How Did Peter Piper Pick a Peck of Organic Produce? An Examination of the Price Premiums and Price Behavior of Organic Produce at Wholesale and Retail Markets

Abstract

The organic produce market has commanded significant market share, occupying a stable and strong 11.4 points of the conventional produce market. Despite the significant growth and market share that organic produce commands in produce sector, price premiums remain high. This study seeks to understand the price behavior and structure of the organic produce market in the United States. While the largest price premium was expected to be applied at the retail level, the results found that the largest percent price differentials are observed at the wholesale level, although decreasing. This study also proved that the organic produce market operates much like a category of its own with the results revealing that organic prices at the retail level could largely not be explained by conventional prices. This suggests that organic price behavior is divergent from conventional produce at both markets, most notably at retail. This thesis attempts to reveal pricing behavior and structure of the organic produce market across two points in the supply chain in order to focus greater attention on the origins of organic price premiums and the factors that may explain them.