Can organic food production develop to deal with both price consciousness and climate concerns?

Denmark has one of the highest shares of organically produced food products in the world and previously boasted an unbroken record of increasing market shares over two decades. However, this development reverted in 2022 and the downward trend has continued in 2023. One explanation for this drop is the general tendency towards ‘downtrading’ when it comes to food, which may have led consumers to substitute organic food products with cheaper organic varieties or with the products’ conventional counterparts. This agrees with the finding that sales have fallen most dramatically for relatively costly organic products, especially beef, pork, and chicken. Downtrading may be a temporary trend due to the economic pressure on consumers caused by inflation and high food and energy prices. However, it could be a more permanent development. Furthermore, organic production is often perceived to be more sustainable than conventional production on several parameters, such as biodiversity and animal welfare. This perception may not apply unambiguously regarding the climate footprint μ particularly when it comes to animal production. Many consumers are concerned about climate change and some are also concerned about the climate footprint of their diet and are transitioning towards a more plant-based diet. Those who are willing to pay for organic food products are also among the most climate-conscious food consumers. Therefore, an increasing number of regular organic consumers could potentially reject animal-based products altogether. Although reduced animal production can be a positive thing, e.g., in terms of climate impacts, this potential development can be not only a livelihood challenge for organic livestock producers but can also threaten the organic sector as a whole due to the key role that animal
production — particularly dairy — plays in current Danish organic production. A lower level of organic animal production may lead to higher production costs, also for organic plant-based products, because of economies of scope related to the supply of nutrients for plants from ruminant based production. This may lead to a price increase and in turn to more downtrading. We discuss these challenges for the organic sector using data on developments in the organic markets and consumer demand for organic food, as well as theoretical considerations of the role of economies of scope in organic food production.