Date:

Author:

The Bucharest University of Economic StudiesRomania

The Risk Management of Organic Products Along the Value Chain

July 4th 2014ICPR-IEMA, Cluj Napoca

PhD(c) Adina-Roxana Munteanumunteanu.adina@gmail.com

20130413_MESMAP_v5.ppt

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► Worldwide, the organic market value registered upward trends in the last years

► The USA organic market surpasses $ 31 billion in 2011, growing by 9.5% since 2010 [1]

► The organic market in Europe reached € 21.5 billion in 2011, increasing 9% compared to 2010 [2]

► EU-27: 9.6 million ha cultivated organically in 2011, out of which 86% of which in EU-15 [3]► Increasing on average by 500.000 ha/year [3]

Brief overview of organic markets

The organic market is expected to continue to grow!

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The relevance of the risk assessment of organic producers for trade

How to design a framework to

assess risk before a

transaction takes place?

► Growth of global organic market► An increasing risk of

contamination of organic product

► Trust and reputation are essential for trade of organic products► From the perspective of

an online trading platform for organic raw materials to facilitate commerce by assessing the risk of farmers / producers

Scope of research

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Snapshot of the organic sector in Romania

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2006 2007 2008 2009 2010 2011 2012N

o.

Ha

No. of organic argiculture operators

Organically cultivated area (arable land) (ha)

The evolution of the no. of organic agriculture operators and organically cultivated area in Romania

between 2006-2012

Source: MARD [4]

► Rather scarce information on the Romanian organic market

► A general trend of exporting raw materials (grains, honey) and importing processed goods

► Value of the organic market in Romania in 2010 is less than 1% ([5],[6])

► There is a lot of growth potential but a good reputation of the organic producers is imperative

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Risk categories Risks assessed at the producer

► According to USDA [7]: production risk, marketing risk, financial risk, human risk, and legal risk

► In chronological order: during the production activities (pre-harvest, harvest and post-harvest), transportation, processing, and delivery of final product to consumer

► According to Fuchshofen [8]: origin-related risks, product-related risks, complexity of transaction risks, spot-buying risks, lack of creditable track record risks of the producers, and non-labelled bulk-product risks

► parallel production related risks► post-harvest handling related

risks (commingling certified and non-certified products on the farms, during transport, storage, packing or processing)

► risk of use of non-allowed substances (chemical pesticides, fertilisers)

► lack of records (a good record system for the entire value chain from producer to exporter is needed)

► price difference between organic and conventional products (the bigger the difference, the higher the risk of fraud)

..by a certification body [9]

Practice and literature focus on the risks at the level of the producer

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Risk assessment needs of an online trading platform of organic products

Online trading

platform

Farmers

Products

Buyers

Certification bodies

Specialized transportation

Money transfers

Focus of the risk assessment

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Proposed framework for risk assessment of an organic producer

1. General Environment

2. Producer Profile

4. Rating of the producer

3. Product traceability

1.1 Country corruption index

1.2 National organic legislation

1.3 Organic certification bodies

1.4 General trade conditions

2.1 Period of organic certification

2.2 Ratio organic to conventional

3.1 Records of the product on the value chain

3.2 Field reports and plans

3.3 Master certificate

3.4 Reports and audits of the Certification Body

5.1 Rating of outside the platform transactions

5.2 Rating of platform transaction

Overall risk score of the producer

20% 30% 30% 20%

25%

25%

25%

25%

2.4 Quality assurance possibilities

2.3 Informa-tion on mana-gement system & practices

2.6 Capacity related to organic practices

2.5 Financial stability

25%

75%

25%

25%

25%

25%

20%

20%

20%

15%

10%

15%

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[1] Oganic Trade Association’s (OTA’s) 2012 Organic Industry Survey, quoted at http://www.organicnewsroom.com/2012/04/us_consumerdriven_organic_mark.html [accessed April 2014]

[2] Schaack, D., Lernoud, J., Padel, S., & Willer, H. (2013). The Organic Market in Europe 2011-Nine Percent Increase Compared with 2010. The World of Organic Agriculture-Statistics and Emerging Trends 2013, 224-229.

[3] European Commission (2013). Facts and figures on organic agriculture in the European Union. DG Agriculture and Rural Development, Unit Economic Analysis of EU Agriculture

[4] MARD (2014). Dinamica operatorilor si a suprafetelor in agricultura ecologica; available at http://www.madr.ro/ro/agricultura-ecologica/dinamica-operatorilor-si-a-suprafetelor-in-agricultura-ecologica.html [accessed April 2014]

[5] InfoMina (2008) Piața Bio din România], available at http://www.infomina.ro/pdf/Despre%20piata%20BIO%20din%20Ro.pdf [accessed April 2014]

[6] Cult Market Research (2010) - Studiu de piaţă – Produse bio. Available at http://cultresearch.wordpress.com/2010/09/14/studiu-de-piata-%E2%80%93-produse-bio/ [accessed April 2014]

[7] USDA (2014b). Risk Management Agency- Risk management planning. Available at http://farm-risk-plans.rma.usda.gov/index.aspx?action=riskman.home [accessed April 2014]

[8] Fuchshofen, W. (2009) Risk Management for Organic Ingredients, Organic Processing Magazine, May- June 2009

[9] Aditi (2014). Group Certification and the Risk Assessment. Available at http://aditicert.net/policy/group-certification-and-the-risk-assessment/ [accessed April 2014]

References

Date:

Author:

The Bucharest University of Economic StudiesRomania

The Risk Management of Organic Products Along the Value Chain

July 4th 2014ICPR-IEMA, Cluj Napoca

PhD(c) Adina-Roxana Munteanumunteanu.adina@gmail.com

Thank you!