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Economics - Organic Food

Customers shopping at the big-name retailers are being charged 60 - 70% more for organic meat, vegetables and other foods than for the ordinary equivalents. In some cases, the difference is far greater, eg; organic potatoes can cost 285 per cent more than the non-organic kind. Due to BSE and the GM food scare, demand has risen for produce farmed organically, without chemical pesticides and fertilisers. Organic production costs are a third higher, but the average price difference on the shelves is often double that.

Dr Anna Ross, senior lecturer in economics at the University of the West of England, researched comparative prices for a typical shopping basket that included fruit and vegetables, meat, poultry and a range of other groceries. She found that the organic basket cost 71 per cent more at Tesco, 65 per cent more at Sainsbury's, 62 per cent at Waitrose, and 60 per cent at Somerfield.

The supermarkets have suggested that prices will fall as the market becomes established. And when Asda announced that it would undercut its rivals, it prompted fears of an organic price war – but there are few signs of it happening so far. "When people suggest that the price will fall as demand increases they are missing the point," insists Dr Ross, who believes that, in line with orthodox economics, the opposite is true. "Supermarkets are able to exploit huge consumer demand with excessive price hikes on organic food."

The Government promised to raise subsidies for farmers who want to go organic from £1m to £24m, as Britain does not grow enough to meet demand. In the meantime, supermarkets are looking abroad for their supplies. Somerfield imports up to 85 per cent of its organic produce, which increases the costs. "We are also dealing with far fewer suppliers with the result that we have limited choice in who we buy from, with far less competition," it said. It has been suggested that while demand for organics is growing, the market for ordinary produce is over-supplied, so it's really a case of conventional being so cheap.


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