Ontario Goes Organic: How to Access Canada’s Growing Billion Dollar Market for Organic Food

Rod MacRae, PhD, Mark Juhasz, Julia Langer and Ralph Martin, PhD
World Wildlife Fund Canada and the Organic Agriculture Centre of Canada

**For widespread distribution and consultation. Please provide comments to Rod MacRae, rmacrae@ican.net **

Ontario is missing out on a major market opportunity for farmers – organic farming processing and food distribution. This report sets out a 15-elements plan to boost organic production to 10% of agricultural acreage within 15 years and to capture about 50% of Ontario’s organic consumption, up from the currently estimated 15%. In addition to financial benefits, Ontario would experience significant environmental improvements. Most of the elements of this plan have been successfully tested elsewhere and could be adapted to Ontario conditions.

Development and Implementation of this report

This report was inspired by the National Organic Strategic Plan (NOSP) and discussions with a few individuals connected to the Ontario provincial government. World Wildlife Fund – Canada (WWF) and the Organic Agriculture Centre of Canada (OACC) decided to collaborate on the development of a detailed Ontario plan, using a process consistent with that used for the NOSP. In this process, a draft plan is prepared by a small group, and then progressively revised as feedback is received from a wide range of interested parties. Following several rounds of revisions, an approach to implementation is developed that usually involves many organizations.

Phase I (January to April):
Several preliminary drafts were prepared and circulated internally. The first full version (v3) was completed in late April and posted on the OACC web site. Emails announcing the draft and location were widely circulated.

Phase II (May to June):
Meetings held with many organizations with an interest in the content and possible role in implementation. A considerable volume of written and oral feedback has been received. The plan is now being revised to integrate all the suggestions for improvement.

Phase III (July to August):
Version 4 (v4) will be posted on the OACC web site, with another round of email announcements. Following further feedback, another version will be prepared

Phase IV (Sept forward):
The final version, with a step-wise plan for implementation, will be released

Main revisions to the report (from version 3 to version 4)

• Timeline for implementation extended from 10 to 15 years
• 5 and 15 year targets established
• Strategic implementation divided into 2 phases, Phase I for first 5 years, Phase II for the following 10 years
• Strategies reorganized to reflect the phased approach
• Most strategic elements revised, particularly coordination, support for new farmers, training, marketing board supports, animation of non-retail distribution, processor supports and support for cooperative development
• A few strategic elements eliminated, a few new ones added
• Existing organic farms more fully integrated into the strategies
• Discussion of processor targets and impacts expanded
• Better linkages made to existing initiatives and organizations
• A preliminary analysis of regional opportunities within Ontario undertaken

Up-dated Full Report

New, up-dated !! Individual sections of report (PDFs)

• Executive Summary and Introductory Sections
• Programmes to Support the Transition - Part 1
• Programmes to Support the Transition - Part 2
• Outcomes and Conclusions

Background information – introductory notes on spreadsheets

We present here the detailed analysis in support of our report.

With each spreadsheet, we provide some details on the methods used to do the calculations, plus each spreadsheet contains more detailed sources and assumptions.

The main report also contains links to each spreadsheet:

• Targets - Ontario Organic Study
• Fertilizer Savings
• Pesticide Savings
• Transition Payments
• Program Expenditure Summary spreadsheet
• Avoided Medications in Feed

1. Targets – Ontario Organic Study

This spreadsheet provides analysis to determine:

• each crop’s contribution to the overall 10% target;
• the number of animal head to be converted
• the number of acres to be converted to organic production
• an estimate of the overall number of farms to be converted

General notes on calculations (see notes in spreadsheet for specific details on individual commodities)

Crops – chosen based on data available on organic production. Specialty crops are excluded from the analysis because of insufficient data. Data on wheat, corn and hay/pasture had to be disaggregated, based on conventional ratios and information from Hugh Martin, Organic Crop Production Programme Lead at OMAFRA. Organic vegetable production data is limited, so all vegetables have to be reported together, except potatoes. Fruit production analysis is based on availability of organic production data.

Animals - chosen based on data available on organic production. Specialty, smaller volume animal production and aquaculture are excluded from the analysis because of insufficient data.

