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Unformatted text preview: The Demand for Organic Food in the U.S.: An Empirical Assessment Jinghan Li, Lydia Zepeda, and Brian W. Gould This analysis examines the determinants of organic food purchase behavior of a random sample of U.S. food shoppers. We analyze food expenditures conditional upon whether a household purchases organic foods. The results from our econometric modeling effort identify shopping venue, awareness of the organic label, positive beliefs toward organic foods, a positive attitude toward cooking, and a lack of religious afFliation as being important determinants of organic food purchases. Income was not found to signiFcantly affect the decision to buy organic foods. Our results suggest that the limiting factors of the organic food market are search cost, dietary patterns, and awareness of the organic food label. Given the recent Wal-Mart effect on the organic food market, it is anticipated that these search costs will decrease as organic foods become more widely available. The organic food market has been increasing at ap- proximately 20 percent per year since 1990, when total organic food sales were $1 billion, compared to $17 billion in 2006 (Dimitri and Greene 2002; Klonsky and Greene 2005; Organic Consumers As- sociation 2007). Consumers are attracted to organic foods because of their characteristics, such as being environmental-friendly and pesticide free (Dimitri and Greene 2002). Recent increases in organic food demand can be attributed to the increased avail- ability, which lowers search costs, and increased selection and variety (Dimitri and Greene 2002). Supplementing the traditional sources of organic food (i.e. farmers markets and natural food stores), conventional supermarkets accounted for 47 percent of organic sales in 2003 (Oberholtzer, Dimitri, and Greene 2005). The decision by Wal-Mart to feature organic foods in their super-centers will undoubt- edly increase the market share of organic food sales by supermarkets (Warnier 2006). In addition, many major food manufacturers, such as Kelloggs, Kraft, and Dean oods, are developing or acquir- ing organic product lines (Dimitri and Oberholtzer 2005). The proFts associated with organic foods have also attracted producers to this market. The 1.45 million acres of certiFed organic cropland in 2003 were 3.6 times the level of 1992 (Dimitri and Greene 2002; Klonsky and Greene 2005). The main factors that prevent conventional farmers from shifting to organic farming include certiFcation costs, the time required for transition from conventional to organic status, lack of understanding of organic production technologies, and generally higher labor costs for organic products (Greene and Kremen 2003)....
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This note was uploaded on 04/07/2011 for the course ECON 380 taught by Professor Showalter,m during the Winter '08 term at BYU.
- Winter '08