The next time you are out on a walk and notice a humble honey bee buzzing from flower to flower, take a moment to stop and appreciate the importance of the busy little insect. Because its work is at the heart of all organic agriculture.

According to the FDA, “About one-third of the food eaten by Americans comes from crops pollinated by honey bees, including apples, melons, cranberries, pumpkins, squash, broccoli, and almonds, to name just a few.” Pollination is essential to agriculture; without it, many plants cannot produce seeds and fruit, and our dinner plates would look very sparse indeed. 

Unfortunately, honey bees are in trouble.

[The world needs to double food production by 2050. Here’s how investing in Precision Agriculture can make that happen.]

Beekeepers in the U.S. have been sounding the alarm for years, reporting sharp declines in honey bee colonies for over a decade, and the winter of 2018/2019 saw the biggest decline on record. This sharp decline in honey bee colonies is thought to be caused by several factors, including shrinking crop diversity, habitat loss, insecticides, and parasites. In particular, a widely used group of insecticides called neonicotinoids are coming under increased scrutiny as mounting research demonstrates the toxicity of the chemicals to honey bee populations. 

Farmers apply neonicotinoids to their fields in an effort to prevent pests such as aphids, but end up unintentionally damaging honey bee colonies, which in turn damages crop yields and the surrounding ecosystem as a whole.

Declining honey bee populations in the U.S. are symptomatic of an ongoing conflict in modern agriculture that pits short term profitability against long term sustainability. Spraying a field with herbicides may kill weeds one year, but the weeds that sprout the following year will be herbicide-resistant, and the farmer will have to invest in new and increasingly complex chemical concoctions to stay on top of the evolving weeds. 

In response to the industrialization of modern agriculture, a thriving movement has emerged that emphasizes quality over quantity. Organic agriculture is a process of producing food that focuses on environmental sustainability. The Rodale Institute, a leading organic agriculture nonprofit, considers organic agriculture to be a “vision for working and living in harmony with nature. The result is healthy soil, which grows healthy plants, which make for healthy people. By abstaining from synthetic inputs and encouraging natural systems, organic farmers help create a better future for people, animals, and the environment.”

For those interested in the investment potential of this growing market, there are a few important points to understand.

What Is Organic Agriculture?

In the context of the U.S., “organic” is a labeling term that food producers affix to products to indicate that their products comply with the organic standards of the U.S. Department of Agriculture (USDA). The USDA’s organic standards are lengthy and cover many agricultural processes, including crop production, livestock/poultry production, and product handling/labeling. (Learn More: Why logistics matter in agriculture.)

Before a food producer can apply an organic label to their product, USDA inspectors must first certify that the producer is in compliance with the relevant organic standards. In general, the USDA’s organic standards require that food producers use natural processes to produce food. 

With crop production, for instance, one of the organic standards is that the land cannot have had synthetic synthetic fertilizers or weed killers applied to it for at least three years before harvesting an organic crop. The organic standards also mandate that organic livestock and poultry have access to the outdoors year-round, and may only be temporarily confined due to poor weather or concerns over the animal’s health.

Making the transition to organic or going organic from the get-go can be a difficult, expensive endeavor for food producers. It is undeniably cheaper to produce food using synthetic chemicals and industrial processes. 

Environmental benefits aside (which are substantial, if difficult to value monetarily), going organic offers food producers access to a rapidly growing market. Young adults are increasingly focused on food quality when they shop, with a recent YouGov study noting that 68% of millennials surveyed responded that they are willing to pay more for higher quality products. 

For a young consumer with health and environmental concerns on their mind, the choice between an organic tomato costing $2.25 and a non-organic tomato costing $1.50 may not be as obvious as one would assume. In this space, there is significant opportunity.

Why Invest in Organics?

Consumer demand for organic food is booming in the U.S., but domestic supply has not kept pace. The development of precision agriculture has helped, but the shortcoming largely boils down to the fact that producing organic food is more difficult and expensive than producing food via conventional agriculture. 

In an effort to facilitate the transition to organic from conventional while satisfying their customers’ growing demand for organic food, large food companies are increasingly partnering with small producers. Established brands like Annie’s (owned by General Mills) are partnering directly with domestic farmers, eliminating many of the hurdles new organic producers face in bringing their products to market. 

With a consumer base willing to pay more for products they value, and with the support of established companies that recognize organic’s potential, the organic agriculture market is primed for substantial growth and expansion in the coming years.

According to research from the Organic Trade Association, sales of organic products in the U.S. reached $52.5 billion in 2018, up 6.3% from 2017. Sales of organic foods accounted for $47.9 billion in 2018, an increase of 5.9% over 2017 food sales. This increase in organic food sales far exceeded the 2.3% growth seen in non-organic food sales during the same period. 

Figures from 2019 look equally healthy, with Category Partners and Organic Produce Network reporting that sales of organic fruits and vegetables increased by 5.1% between 2018 and 2019, while sales of conventional fruits and vegetables increased by about 1.9%.

These trends demonstrate that consumer interest in organic products is strong. Young consumers are more concerned about their health and the health of the environment than any preceding generation, and these consumers are on the cusp of becoming the most dominant group with respect to consumer spending. 

Organic agriculture represents a unique opportunity in the investment landscape because it offers the potential to serve an undersupplied but growing market with products that are increasingly seen as ethically and environmentally superior to similar products available at lower prices.

How to Invest in Organics

But, for investors, organic agriculture as a category is almost too broad. It’s a trend that impacts almost every aspect of the food and ag industry, but it’s something that very few companies are dedicated entirely to. Every company in the space has an organics program, making it very difficult for investors to get in on this trend directly without investing in a very broad group of companies.

However, investing in a mutual fund or ETF that offers exposure to the organics market can be a good way for investors to access this growing segment of agriculture without having to invest in many companies directly. A search on Magnifi suggests that there are a number of funds available today for those investors interested in investing in organic agriculture.

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