Organic farming set to fly in 2014

By: Anna Game-Lopata

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The organic farming sector is third on the list of Australian industries set to take off this year, after superannuation funds and gemstone mining in the top spot, according to new research.

Organic farming set to fly in 2014
Organic farming is one of the top industries expected to soar in 2014, after gemstone mining and superannuation.

Business information firm IBISWorld has revealed five industries expected to soar and five expected to sink in 2014, with organic farming high on the list for success.

Diamond and gemstone mining tops the growth industries, with an impressive 24 per cent rise anticipated for 2014, followed by superannuation funds, organic farming, online shopping and internet publishing and broadcasting.

Industries expecting a decline include video and DVD hire, sugar cane growing, mineral exploration, newspaper publishing and horse and dog racing.

Organic farming is blossoming and has been one of the economy’s best performing industries over the past five years.

IBISWorld predicts industry revenue to grow quickly over the five years through 2018-19, at an annualised 8.4 per cent to reach $980.6 million. This includes growth of 16 per cent in 2014-15.

Domestic demand for organic food is expected to continue to grow strongly over the five years through 2018-19.

IBISWorld General Manager Australia Karen Dobie says global demand for organic products is rising with increasing health consciousness, growing concern for the environment, income growth and the increased convenience of organic food.

Improved presentation and product quality in the past few years, particularly across fresh produce, has further driven demand.

Dobie says growing demand has supported the increasing availability of organic food in mainstream markets.

"The two major supermarket players, Woolworths and Coles, are now stocking greater amounts of organic produce and wider ranges of organic food, increasing the convenience of purchasing organic products," Dobie says.

"Supermarkets account for over 60 per cent of organic food sales."

Downstream demand from food and beverage manufacturers, also expected to increase over 2013-14, is another key driver of industry revenue, as manufacturers are key purchasers of industry products.

"Greater production volume of processed organic products will be a key opportunity for growth in demand," Dobie says.

"This demand will come from greater processing capabilities, which will be aided by continued growth in organic farming to supply processing and more developed supply chains.

Dobie says there is a good range of high-quality fresh organic produce in Australia, but there are still opportunities for growth.

Australia has the largest area of organic farmland in the world at an estimated 12 million hectares, with the majority of this land comprising large rangelands for organic cattle production.

However, the industry is comprised mainly of small operators, which has contributed to difficulties in providing consistency in the quantity and quality of produce.

"Some consolidation over the past five years hasn’t yet significantly reduced the highly fragmented nature of organic farming and techniques are still not as efficient as conventional farming," Dobie says.

"Despite this, the Organic Farming industry continues to grow strongly as organic consumption becomes more mainstream, with retailers, including restaurants, selling a growing number of organic products.

"Favourable weather conditions have helped to reduce the price of organic produce," Dobie adds.

"While some supply issues will hamper the industry, a greater level of technology employed by farmers and innovation in products and practices is expected to help organic farmers meet demand," she says.

In 2014, IBISWorld anticipates revenue for Australia’s organic farming to increase by 13.7 per cent  to reach $707.7 million.

Production is anticipated to increase because of supply chain improvements, more refined processing capabilities and increased variety in the sector.

Despite anticipated growth organic food sales still only account for a small percentage of total food sales in Australia.

"Two important factors in demand for organic produce are availability and price. Both present challenges for the industry," Dobie says.

"A broader selection of organic foods in supermarkets, independent retailers and markets should assist in increasing sales and driving revenue for primary producers. This will include more private-label organic products available at lower price points."

Organically farmed products  represent just 1 per cent of the total value of farmgate sales including grains, meat, horticulture and dairy.

Meanwhile revenue for the sugarcane industry has been negatively affected by adverse growing conditions, particularly those attributable to extreme weather patterns over the past five years.

IBISWorld predicts that industry revenue will slump by 11.4 per cent in 2014 to $1.1 billion.

Dobie says volatile fluctuating prices and global production had intensified industry revenue volatility.

"The high Australian dollar reduced the industry’s international competitiveness and choked export markets in developing countries and established partner nations," she says.

Sugar cane growing is second on the IBISWorld list of industries expected to decline in 2014. Video and DVD hire is at the top with a predicted slump of 14.8 per cent.

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