The role of US organic certifiers in organic hotspot formation

Because consumer demand for organic food products has seen a recent surge in momentum, the question of what factors encourage development of (domestic) organic supply has become increasingly important. Consumer interest in organic products has increased in the past decades, with growth rates upwards of 20 percent per year before the 2008 recession, and above 10 percent in the most recent years. This growth, however, has led to the concern that the demand for organic ingredients is out-pacing domestic supply. As a response to this possible shortage, organizations such as Stonyfield, Organic Valley, the Organic Trade Association, and other groups have taken an interest in promoting the organic sector and recruiting new organic operators. This situation, along with the fact that research has linked organic agriculture to regional development, makes it important to analyze and understand the factors associated with the development of geographic areas that have a high presence of organic operations. Existing literature addresses both factors affecting the formation of hotspots in general, and factors affecting the development of the organic industry. For example, factors such as proximity to urban centers and receptiveness to organic are mentioned as factors associated with increased organic operations. Papers discussing the formation of general hotspots also mention lower transportation costs, more labor market pooling, and knowledge spillovers as reasons for hotspot formation. However, none of the literature addressing the organic industry, to our knowledge, discusses the role of the organic certifying agent in the formation of hotspots of organic operations. Examining this role is important because the services provided by the organic certifying agent may be indicative of the level of communication among organic operations, and between organic operations and their communities, which may further indicate networking and knowledge spillover opportunities. The purpose of this paper is to investigate organic hotspot formation, paying particular attention to the role of the organic certifying agent. To do this, we determine how county-level certifier characteristics are associated with the probability that a county is in a hotspot of organic operations. We first identify hotspots (counties with positively correlated, high numbers of organic operations), cold-spots (counties with positively correlated, low numbers of organic operations), and outliers (counties with negatively correlated numbers of organic operations) of organic operations using data from the National Organic Program and the Local Moran’s I test statistic, which tests the null hypothesis of no spatial autocorrelation. We then use a logistic regression to analyze the association that county-level factors related to policy, economics, demographics, and organic certifiers have with the probability that a county is in one of the identified hotspots (or coldspots) of organic operations. We estimate the logit model for several different variations of dependent variables (organic hotspots, organic-production hotspots, organic-handling hotspots, and organic coldspots), but the same specification of influencing factors. By comparing results across these four models, we can focus on the roles of organic certifiers in the different models, rather than the individual results. As a robustness check, we also perform a secondary analysis using a subset of the data where all included counties have at least one certified organic operation. Specifically addressing organic certifiers, we create an indicator variable that takes a value of 1 if more than a certain percentage of certified organic operations in the county are certified by agents who publicly note outreach services, and 0 otherwise. This variable is included as an independent variable in our logit regressions. To examine the robustness of this variable, we examine variations where the thresholds for county-level percentage of organic operations certified by outreach-oriented certifiers are 30, 50, and 70 percent. We use this same technique for government-run certifications. That is, we create include a dummy variable that takes a value of 1 if the more than a certain percentage (again, 30, 50, or 70 percent) of organic operations in a county are certified by state or local government agencies. The results suggest that a high presence of organic certifying agents who provide outreach services, as well as a high presence of government run organic certifying agents, are both positively associated with the probability that a county belongs to a hotspot. Other factors, such as the level of property taxes and the distance of the county from the nearest interstate, are also significantly correlated with the probability that a county is in a hotspot. The results of this paper may encourage public institutions associated with organic certifiers to provide incentives for offering outreach services, and private institutions interested in promoting organic to work more closely with certifying agents as a means to boost organic hotspots. In the future, it would be interesting to quantify the economic impact of organic hotspots and coldspots, and then isolate the indirect economic impact of characteristics related to the organic certifiers.