• Conventional crop and animal production – taken from OMAFRA statistics, 2004 (http://www.omafra.gov.on.ca/english/stats/welcome.html) unless otherwise noted.
• 5 and 15 year targets – we started from the targets set out in the National Organic Strategic Plan (http://www.organicagcentre.ca/reportfinal.pdf). These were modified to reflect Ontario conventional and organic production realities and to balance crop and animal production.
• Target acres and head – calculated by multiplying conventional acres (animal head) by the target percentage for organic conversion
• Current organic production, organic head, and current organic farms – based on 2003 data provided by Macey (Macey, A. 2004. “Certified Organic”: the state of the Canadian organic market in 2003. Report to AAFC, Ottawa. Sept. 2004) unless updated with 2004 data provided by Macey (Report of the Organic Research Advisory Committee, 2004, prepared by Hugh Martin, Committee Chair, OMAF) or otherwise noted.
• Acres (and head) to be converted – calculated by subtracting current organic acres (head) from 15-year target acres (head)
• Size range targeted – to estimate how many farms would be required to convert to a specific commodity production, we estimate the current size of an average organic operation. Where that information is not available, we use conventional averages. We also take account of the size dispersal of operations in conventional production, under the assumption that most converting operations will not be in the largest size classes.
• Estimated additional numbers of farms converting – calculated by dividing acres (head) to convert by the average size of an operation.
• Calculating number of addition farms required to convert – we found that in the 2001 Census of Agriculture, when adding up farms reporting crops in each commodity studied and comparing that to the total number of farms, the ratio was 2.5. In other words, each farm reported on average 2.5 of the studied crops. We assumed the number would be higher in organic production, since these operations are usually more diversified, so divided the total of all farms required by 3 to come up with our estimate. We did not add animal production estimates since we assume that all organic farms would report crops.
• One weakness of this analysis is that we are unable to account for dynamic changes in crop rotations. Organic farmers usually diversify and employ longer-course rotations. This would cause shifts in the relationships between different crops for which we could not account in this study. In this sense, our study assumes that organic farmers keep producing what they did as conventional producers.

2. Fertilizer Savings

This spreadsheet shows the detailed calculations on nitrogen, phosphorus and potassium fertilizer saved and reduced input costs for farms converting.

• We assume that all acres would have been fertilized prior to organic conversion.
• Conventional fertilizer application rates are taking from OMAFRA recommendations, focusing on mid-range soil test results, loam soils, and mid-range yield objectives, unless otherwise noted.
• Fertilizer prices are taken from the Ontario Farm Input Monitoring Project, Ridgetown College, Oct. 5, 2005
• The N price is an average of ammonium nitrate, anhydrous ammonia, urea and nitrogen solution.
• The P price is an average of MAP, DAP, and triple superphosphate.
• The K price is for muriate of potash 60%.

3. Pesticide Savings

This spreadsheet provides the detailed calculations of pesticide applications avoided (in kg active ingredient) and the input savings for farms converted.

• Pesticide use data come from McGee, B. et al. 2004. Survey Of Pesticide Use In Ontario,
• 2003 Estimates of Pesticides Used on Field Crops, Fruit and Vegetable Crops, and Other Agricultural Crops
• Not all pesticides are accounted for in this survey, but the main ones are. As such, the estimates provided here likely underestimate pesticide savings.
• Adjustments were made to vegetable and fruit production use totals by subtracting Bt, Copper Hydroxide and Sulfur from the savings, as these actives are permitted in organic production. Use patterns of these materials would likely be different as organic farmers have limitation on their use of copper and sulfur, but we are unable to account for this in the estimates, so assume that the same levels would be used in organic production.
• Pesticide costs are provided on a use weighted basis, using data from the Ontario Farm Input Monitoring Project Survey # 4 - October 5, 2005 Economics and Business Section, Ridgetown College
• Since not all pesticides are listed in that survey, we used the ones available which generally accounted for 80% of the AI applied, except for fruits and vegetables where they accounted for more like 66%. We assumed that closely related products where the same price if they were not separately listed. The estimate of pesticide costs in vegetables is high due to the cost of rimsulfuron use in sweet corn.

4. Transition Payments

This spreadsheet provides details on our calculations for the Transition Risk Offset Programme and Payments for Environmental Services (section 5.6 in the main report).

