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Withering competition threatens small organic farms

(Sunday, Feb. 23, 2003 -- CropChoice news) -- Maria Alicia Gaura, SF Chronicle, 02/18/2003: When Jeff Larkey began farming near Santa Cruz two decades ago, he found he didn't have to compete hard for the San Francisco shoppers eager to pony up premium prices for his chemical-free veggies.

"You could sell pretty much anything organic 15 or 20 years ago," Larkey said. "And it didn't matter that much if it wasn't really great-looking." Organic lettuce, a small-farm staple, reliably sold for $12 per 24-head box -- far more than the going rate for conventional lettuce.

Since that sweet beginning, the lure of profit has drawn agribusiness into organics -- and small organic farms are now feeling the sort of dread that a mom-and-pop grocery gets watching a brand-new Wal-Mart go up down the street. As large organic operations snap up contracts with grocery chains, drive down prices and dominate basic crops such as lettuce and carrots, small farmers have to be creative to survive.

Many have not.

"I personally know six or seven small growers who have completely quit farming," said Larkey, co-owner of Route One Farms. "It gets harder every year. "

The organic lettuce that used to be so lucrative for Larkey is a case in point. Competition has slashed prices as low as $4 a box, making it one of an increasing number of crops that he can no longer afford to grow for wholesale distribution.

"In America, if you do something really well and make a good profit on it, you'd better be thinking about what comes next," said Bob Scowcroft, executive director of the Organic Farming Research Foundation. "Because someone out there will do it bigger and more efficiently."

Since Larkey got his start, the organic farming industry has expanded lavishly, with revenues billowing 20 percent a year for the past decade to an estimated high of $10 billion in 2002. But the hard feelings between small and large farmers date back to the industry's early days, according to Scowcroft.

"Back in '87, I was director of the California Certified Organic Farmers, and we would have these terribly tense meetings, where the farmers with 2 and 3 acres would accuse the 10- and 20-acre guys of throwing their weight around, " Scowcroft said. "Now you have companies like Grimmway and Earthbound Farms with thousands of certified (organic) acres -- they're some of the biggest farmers in the world."

The pressures making life difficult for small and medium-size organic growers mirror those faced by conventional family farms, thousands of which have been forced out of business by factory-style farms and imports.

What makes the loss of small organic farms poignant to some is that many of those being forced out were industry pioneers, even zealots, who farmed out of conviction that organic is better for farm workers, consumers, the food chain and the planet.

But farmers also are realists, and while nobody likes being squeezed financially, most admit the changes are irreversible.

"Overall, it's probably a good thing," Larkey said. "Having organics go mainstream is what we always hoped for in the early days."

Not surprisingly, big farmers agree with that assessment.

"As far as the environment is concerned, it doesn't matter why anyone goes into organics," said Jeff Huckaby, who manages the organic division of Grimmway Farms -- the biggest carrot producer on the planet, both of organic and conventionally grown carrots. "The bottom line is that we're growing thousands of acres every year with no chemicals or pesticides. That's a good thing, no matter who is doing it."

Huckaby sad he thinks the disappearance of independent grocery stores is the small farmers' real threat.

"We supply the big chains that a smaller farmer would never be able to supply," he said. "The success of the small farmer depends on the small retailer, and if they all get bought out, that will be a huge problem."

Grimmway, based in Bakersfield, was founded in 1968 as a roadside produce stand. Today, its numbers are vast -- 9 million carrots per day, 365 days per year, more than $300 million annual revenue, distributed in more than 30 countries. Although a relative newcomer to organics, the company already farms 18,000 organic acres.

Grimmway carrots, also sold under the Bunny-Luv and Cal-Organics labels, are planted, harvested, washed, sliced and packaged by machine -- keeping prices low. They come bagged, peeled, crinkle-cut, shaved down to bite-size nuggets, grown with pesticides and without and -- most importantly -- they are available year-round, without fail.

"The big grocery chains are moving into organics, and that's why our market is taking off so drastically," Huckaby said. "Companies like Albertson's, Safeway, Whole Foods and Wal-Mart need a large player like us to keep the shelves stocked."

With the wholesale market becoming the province of the big players, small growers are forced to find other buyers. Many are turning to direct sales -- and looking for individual customers in their own communities.

"It doesn't feel great to see a big operation with no philosophical connection to organic farming come in and take my market away," Larkey said. "But the real question here is, how do we cope? How do we keep going?"

Julia Wiley and Andrew Griffin, husband-and-wife owners of Mariquita Farms in Watsonville, grappled with those questions after decades in the organic business. The result is that they now sell all of their produce at farmers' markets and directly to subscribers who pay for weekly deliveries of a box of fresh mixed vegetables.

"We don't do any wholesale anymore -- zero, none," said Wiley. "We can't even sell to (our local organic foods store) any more. Direct-to-retail marketing is how we as small farmers have figured out to survive."

Their survival strategy included another big change: last year, they merged their operation with High Ground Organics, another area family farm. The merger provides some economy of scale, increases the company fleet to two delivery trucks, and allows all the growers to focus on the crops they do best.

Mariquita grows tomatoes on hot-weather fields near Hollister, while High Ground contributes greens from its cool-weather acreage near the ocean.

The business is thriving, but the workload is staggering. In addition to growing dozens of varieties of produce year-round, the little alliance does its own marketing, customer service, route planning, box packing, deliveries, publicity and special events.

The produce has to be varied, plentiful and flawless. Harvesting is by hand.

Sample recipes are provided. Dealing with customers requires cheerfulness and patience. Weeks go by without a day off.

"We've done wholesale in the past, baby salad mix and specialty mixed vegetables," Wiley said. "But when the big boys get involved, well, forget it."

Wiley still grows carrots for the farmers' markets and her regular customers, real baby carrots harvested young and tender -- not the machine- shaped nuggets mass-marketed by Grimmway.

"Some schoolteachers around here take our carrots into the classroom," Wiley said, "so they can show the kids what a real carrot looks like."

Given the market trends, farmers' associations throughout the state that represent farmers like Wiley and Griffin are encouraging consumers to buy local produce. A group of Marin County farmers is close to starting a Buy Marin campaign. The Community Alliance with Family Farmers has campaigns in Santa Cruz and Sonoma counties to label locally grown food on supermarket shelves and will soon expand its efforts throughout the Central Coast region.

Aside from the obvious selling points of taste and freshness, small farmers point out that buying local produce will have ripple effects in terms of preserving farmland and open space -- and jobs.

"I think there should be room for different levels of farming," Wiley said. "We're happy with our level. But for this level of farming to exist much longer, it's going to be up to the public."

E-mail the writer at mgaura@sfchronicle.com.