switch a risky move as well. So Big Food is in some cases bridging the gap, providing start-up funding to help farmers transition and paying a premium for foods during that transitional phase.

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