Consumers Trust Organic Labels, But Fraud Threatens The Industry
Peyton Manning, the NFL quarterback-turned-pitchman, apparently has another side hustle: Certifying shipments of grain as organic for a Nebraska-based agency called OneCert.
Problem is, OneCert president Sam Welsch doesn’t remember hiring Manning for his business, which is accredited by the U.S. Department of Agriculture to inspect everything from small vegetable farms to processing plants and international grain operations.
“I’m sure they found his signature somewhere on the internet and threw it on one of our certificates,” Welsch says.
It’s an example of fraud: People throughout the food-production chain — both domestically and internationally — trying to scam the system and make money off the premium prices for organic foods. The organic industry is trying to battle the problem, given that it could undermine consumers’ trust and burst its burgeoning $43 billion food market.
“There's an incentive for people who want to get organic prices for products that are not organic,” Welsch says, “because organic products generally are worth more than the conventional.”
The scope of the problem isn’t fully known, but the USDA has published a list of 90 fraudulent certificates forged since 2008. Violators can face fines that start at $11,000 and go up to, depending on the scale of fraud, jail time.
The USDA declined an interview, but said this month in a newsletter that the vigilance of the organic community is vital in ensuring organic integrity.
The penalties don’t always deter lawbreakers, according to Gwendolyn Wyard, vice president of regulatory and technical affairs at the Organic Trade Association.
The longer and more complex the supply chain is, the more potential risk there is for fraud, she says.
Consider a possible path for organic corn tortilla chips. The corn might come from a farm in Ukraine, then is stored in a grain elevator. Next it travels by truck or ship or rail (or all three) to a mill, after which it is processed and packaged before ending up on a grocery store shelf.
Each spot where the corn changes hands is vulnerable for fraud — and a place to lose what the organic industry relies on: shoppers’ trust.
Olivia Meyer buys organic as much as she can, and says the label means something to her, like fewer chemicals and perceived health benefits for her family.
“If I were to find out that these organic blue corn chips were not actually organic blue corn chips, I would feel tricked and that I was wasting my money and sort of why spend the premium if that wasn’t the case,” says Meyer, who lives in Columbia, Missouri.
Consumers don’t always get reimbursed, though, as the decision is ultimately up to the retailer. But consumers also can file complaints with the USDA. The agency reported 379 complaints and $187,500 in civil penalties for the fiscal year that ended June 30.
The Organic Trade Association knows it can’t lose shoppers like Meyer, so it’s trying to target one of the most exposed parts of the organic supply chain: shipment ports. A bill awaiting a U.S. House hearing would close a loophole in those spots.
The Organic Farmer and Consumer Protection Act would require the middlemen in organic sales, who often doesn’t even touch the products, to follow the USDA’s organic rules. Right now, they don’t.
“That means that he or she is not getting their required annual inspections,” Wyard says. “You don't actually have an inspector that's going in and looking at all of the paperwork and all that activity every year as is required with a certified operation.”
Without the organic certification, a broker can flip a conventional crop as an organic one to make a little extra money.
“This is the label that’s all about trust. If you want to take trust out of the supply chain very quickly, fraud is the way to do it,” Wyard says.
Wyard is optimistic about the bill, which also seeks more money for enforcing organic standards and investing in technology to improve tracking in the international market. But the trade organization also is pushing for its requests to be included in the next farm bill. Those congressional talks likely will get underway in early 2018.
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