Cost in Translation

Frog Hollow's tree-ripened fruits have developed a nationwide reputation, and a single, succulent peach can run more than $3. But generally, "it" fruits from small farms are not the ones causing a strain on the bank account. Most organic fruits and vegetables -- the largest sector of the organics market -- are only 10 to 30 percent more expensive than their conventionally grown counterparts, and Dobbs says many people are willing to pay that kind of markup for better produce. Where economies of scale could really make a difference is in the world of frozen produce, processed foods, and animal products.

Those items typically cost 50 to more than 100 percent more than their conventional counterparts, according to a 2002 USDA study. In a survey conducted by Colorado-based Walnut Acres -- which bills itself as America's first organic-food company -- price was a major barrier for nearly 70 percent of shoppers who didn't usually buy organic items.

So to win these folks over, do organic producers have to start offering cheap cheese and budget bonbons? Dobbs makes a surprising estimate: if just one-third of American shoppers bought organic foods on a regular basis, most prices would come down to that 10 to 30 percent markup we're seeing on produce today.

Still seems expensive, but Dobbs says a third of U.S. consumers could afford to buy at today's prices if we chose to. The reason we can afford more than we think? We're already paying that much -- and more -- for supposedly cheap food.

More than Meats the Eye

Conventional crops are heavily subsidized by the federal government in the United States, making them artificially inexpensive. Couple those subsidies -- which have been in place since the New Deal -- with the cost of cleaning up pollution and treating health problems created by conventional farming, and we're paying a lot in taxes in order to pay a pittance at the grocery store.

"When we make the argument that low-income people can't afford organics, we're assuming that the prices of conventionals are the prices we should be paying," says a USDA economic researcher who asked to remain anonymous. "But those prices externalize a lot of costs, like pollution and higher energy inputs."

A study last year by Iowa State University economists showed that the annual external costs of U.S. agriculture -- accounting for impacts such as erosion, water pollution, and damage to wildlife -- fall between $5 billion and $16 billion. (For context, that's as much as twice the EPA's 2005 budget.) And Michael Duffy, a coauthor of the Iowa paper, says his team's estimate is conservative.

So will this drive frustrated consumers to the o-side? Hardly. If anything, the taxes consumers already pay to support conventional farming are a disincentive to paying "double" for organics. To encourage a shopping shift, as European agricultural researchers Stephan Dabbert, Anna Maria Haring, and Raffaele Zanoli write in Organic Farming, government has to throw farmers a bone.

"In Western Europe, most countries have decided that organic agriculture needs special support to bring production [and consumption] up to a significantly higher level," Dobbs notes. In countries including Denmark, Sweden, Germany, Austria, and Switzerland, and also at the European Union level, governments contribute to organic markets. In fact, many European policy makers treat organic farming as an instrument to help mitigate environmental problems, manage marginal lands, and address falling farmer incomes, according to Dabbert, et al.

Meanwhile, in the U.S., scant federal money is set aside strictly for organic farmers. The industry doesn't even have access to the type of pricing data and guarantees available to conventional farmers, says University of Georgia agricultural economist Luanne Lohr. "In order to induce producers to get into the [organics] market, they need to know what kind of prices and revenue they're looking at," she says. Without that information, "the producers are flying blind," at the mercy of large distributors who can set unfair prices. "A lot of people would be willing to go into organic, but they don't want to just throw away their investment [in their conventional farms] to get into a system in which they don't have price guarantees," says Lohr.

The success of the USDA's Natural Resources Conservation Service, which dispenses grants that help conventional farmers implement more sustainable practices, suggests subsidies are a key part of encouraging such changes. Deputy Chief Tom Christensen reports that so many farmers are interested in the $3.9 billion program that only one in four applicants is given funding.

Loaves and Wishes

Subsidies are a useful way to increase supplies, experts say, but they're only effective in conjunction with a well-run market. "Regulations that promote organic agriculture by encouraging supply are not ... sufficient to ensure the continuous growth of the organic sector," wrote Nadia Scialabba, a senior officer of environment and sustainable development for the U.N., in 2001.

Scialabba cited the case of Austria, which was the leading organic producer in the E.U. in the mid-1990s. About 10 percent of farmers in the country decided to go organic because of subsidies offered by the government, but this increase in supply was met with inadequate information, distribution, and marketing channels; as a result, many threw in the trowel. They had the money -- they just needed a market.