Organic price premiums dip as demand grows, product choices multiply
U.S. shoppers are still paying more for organic food, but the price premium is falling as organic options multiply.
Last year, organic food and beverages cost an average of 24 cents more per unit than conventional food, or about 7.5 percent more, according to Nielsen. That was down from a 27 cent, or 9 percent, premium in 2014.
There’s a lot of variation within those numbers. The average price for a gallon of organic milk — $4.76 — is 88 percent higher than the $2.53 shoppers pay for a gallon of regular milk. Organic eggs have an 86 percent premium. At $4.89 per loaf, organic bread is double the cost of regular bread.
Parents buying organic baby food, on the other hand, pay just 3 percent more than they would for conventional baby food. In mid-January, a bunch of organic kale was 5 percent more than organic kale, according to the U.S. Department of Agriculture. Some organic products — like artichokes, soy milk and Granny Smith apples — may even cost less than their conventional counterparts.
There are many shifting factors behind the prices for organic foods. Premiums for milk and eggs tend to be much higher, for example, because the government has very specific rules for what “organic” means. For example, cows producing organic milk must be allowed to graze for at least one-third of their food intake, says Jeremy Moghtader, the manager of the campus farm at the University of Michigan.
Organic and conventional vegetables are grown in similar ways, so the price difference tends to be lower. Organic farmers can save money by not using pesticides or synthetic fertilizers, but they may have to pay more for workers to pull weeds or control bugs, Moghtader said.
One reason organic premiums are falling is the increase in products on the shelves. Organics used to be confined to health food stores and high-end groceries like Whole Foods, but mainstream stores are increasingly offering them.
Consumer demand also affects prices. Right now, demand for organics is outpacing supply in many categories. U.S. sales of fast-moving consumer goods were flat last year, but sales of organic goods jumped 9 percent, Nielsen said.