Embattled organic sector worries about regulation

By Mari Saito

WASHINGTON (Reuters) - California farmer Tom Willey was first attracted to organic farming 21 years ago after noticing how many chemicals he was using in conventional farming.

As a certified organic farmer selling everything from artichokes to zucchinis from his 75-acre farm in the San Joaquin Valley in California, Willey has become a respected pioneer in the organic farming community.

But now with the deep recession in the United States, farmers such as Willey are worried about the future of organic farming that grew sharply during the boom times.

The industry, which prides itself on delivering wholesome and safe products, also is worried and even a little angry about new food safety rules emanating from Washington.

"There is a lot of transparency in the organic food system and we've had it in place for several decades and we do so willingly," said Willey. "The lack of that is what characterizes industrial producers."

The global market for organic food has grown sharply over the past decade, with the United States accounting for about 45 percent of the global share.

Sales of organic food have soared from $1 billion in 1990 to an estimated $20 billion in 2007 and by 2006 became the fastest growing sector in the industry, according to the Organic Trade Association.

But now growth is coming to a halt as Americans tighten their purse strings and opt for cheaper alternatives.

"Millions of people who were occasionally buying organic products have cut back to save money and we're seeing the real decrease in growth in the last nine months," said Ronnie Cummins, the national director of the Organic Consumers Association.

Whole Foods Market Inc, a chain that sells organic and luxury grocery items, reported in May that quarterly sales fell nearly 5 percent from its stores opened at least one year. Profits also fell but the company said it avoided going into the red by cutting prices to keep consumers coming back.

Neil Currie, an UBS analyst said consumers are seeking lower prices and staying clear from luxury food products.

"Organic food comes at a premium price and Whole Foods sales have been quite negative," said Currie.

Growth in the organic sector dwindled to 12.5 percent last year compared to the 20 percent it used to enjoy.

"We might not see that kind of growth again," said Cummins.

An added worry for organic farmers is a new food safety legislation that passed last month in the Energy and Commerce committee of the U.S. House of Representatives that would be the most sweeping reform of the food safety system in close to 50 years.