Are you America's next top farmer?
An undersupply of organic foods has stunted the market's growth and has producers scrambling to recruit new farmers.
By Matthew Boyle, FORTUNE

NEW YORK (FORTUNE) - Yale University's Sage Hall is a long way from Alburgh, Vermont, a tiny agricultural hamlet that sits on a peninsula jutting southward from Canada into frigid Lake Champlain.

But on February 15, Yale hosted a visitor from Alburgh named Travis Forgues, a 32-year-old dairy farmer with an unenviable task. His mission? Increase the ranks of organic farmers, by whatever means possible.

Timber firms, customers and environmental groups are working together to get companies to use more "green" paper, but some forests remain endangered. (Read the column)

Forgues, who along with his father runs a 220-acre farm with 80 cows, hopes to encourage young farmers -- and maybe even some Ivy Leaguers -- to join what he calls "Generation Organic" and help stem a critical undersupply of organic foods that has left supermarket shelves bare and threatens to stifle the industry's torrid expansion.

With growth rates in the double digits for well over a decade, organics are the darlings of an otherwise moribund food industry. Almost half of US consumers use organic products, according to data tracker Mintel, and their increasing popularity -- sales hit $14 billion last year -- has encouraged mass merchants like Wal-Mart (Research), the nation's biggest grocer, to significantly ramp up its organic offerings. Earlier this month supermarket chain Safeway launched an organic store brand, and today you can even get organic dog chow for your cocker spaniel.

But producers have failed to meet this surging demand for all things organic. "Most sectors of the organic food industry are suffering undersupply, which is stunting market growth," according to UK-based industry consultancy Organic Monitor. "American consumers can't get enough."

It has gotten so bad that Organic Valley, America's largest organic farming co-operative, actually had to cease milk shipments to Wal-Mart last year as it could not keep pace. Organic milk found in New England retailers is sometimes trucked up from as far away as Texas.

One reason for the shortage is that it can take a farm three years to meet federal certification standards, so it's impossible to ramp up production overnight.

At least in dairy, farmers using conventional methods have enjoyed high milk prices and low operating costs of late, providing little incentive to make the arduous switch over to organic. And even for those who do, higher feed costs make profits hard to come by -- a November 2005 study by researchers at the Universities of Vermont and Maine concluded that the average organic dairy operation was not profitable in 2004.

Some dairy companies hope that imports can fill the gap. Stonyfield Farm, which makes organic yogurt, has looked to New Zealand to supply its organic milk powder.

But most of the efforts are focused on boosting domestic supply. One county in Iowa has agreed to give farmers a tax break of up to $50,000 a year if they convert over to organic. In California, farmers hope to increase organic acreage by nearly 5 percent in that state through a training, education and mentoring program.

And in New York, where 30 million more pounds of organic milk are required annually to meet surging demand, Senator Hillary Clinton has lent support to a program from Horizon Organic that provides technical and financial assistance to farmers wishing to make the transition. Currently, 79 farmers are doing so.

Organic Valley, America's largest consortium of organic farmers with sales of $245 million last year from 723 farmers in 23 states, believes that appealing to "Generation Organic" is the answer.

The company wants conventional farmers to convert to organic, and new farmers to enter the field. To that end, Forgues, a member of the co-op since 1999, has traveled to schools such as Yale and Tufts University to preach the gospel of organics. (This weekend he'll be in Anaheim, moderating a panel discussion at a food industry trade show.)

The "Generation Organic" campaign also includes educational workshops, online resources, a farmers' hotline, partnerships with university farm training programs, and a mentoring and internship program.

The mentoring element hopes to appeal to younger people, which makes sense: Two-thirds of Organic Valley's farmers are 50 or younger, in contrast to the 61 percent of US farmers overall who are 55 or older. But young or old, "there is such a shortage, we're taking any farmers we can get," says Forgues.

Those tactics don't sit well with some in the industry. Ed Maltby, executive director of the Northeast Organic Dairy Producers Alliance, which represents 563 organic dairy producers in the region, believes that such a blatant, widespread appeal could result in compromised standards.

He'd rather see empty shelves than corners getting cut in the name of increased sales. Indeed, the food industry has been rife with debate recently over what can and cannot be called an organic product.

Those debates, and Forgues' clarion call for more farmers to take the plunge into organic farming, are two clear indications that the organic industry's growing pains will continue for some time. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.