WAL-MART is jumping on the organic bandwagon. The decision by America's largest retail chain to sell organic food is a significant barometer of Middle America's acceptance of organic produce. It is also an indicator of pricing for organics at the consumer level, which has come down.

"The market is changing,"� says David Granatstein, sustainable agriculture specialist for Washington State University's Tree Fruit Research Center, referring to surveys showing the broad appeal of organic products. "The consumer isn't who we once thought they were."�

The growing market for organic food is having a significant effect on Washington's apple industry, too. Demand for organic apples is growing, and returns to organic apple growers have been increasing over the past six years, with a 10 percent increase for each of the last two years. Returns for organic apples are from 10 percent to 17 percent higher than traditional apples (depending on variety and grade). Those prices have caught the attention of traditional apple growers. "Now everybody is dipping their finger in it," says Granatstein.

Presently, there are about 10,000 acres of organic fruit in production in Washington, Granatstein says, and apples comprise about 6,700 of those acres, compared to 1,800 acres in 1998 and 4,200 in 2000. The acreage is expected to double in the next three years. Orlin Knutson, owner of Alamo Organic Orchards in Mattawa, says six years ago he was one of the biggest organic fruit growers in the state, with 250 acres. "Larger growers are now in the business, and I am a medium-size to large operator,"� he says. Wenatchee-based Stemilt Growers Inc. has dedicated 2,000 acres, or 12 percent of its total acreage, to organic production, making it the largest organic producer in the state.

Stemilt's move adds to Washington's existing status as the largest producer of organic apples in the world. Why Washington? Granatstein says sunny skies and few pests in Eastern Washington are big reasons. Other areas get too much rain, which increases chances for pests and disease.

SCENT OF A MOTH
The pests that did exist among Eastern Washington orchards were formidable and made branching into organic production difficult. Knutson entered organic farming in 1987, starting with about 25 acres. His biggest challenge was controlling the codling moth, a pest whose larva bores holes in apples and pears.

Traditional fruit growers use powerful chemical sprays to kill the larva, something organic growers had no answer for until the early 1990s, when researchers developed pheromone trapping. Researchers were able to reproduce the natural compound and found a way to spread its scent throughout the orchard, which disrupted the mating process of the moth.

"If they do not reproduce, the larva does not get on the fruit,"� notes Knutson. "Pheromone trapping was the spring-board for organic apple production. Once they solved the codling problem, the other problems were easy because of the availability of organic sprays."�

But weed control and soil fertility remain major challenges for Knutson and other organic farmers and continue to drive up prices. "It costs about $5,000 per acre to produce organically, compared to $4,000 the traditional way,"� Knutson says. "The main reason is that organic production is more labor intensive. Labor costs  from 10 [percent] to 15 percent more for organic growing. Organic sprays are also more expensive than chemical sprays, and natural fertilizers are a big expense."�

Most of the growing issues in the orchards have been resolved, but the orchards are just part of the equation of bringing an organic apple to the marketplace. "The apples need to be protected from the orchard into the box," says Roger Pepperl, Stemilt's director of marketing, referring to the need to shelter the apples from chemicals in the packing houses. Packers use chemicals to prevent traditional apples from developing scabs while they sit in cold storage, which allows them to pack and ship them throughout the year.

However, there are no natural processes or compounds to prevent organic apples from developing scabs. As a result they cannot store them for a long period. "We have to pack and ship the organic apples soon after the harvest,"� Pepperl says. "You will see stores stocked with organic apples in the fall and winter, which is our best selling season, but the supply will be limited in the spring and summer."

While researchers were developing more effective technologies for organic apple production, demand started to pick up, especially after the Alar scare in the late 1980s. Consumer awareness grew during that period, but the main markets remained small natural food stores. Those stores relied on people who had a value structure that included organic products, explains Joe Gabriel, North American coordinator for the Sedro-Woolley-based CF Fresh, an international distributor of organic produce.

THE WHOLE STORY
The natural food store landscape, however, started to change in the 1990s. Just like their traditional counterparts, natural food stores began to consolidate, giving rise to such large chains as Whole Foods Market Inc. and Wild Oats Market Inc. "There is no doubt that Whole Foods gave a big boost to organic fruit production,"� says Knutson, whose major client is Whole Foods.

The creation of Whole Foods not only resulted in more outlets for organic apples; it also jump-started the market for organic products by igniting a chain reaction in the entire grocery store industry, suggests Gabriel. "Whole Foods was taking away about 10 [percent] to 15 percent of traditional grocery chains - customers, and was taking away the cream of their customers. They were losing the low end to Wal-Mart and the top end to Whole Foods. So they went organic and were surprised by the volume and sales."

There was another piece to the marketing puzzle before products such as organic apples could hit center stage in the traditional grocery store chains, explains Gabriel. “The chains also realized that they needed a whole line of organic products to attract customers. It had to be more than apples. Now you can go into stores like Smiths in Utah and see a whole line of organic products.�

Since more consumers are buying organic products, there is no longer a “movement tagâ€� to organic food â€" “it is part of the mainstream world,â€� Gabriel continues.

Wal-Mart Stores Inc.'s entry into organics is adding even more momentum to the industry. "Costco even sells organic presliced apples, which is a new and big growth area," says Granatstein. And recently the last piece of the marketing challenge was resolved.

INTO THE MAINSTREAM
"Each state has defined organic in its own way, which created confusion for the national grocery chains,"� says Gabriel. "It was a crap shoot for them."� But after about 13 years of wrangling with the issue, the U.S. Department of Agriculture (USDA) developed a national standard in 2003. Each state still certifies organic products, but the USDA certifies the state agency, which has to follow the USDA criteria. The creation of a national standard for organic products, Gabriel says, helped create a surge in demand for organic apples.

The immediate future for organic apples seems relatively bright, but there are problems looming. Demand is out pacing supply, and prices are expected to remain stable for several years. Although more growers have planted organic apple orchards, it takes three years for an orchard to become certified as organic. The crop will double by 2009 and will continue to grow, which raises a critical question. "It will be about five years before things will happen,"� says Pepperl. "What we do not know is what will happen to the market. Will the consumer base grow?"�

Also, adds Knutson, will Wal-Mart's entrance into organics drive down the price of apples?

As demand increases, there is a concern that if Washington organic apple growers cannot adequately supply the grocery chains on a year-round basis, the chains will turn more extensively to Southern Hemisphere countries such as Chile. "The stores are already getting organic apples from Chile for the summertime,"� says Knutson. "Its organic industry is not as extensive and highly developed as the United States. But it is probably a matter of time. It is a world economy, and capital flows where it can make a profit. Then again, there are always worries in agriculture."