Price transparency is vital to fair and seamless transactions in the organic food system. Price information is largely lacking in the organic sector, but has been assessed as a critical need for both the private and public sectors. Of the three price series now available to the industry, only one data product is representative of the entire U.S., offers an historical price series, and allows internally consistent calculations of margins from farm to wholesale to retail. None of the existing services offer interpretive analyses of their price data. In the absence of these data, the industry cannot even be adequately described in terms of value of sales and revenue-cost ratios, among other metrics. Lacking historical data, trends in market development cannot be identified. Without descriptive information, it is impossible to assess global competitiveness of the U.S. organic sector, and regional competitiveness in the U.S. within commodity groups. As a result, the future development of the sector may only be guessed at, not planned for. This project will examine user data needs and identify preferred price information products, formats, and information delivery methods through a survey of current and prospective subscribers. The technical and economic feasibility of collecting and disseminating price information on organic feed and seed products will be assessed. To assure users of the quality of the data, the national representativeness of the information sources will be evaluated in terms of geographic dispersion and market significance. OBJECTIVES: Our goals in Phase 1 are to validate currently available organic price data, to assess the price information needs of existing prospective clients, and to determine the relative cost-effectiveness of Hotline Printing and Publishing (HPP) providing new commodity prices and data products compared with other price reporting services. To be useful in projecting market returns and growth, price data should be representative of the entire U.S., offer an historical price series, and allow internally consistent calculations of margins from farm to wholesale to retail. Of the three price series now available to the industry, separately produced by the USDA Agricultural Marketing Service, the Rodale Institute, and HPP, only HPP's data product meets these criteria. HPP offers the only national farm and wholesale price series data set for organic products. High and low prices for more than 100 crops are provided weekly to subscribers by Organic Business News'(OBN) Organic Commodity FAX Service compiled by the project director. None of the existing services offer interpretive analyses of their price data. The problem is in identifying industry price information needs and tailoring products to fill the most significant gaps at a reasonable cost to subscribers. This project will identify the range of products requested, assess which HPP is best suited to provide, and share the results with the other major price information providers. Emerging market categories present special challenges in providing reliable price information because the categories exhibit both rapidly increasing demand and widely scattered sources from which to collect data. We will evaluate adding organic feed grains to the commodity list because it is an example of a production input with sufficient market maturity to obtain a price series. We will conduct exploratory analysis on listing organic seed as a new commodity because it is a significant new market category. The protocols we develop in organic feed and seed assessments can be used in future decisions to increase the commodity list. Our Phase 1 project tests the feasibility of collecting and disseminating current and emerging commodity prices and of interpreting those prices APPROACH: The overall goal of this Phase 1 project is to improve organic market performance by increasing price transparency. The specific tasks are targeted at answering four questions. First, can statistically representative samples be developed for reporting organic commodity prices? Second, what are the user-preferred information products and delivery format for commodity prices? Third, can organic prices for emerging commodities, including inputs, be collected economically? Fourth, what is the most cost-effective allocation of price information products between public and private sector providers? Task 1 is to validate representativeness of firms providing price information. For the existing sample, we will identify the states in which the sources are located and compare this list to the geographic distribution of all organic enterprises. Statistical t-tests for significance of underrepresentation will compare state means of organic acreages or frequency counts of organic enterprises for those states in the data collection sample with those not in the sample. Contacts will be established for price reporting in regions that are found to have significant farm production or processing, yet are not represented in the current data collection sample. For new commodity categories, we will interview large and small producers and processors/wholesalers and select sources based on frequency and quantity of product handled as well as geographic representation. Data in the new commodity categories will be collected for 8 to 12 weeks initially, and the quality of the data and the sources will be evaluated to determine whether it is technically feasible to add them to the existing price report. Task 2 is to determine preferred data products, format, and willingness to pay for commodity price reports. A mail out survey questionnaire will be constructed to elicit preferences for information product uses, delivery methods, uses of price forecasts, willingness to pay for information products, and reactions to report formats. The