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Organic, With Pesticides?

Some farmers in China are taking advantage of confusing rules to falsely label food.

From http://www.businessweek.com/print/magazine/content/07_31/b4044062.htm?chan=gl

JULY 30, 2007
SPECIAL REPORT
By Chi-Chu Tschang

The word "wholesome" doesn't exactly spring to mind when describing Chinese exports these days. But for years now, Chinese farmers have fed soaring global demand for organic foods. China's organic exports totaled $350 million in 2005 (the most recent data available)—up from $150 million the previous year—according to China's largest organic food certification agency. The country now represents 5% of global trade in such products, up to this level today from 1.2% in 2004. And that share is bound to grow as more land is converted to chemical-free farming. China now ranks third worldwide in organic farmland, after Australia and Argentina, up from 45th in 2000.

Organic produce from China isn't turning up at supermarkets stateside just yet. Organic vegetables and fruits don't travel well, so most of China's organic produce is shipped to closer markets such as Japan, Hong Kong, and Taiwan. But organic soybeans, rice, and other grains, along with frozen vegetables and fruit concentrate from China are all making their way into processed organic foods that wind up on store shelves in the U.S., food brokers say. U.S. government agencies don't collect data on the value or country of origin of organic food imports.

In light of the recent toothpaste and medicine scandals, Americans might rightly wonder what passes for organic in China. While falsely labeled organic foods are a problem all over the world, in China the situation is murkier than just about anywhere. Not only are there two rival clean-food standards, Green Food and Organic Food, backed by different government ministries, there also 21 separate agencies that claim the right to certify food as organic.

FRAUD THRIVES IN CHAOTIC MARKET.  Only one, the Nanjing-based Organic Food Development Center (OFDC), is accredited by the International Federation of Organic Agriculture Movements, an umbrella organization headquartered in Bonn, Germany. "The problem with the domestic market is that Chinese consumers don't believe in certification. They don't believe in the integrity of what they see," said Washington State University professor Paul Thiers.

Within China's organic food industry, fraud is a widespread problem, say organic farm owners. "China's organic food market is chaotic," acknowledges Liu Lei, secretary general of the Association of Green Development, a trade group representing organic farmers in the southern province of Yunnan. "You have a lot of small companies taking produce grown with pesticides and chemical fertilizers, then advertising it and selling it as organic."

Even some global heavyweights have been duped. Wal-Mart (WMT ) began several years ago procuring organic produce from a large-scale "organic" farm near Beijing to sell in Supercenter branches around China. Last year, Wal-Mart had to pull the produce from its Chinese stores after a surprise inspection revealed that the supplier was selling vegetables treated with pesticides. "It wasn't just Wal-Mart. The organic farm had to recall their produce from all the supermarkets they supplied," said Yunnan-based He Fan, Wal-Mart Kunming fresh produce procurement manager.

IMPORTERS VISIT THE FARM.  Worries over quality have spurred some U.S. companies to dispatch their own people to verify whether Chinese producers are really organic. For instance, Frutzzo, a small producer of organic juices in Alpine, Utah, was interested in buying yungberry—a small, round, bright-red fruit that only grows in southeast China—fruit concentrate from a supplier in Zhejiang province.

Chief Executive Tony Xanthos made two trips to China this year to visit the farms where the fruit is grown, in the mountains of Zhejiang, and the processing facilities where it's turned into concentrate. Xanthos found a clean processing facility and yungberry farms where farmers worked under fair and humane conditions. Afterward, he inked a deal to import 30 containers of concentrate. The first shipments have already arrived and will be on shelves nationwide in September. "We need to know where the food comes from and we need to be able to trace it back to the farmers," says Terry Xanthos, Tony's son and president of the company.

QUESTIONABLE PRINCIPLES.  Still, some unscrupulous companies in China clearly have tried to con their way into the U.S. market. Haobao Certified Organic Farm cultivates vegetables and raises chicken, cows, and sheep on a small farm in Yunnan province. OFDC-certified Haobao supplies the Parkson and Trust-Mart supermarket chains in Kunming with organic vegetables and recently signed on to supply Wal-Mart supercenters.

Founder Ming Yi says he was once approached by a farm in northeastern China that exports vegetables to the U.S. under the Ministry of Agriculture-backed Green Food standard, which is less stringent than organic. The outfit wanted to buy 10 kilos of Haobao's produce and submit it to the OFDC for inspection as if it were its own. Says Ming, "We don't do business with these kinds of people."

With Coleman Cowan in New York

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