Conclusions on the future evolution of the organic sector

The purpose of the research study was amongst others to predict some future outcomes of the Dan- ish organic sector.

By implementing the theoretical framework of the PLC model investigations would focus on the factors influencing the evolution of the organic market in the past, which then could be used to pre-

dict some future market scenarios in period of market decline/diffusion. By combining the PLC theory with the Adoption model, supplier motivations gathered through qualitative interviews among laggards could then give some indications of future outcomes within the supply system. By adding a special focus on bargaining power analyzing counter actions and strategies along the chains analyzed, the result could then be picture about what type of innovations the various catego- ries of suppliers would come up with in the near future.

The first part of the research started in a period of decline concerning the number of farms and ar- able land, but a status quo in the market size indicating a concentration of production was taking place. The second part of the research has been taken place when the market size since 2005 has in- creased and the number of farms and arable land is for the prognoses of 2007 for the first time ris- ing (www.lr.dk/oekologi/ oko-boom: 100 new organic farms on the way [Danish:100 nye økolo- giske landbrug på vej], pressemedd. 05.07.07). In other words: the research has been taken place during a time of both decline (farms, arable land), and a time of increasing market size and now prognoses of increasing number of farms and arable land again.

Despite these market fluctuations the findings of this research indicate that the new type of organic farmers entering the organic market in the near future will be both professional market oriented and have on average larger farms than the producers who entered previously during market matur- ity and decline. If the market grows, partly due to higher efficiency in the production and distribu- tion system as well as changes in the demand system, an increase in smaller hobby or part time farmers might follow in the wake of the larger efficient ones. However the converging prices be- tween organic and conventional would similarly keep a pressure on the organic farm structure with concentration of the production.

The support for these statements is first of all found in the organic pork industry. The producers supplying organic pork to Friland, slaughtering 81 per cent of total production, are for most of them full time producers. Full time producers have increased from 21 to 30 and full time producers in 2007 occupied 2/3 of all organic pork production. The producers in Friland will favour their own needs for expansion first, before letting newcomers enter the coop. Changes in the production struc- ture in organic pork will therefore depend on the future policies of Friland, the development in de- mand for organic pork and the type of producers Friland will let in to meet the demand.

Secondly, in relation to the choice of new suppliers to Friland, this research ended up with a laggard profile having a very modern and large full time organic pork production. Again, depending on the size of demand in relation to supplies there are no indications from the in-depth case study of the pork chain that Friland would have to take in part time producers.

Thirdly, the demand system for organic pork is for 60 per cent of the production based on exports and 77 per cent of it goes to one country: the UK. The UK meat market is highly competitive, and

the products exported consist mainly of high quality products. The home market has besides high quality products also become a regular market for chopped pork, pates, fillings etc. Both markets are dominated by retailer chains, where the bargaining power is in the favour of the retailers in rela- tion to processed pork products. With regards to fresh cuttings from slaughtering the producers or- ganized in Friland has a greater influence on volume and price – especially when demand is higher than supply as the development on farm gate prices showed. The need for securing a critical mass in supply for the retail market, so all parts of the organic pork can be sold as organic and keep up the farm gate price will likewise in the near future support a production structure of larger efficient full time producers.

Within the organic vegetable industry the picture is a bit different. Four packagers are at the same time the node of control concerning distribution to the retailers, and in the same time in fierce com- petition with each other on price and volume securing access to the retailers. This competitive envi- ronment on price and deliverance pushes less efficient vegetable producers out of the market open- ing up opportunities for more professional and larger farms to stay in the vegetable production de- livering to the packagers. However, to have something extra to offer the retailers some of the pack- agers pay other plant/cereal farmers to produce smaller portions of special vegetables so the pack- ager can have a basket of variety towards the retailers during bargaining. Two opposite trends are therefore seen in the vegetable industry. At one end, the production of the ‘bulk’ vegetables from the ‘top ten list’, becomes concentrated, while at the other end farmers in plant/cereal starts to have a smaller plot of land to grow special vegetable crops. This could be an explanation for the increas- ing number of vegetable farms being registered while the arable land declines from 2000 to 2003. However, if demand for organic vegetables continues to grow a professional market oriented vege- table grower would in the future be expected to start up a specialized production producing at lesser cost what several farmers do at small plots. Over time the trend of professional market oriented farmers having on average larger farms than previously seen entering the organic market, would also be expected taking place in the organic vegetable industry. Similarly the qualitative interviews could be an indication of this trend with one packager claiming he is considering establishing trans national packager networks between him, Scandinavian and German packagers to combat some of the bargaining power from the retailers.

The prognoses from DAAS on the new farmers converting to organic supports the findings of this research indicating the new comers to be professional farmers with larger farms than previously. The average farm for 2007 is 74 hectare whereas in 2001 they were 35 hectare.

The Adoption/diffusion theory opens up for interpreting that in the long run a new second wave of innovators could emerge. This research was therefore investigating if the period of market decline would foster a group of new innovators eventual laying the ground for a new second wave of the

organic PLC. The findings did not indicate a laggard type of this kind. Instead they had the same supplier profile as the early majority found when the organic market last time experienced growth.