questionnaire will be sent to current and prospective subscribers, including representatives from industry, research institutions, and government agencies. The responses will be collated into a computer data base as they are received and analyzed to determine user preferences for information products. Task 3 is to determine the economic feasibility of the preferred price reporting format. Cost estimates will be developed for collecting and disseminating data products in the user-preferred format identified in Task 2. The cost estimate will be compared with client willingness to pay from Task 2. If costs exceed willingness to pay, variations in the user-preferred interpretive products and reporting formats will be tested for their effect on cost to develop an economically feasible product that matches client needs as closely as possible. Task 4 is to share research results with the USDA-AMS and the Rodale Institute. Possible collaborative arrangements for Phase 2 will be discussed. PROGRESS: 2004/05 TO 2005/01 The purpose of this report is to assess demand for new organic price information products that could be introduced by Hotline Printing and Publishing. Hotline currently offers a weekly organic price fax information service with national average high and low prices for more than 100 horticultural and grain commodities at the wholesale and farm levels. New products may include adding commodities or regions to the Hotline price series, new delivery systems or formats for existing price data, or new products such as reports generated from the data. The existing Hotline fax price service has all the content attributes most preferred by survey respondents. It is national in scope, covers the top three commodity categories, lists both farm and wholesale prices, and includes both high and low prices. Among preferred technical attributes, only frequency of delivery is satisfied by the current Hotline service, which is provided weekly. Prospective clients overwhelmingly prefer emailed spreadsheets as the delivery method and format. To determine the demand for organic price information products, a survey questionnaire was constructed to elicit interest in existing and new products. The six-page survey was mailed in November 2005 to 2,082 farmers, processors, ingredient suppliers, brokers, retailers, and exporters selected from the Hotline database. Results of the survey confirm other research cited that price information is a critical need for the organic industry. The emphases on negotiating output prices, tracking price trends, and planning marketing strategies indicate that price information is perceived to improve the transparency of negotiations. This benefits sellers of organic commodities by enabling them to seek prices consistent with what others are receiving. Hotline offers a weekly organic price information service, the OBN Fax Commodity Service, with national average high and low prices for more than 100 horticultural and grain commodities at the wholesale and farm levels Hotline?s ability to compete as a for-profit private sector information provider in the presence of relatively well-funded not-for-profit and government information providers relies on perceptions of product quality and packaging, as well as on generating product awareness. Development of new price products that Hotline might offer requires a frank evaluation of the existing service to identify strengths and weaknesses that affect product quality and service delivery. The following sections focus on the statistical representativeness of the current information sources and perceptions of product quality by current subscribers. Hotline obtains price information by weekly telephone interviews of brokers and farmers throughout the United States, as deemed appropriate to the particular commodity. The list of sources used is highly confidential and is not presented in this report. To obtain national average prices, all major production and distribution regions should be represented among the sources IMPACT: 2004/05 TO 2005/01 Hotline has experimented with adding prices for some of these products in the past, but is particularly interested in adding a price line for certified seed. It may be possible to ?back out? a wholesale price from retail sales data, but since much of the organic seed is from foreign sources, the prices would probably not be f.o.b. Hotline plans to monitor the market conditions for seed and evaluate an appropriate time to add the item to its price report. Given that most respondents use price information for tracking current trends and negotiating output prices, subscribers should have confidence in the accuracy and usefulness of the reports. PUBLICATIONS (not previously reported): 2004/05 TO 2005/01 1. E. Walz, Final Results of the Third Biennial National Organic Farmers? Survey, Santa Cruz, CA, Organic Farming Research Foundation, 1999, p. 91. 2. E. Walz, Final Results of the Fourth National Organic Farmers? Survey, Santa Cruz, CA, Organic Farming Research Foundation, 2004, p. 79. 3. C. Dimitri and N. J. Richman, Organic Food Markets in Transition, Policy Studies Report No. 14, Henry A. Wallace Center for Agricultural and Environmental Policy, Greenbelt, MD, April 2000. 4. N. J. Richman, The Natural Foods Market - A National Survey of Strategies for Growth, Policy Studies, Report No. 12, The Henry A. Wallace Institute for Alternative Agriculture, Greenbelt, MD, April 1999. 5. Organic Trade Association, OTA?s 2004 Manufacturer Survey, Greenfield, MA, May 2004. 6. National Agricultural Statistical Service, Farm Computer Useage and Ownership, U.S. Department of Agriculture, Washington, DC, July 2003, p.1 7. T.A. Park and L. Lohr, Supply and demand factors in organic produce markets, American Journal of Agricultural Economics, 78(August 1996):647-655.
