Organic Goes East

The booming global organic market was worth an estimated 33 billion euros ($43 billion) in 2006. Even though eastern European countries made up only a tiny portion of that market, the production of organic crops and goods in the region once known for its industrial assemblies and gray apartment blocks has been on a steady rise.

Thanks to increasing incomes and growing environmental awareness, domestic markets are starting to emerge in the region. Experts say that Poland and the Czech Republic have the biggest internal markets for organic produce, followed by Hungary.

According to Tom Vaclavik, who runs a Czech organic consulting company called Green Marketing, Czech consumers bought an estimated 18 million euros worth of organic goods in 2006. This may be a drop in the ocean compared to Germany -- Europe's biggest organic market, which is worth 3.9 billion euros -- but a threefold market growth could be expected within five years.

"The demand is increasing incredibly," Vaclavik said. "In the last two years, the market grew by combined 80 percent. Demand is really increasing, mainly in the large cities. The media are also becoming more concerned about the quality of food production."

Ripe for investment

As a result of the interest in organic products, domestic organic production has not been able to keep up with demand.

"Organic products are mainly coming from Germany, the Netherlands, Italy, France and even the United Kingdom," Vaclavik said. "In the processed food area, I would say it could be 60 or even 70 percent that are imported."

This is a common story throughout eastern Europe, where organic produce is mainly raw, such as cereals -- wheat, rye and barley -- as well as berries, some fruits and vegetables. There is currently hardly any investment in the processing and manufacture of organic goods in the region.

"I think the market is ripe for new investments and new products," Vaclavik said. "The market is still in its initial phase of development, but it's quite cheap to invest. It will be more expensive in five years."

Expansion of farmland

The increasing eastern European domestic markets and the booming western European markets are also fuelling the expansion of organic farmland in eastern Europe.

In 2006, the Czech Republic had around 280,000 hectares (692,000 acres) under production, Poland 220,000 hectares, and Hungary 130,000 hectares -- making these three countries the market leaders. But there is reason to believe that organic production in other eastern European countries will pick up as well.

"If you look at the western European markets, demand is outstripping supply in many areas," Vaclavik said. "There are shortages of milk, meat and organic feed, which has to be produced somewhere. I believe some of the new EU countries such as Romania, Bulgaria but also Slovakia and the Czech Republic could produce organic products."

Europe's organic grain basket

Another important newcomer to the organic scene is Ukraine. With 240,000 hectares under production, it's the second most important producer in eastern and central Europe. The vast majority of Ukraine's organic farms are large-scale -- more than 3,000 hectares.

According to Eugene Milovanov of the Organic Federation of Ukraine, the production is still mainly limited to wheat for export.

"Ukraine is already developing as agricultural and organic agricultural country," Milovanov said. "It was the grain basket of Europe in old times, and it is now becoming the organic grain basket of Europe."

"If you look closely at what is happening with demand in the Netherlands, in Germany and in the United Kingdom -- these countries have quite a big demand for grain, and a big shortage was already covered by Ukrainian supplies this year."

Milovanov says Ukraine's organic sector is being held back by the lack of legislation setting legal standards. In 2004, however, the government formed a working group to draft regulations, and it is hoped that the parliament will pass the law later this year.