Examining the Cost of an All-Organic Diet

Abstract

Some consumers have shown a willingness to pay a price premium for organic products because organic agriculture is considered a more environmentally friendly form of agricultural production. These price premiums result from the limited supply relative to demand for organic products and the added cost of maintaining a separate food-distribution system for organic products. The U.S. Organic Foods Production Act of 1990 requires the segregation of organic production and distribution in order to maintain the integrity of foods labeled “organic.” Despite relatively high organic price premiums, demand for organic foods has been growing rapidly (Dimitri and Greene 2002). Organic price premiums have been examined at the wholesale level, mostly for their impact on farm profi tability. Limited data on organic prices at the retail level are reported in a U.S. Dept. of Agriculture (USDA) study on the growth of the U.S. organic market (Dimitri and Greene 2002) and in an examination of retailers’ attitudes toward organic products (Lohr and Semali 2000). Several studies have examined specifi c categories of organic foods (CDS, Inc. 2002; Glaser and Thompson 1999; Glaser and Thompson 2000; Rosen and Larson 2000). Studies of consumption of organic foods have looked at who buys organic, where they buy organic, and why they buy organic (Estes and Smith 1996; Thompson 1998; Thompson and Kidwell 1998). Promar International (1999) generalizes that retail organic foods have an average 70% price premium. Thus a household would need 70% more income to consume all organic products and continue spending the same proportion of its income on food, or that household would spend 17% of its income on food compared to the U.S. average of 10%. Study results regarding the income levels of organic consumers are mixed. Thompson (1998) found that higher-income households were not more likely to purchase organic products, and that some groups of consumers who are committed to buying organic products have relatively low incomes. No studies have analyzed the impact that the higher cost of an all-organic diet could have on food expenditures. The purpose of this research is to assess the impact that organic price premiums could have on consumers trying to purchase an allorganic diet in the mid-Atlantic region of the U.S. using foods that might be consumed by a family during a given period.