• Transition year – we report payments for each of the three years of required transition, except in animal production for which the period on farm is less than three years.
• Yield decline – estimates derived from the literature and expert opinion. See Appendix 2 of the main report
• Average 5-year yield and prices – 2000-2004 averages taken from OMAFRA statistics, unless otherwise reported.
• Government payment – at 10% of the gross revenue loss associated with the yield decline. We assume there are no transitional product premiums available.
• Avoided cost payment – this figure derives from table 1 of the main report. The pasture payment accounts only for reductions in GHG externalities. These payments only apply to crop acres.
• Net payments – assumes a 30% reduction in safety net payouts, 12% of which is payable by the provincial government.

5. Programme Expenditure Summary spreadsheet

This spreadsheet summarizes all the expenditures proposed in section 5 of the main report. These estimates were derived from implementation in other jurisdictions and from communication by the authors with organizations and agencies implementing these and related proposals. The distribution of costs by year is usually an average or a graduated increase with a fixed formula, since uptake of programmes is difficult to predict at this point.

6. Avoided medications in feed

This analysis was carried out to estimate the amount of sub-therapeutic medication that would not be consumed in animal feed resulting from the transition to organic production of beef, swine, and chicken (broilers) only as these were the commodities for which sufficient data could be assembled.

Little data is available on consumption of medications in feed, so we used the method contained from a study carried out in the US: Benbrook, C. et al., 2003. Hogging it: estimates of antimicrobial abuse in livestock. Union of Concerned Scientists, Washington, DC.

The first part of the analysis required a comparison of sub-therapeutic antibiotics approved in both Canada and the US. For this, we used the Benbrook et al. study and Title 21--Food And Drugs, Chapter I--Food And Drug Administration, Department Of Health And Human Services Part 558--New Animal Drugs For Use In Animal Feeds (http://www.access.gpo.gov/nara/cfr/waisidx_99/21cfr558_99.html)
and compared it to Canada’s Compendium of Medicated Ingredients Brochures (CMIB) (http://www.inspection.gc.ca/english/anima/feebet/mib/mibtoce.shtml). The comparison was frequently straightforward, as the list of approved materials is slowly being harmonized. However, some medications are approved in the US, but not in Canada or they are approved as a slightly different formulation, or on different animals or at different growth stages, or they are approved at different doses or for different lengths of time. For these, we made the following assumptions:

• We eliminated from our analysis any medication approved in the US but not in Canada,
• We eliminated from the analysis any medication / growth stage combination that is not approved in Canada; the largest discrepancies occurred in the broiler analysis, so this is likely the weakest (but also likely most conservative) estimate
• When it appeared that a slightly different formulation was used in Canada, we considered the Canadian medication equivalent to the US formulation
• No veal, pregnant animals or breeding stock were included in our analysis, so no medications used exclusively on those animals were included
• We substituted Canadian doses for US doses where they differed
• When multiple dose options are provided in the CMIB, we used those most related to weight gain and efficiency, not options for treatment of acute conditions; if there was more than one option related to weight gain and efficiency, we chose the one closest to US use patterns
• We did not include medications that appear to be approved in Canada but not in the US, since we had no data on percent of animals treated to support an analysis

See the notes in the spreadsheet for particular notations on the US – Canada comparison.

To carry out the calculations, we worked from Tables B-1, B-2 and B-3 in the appendices of the Benbrook et al. report. We used their estimates of percentage of animals treated, which assumes that treatment patterns between the two countries are consistent. Since there is no public Canadian data on treatment patterns, we do not now how accurate this assumption is. We used their estimates of average days on feed unless there was information in the CMIB that indicated a shorter period was required in Canada. We used their estimates of feed intake for swine and broilers. In a few cases for beef, the Canadian doses were reported in ways that required we multiply them by average daily feed intake for a particular growth stage, so used standard animal production guides of feed intake to determine those. We substituted the number of animals converted to organic for their numbers.

Other assumptions relative to the Benbrook et al analysis:

• We assumed no mortalities
• We left out of the broiler analysis those combinations for which the majority of medications are not approved in Canada
• Because the size ranges used to different growth stages were sometimes different than those employed in the US, we did not include medications used in Canada that extended beyond US categories