Organic Production Management

Organic Production Management

Brief BackgroundBrief Background

Organic ProductsOrganic Products

• Products labeled as “organic” are those certified as having been produced through clearly defined organic production methods.

• “Organic” is a claim on the production process rather than a claim on the product itself.

(FAO COPORATE DOCUMENT REPOSITORYEconomic and Social Department)

Organic plant-based foods are, onaverage, more nutritious.

The Organic Center State of Science Review: Nutritional Superiority of Organic Foods

Organic Standards

• All or almost all organic standards are basing on IFOAM ( International Federation of Organic Movements) standard.

• Three standards dominate world organic farming and organic markets:

• EU Standard• US Standard• Japan Standard

Certification

• In international trade, third-party certification is required.

• Certified body, for third-party certification, must be qualified and licensed.

• Approval from national authority is required in labeling products as organic ones.

• “Participatory Guarantee System (PGS)” has been gaining ground in recent years.

Organic FarmingOrganic Farming

Organic Farming• Organic farming is a production system that

sustains the health of soils, ecology system and people (IFOAM).

• It combines tradition, innovation and science to benefit the shared environment and promote fair relationship and a good quality of life for all involved (IFOAM).

• It relies on production techniques such as, crop rotation, green manure, compost, and biological pest control (IFOAM).

• Manufactured fertilizer, agro-chemical and GMO are not allowed.

Farming Methods

• Soil managementProviding N,P,K, micronutrients without using synthetic ones.

• Weed management

Promoting weed suppression instead of weed elimination.

• Controlling other organismsBiological pest control, IPM, crop rotation, provision of habitat for beneficial organisms, row cover and etc.

• Compost/Organic fertilizerManure must be subjected to proper thermophilic composting.

Risk Assessment

• Risk assessment has to be carried out on farm plots before farming.

• History of land use, source of water supply, soil and water analysis, environmental survey for any possibility cross contamination must be carried out.

• If the assessment is acceptable, risk manage- -ment has to be incorporated in farm production planning.

Transition Period

• In changing the practice from conventional to organic farming, a transition period, generally 3 years, is required by all standards.

• Third-party CB should be engaged right after the conversion.

• Annual inspection by the CB has to be carried out from the first year.

• Since the standards and the transition periods vary, targeted markets in international trade must be determined before the farming takes place.

Farm Inputs• All inputs must be verified and complied with

organic farming guidelines and approved lists.• Inputs, such as organic fertilizer, fermentation

organism, peat, must be carefully selected to enhance soil and plant health.

• In protecting plant from disease and pest, only biological pest control is allowed.

• Naturally-occurring pesticides and naturally-derived insecticide such as BT (Bacillus Thuringiensis), and plant extracts are allowed.

• Local inputs are encouraged.

Farm Management

• Key success factors in organic farming:– good soil; well prepared organic fertilizer;

supply of clean water; and skilled labors.

– Knowledge base farming.

– Develop and enhance ecology balance farming.

– Dynamic approach in farming.

– Farm production planning: crop rotation, crop diversification, and minimizing impacts of extreme weather conditions.

Farm Production Planning

• Daily volume of harvest of each crop must be planned to meet customers’ requirements.

• Factors such as:– market demand, targeted market, market

channel, price level,

– weather condition and

– seed varieties

must be taken into consideration in the farm

production planning.

Logistics in Supply Chain

Supply Chain

Market &

Farm Processing Consumer

Requirements in Logistic chain

• Organic products must be separated from the conventional ones in the logistic chain from farm to table.

• Transportation, handling, equipments and container must be separated and clearly marked.

• Cross contamination must be prevented in the chain.

Logistic Management

• Logistics is a major cost item, especially in fresh produce line.

• To be competitive in any market, the logistic chain must be extremely efficient. Critical mass must be achieved to minimize logistics cost per unit.

• Freshness, quality and food safety of farm products can be maintained through the proper application of post harvest system which have to be incorporated in the logistic chain.

• Modes of transport have to be taken into consideration in logistic management.

Processing

• Organic-product processing line, equipments, containers must be separated from those of the conventional ones.

• Storage and handling must also be separated.

• Packing and packaging material must be fully separated in the line.

• Manufactured chemical is not allowed.

• Facilities and processing are subjected to certification by third-party CB on annual basis.

Market and Marketing of Organic Foods

Market and Marketing of Organic Foods

Market Channels

• Chains of grocery multiples.

• Specialty outlets, natural food stores.

• Membership market and localized market• Major food manufacturers are increasingly

entering the organic food market (International

Trade Center, UNCTAD/WTO)

• The market is increasingly dominated by modern-trade or chains of grocery multiples (Ibid).

Market Channels of Organic Foods in EuropeSource: Specialized Organic Retail Report, Europe 2008

Basic Requirements of Retail Chains

• The bottom line is price – cheap price.

• Consistency of high standard of quality and food safety.

• Regular supply.

• Professional service that can be trust.

• Environmental friendly operation.

• Ethical and fair price business trading.

Labeling

• Labeling of organic product must comply with rules and requirements of each importing country.

• Label must be put at the designated place on the packaging of the products.

• It is a must to study the labeling rules and regulations carefully before exporting to each country.

Breaking into the Market

• Certification by selected licensed or accredited CB is a prerequisite.

• It is important to select and target the export market before certification.

• National rules of each targeted countries must be met.

• Must get specific approval from relevant authority or control body in each country before exporting the organic products.

• It is most likely that Participatory Guarantee System (PGS) will not be accept in the international trade in the foreseeable future.

Consistency of Supply and Service

• Modern trade or grocery multiples chain, which enjoy the market share of over 70% in the main markets, require consistency of supply in their operation.

• Professional service is a must in supplying to the high-end market.

• The service including accountability and professional integrity.

Export - Key Success Factors

• All the prerequisites must be fully met.• Consistency in quality of the products

have to be maintained at all time.• Must be in the position to provide regular

supply, possibly year round.• Must have reliable traceability system.• Meeting specific requirements or private

standards of modern-trade retailers.• Price competitiveness is a key to success.

Market Value of Organic Foods

• The world retail sales was estimated by ITC (International Trade Center, UNCTAD/WTO) to be USD 23–25 billion in 2003 and 29-31 billion in 2005.

• Global organic food market grew by 10.9% in 2007 at the value of $43.5 billion. The market was forecasted to be $66.8 billion in 2012 (Global

Industry Guide).

• Major food manufacturers are increasingly entering the organic foods market.

Conclusion

• Organic production chain starts from farm to end-users with no weak link.

• Production management can be subdivided into 4 parts: farm production; processing; marketing and logistics.

• For sustainability, commercial farm production must be market oriented. Product cost must be competitive.

• Processing, marketing, and logistics must be efficient, innovative and dynamic to achieve lowest possible cost of product per unit.

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