Private sector support of the farmer transition to certified organic production systems

Abstract

Certified organic handling firms, situated between the farm and the consumer along the supply chain, rely on a predictable supply of organic ingredients and commodities to meet consumer demand for organic food. Yet organic firms often incur high transaction costs related to locating certified organic products. The transaction costs may be one reason that growth in organic farmland fails to keep pace with consumer demand for organic food. When costs are sufficiently high, certified organic handling firms may choose to directly support farmers as they undergo the 3-year transition process; support may take the form of providing advice or providing financial assistance. Analyzing primary data collected in 2017, we find that approximately 20% of certified organic firms in the sample assist farmers with the transition. The most common types of support focus on reducing technical barriers to organic farming and include providing advice on the organic standards and organic farming practices. Factors influencing the likelihood of a firm assisting with the transition to organic include firm size, function, share of procurement made locally, and the importance of organic to the firm’s business.