Supply and Demand Factors for Organic Produce

Although the organic produce industry is growing dramatically, little is known about market structure. We estimate a system of reduced‐form equations to evaluate supply and demand factors that influence equilibrium farm price and quantity in wholesale markets for organic broccoli, carrots, and lettuce. In the long run, demand factors dominate supply factors. Reduced wholesaling costs, increased margins by which organic wholesale price exceeds nonorganic price, and higher consumer income stimulate both farm price and output. Increasing the nonorganic farm price decreases equilibrium quantity of organics. Market expansion strategies should target consumers and wholesalers.