New Study Touts Benefits of Organic Goods, Questions Pesticides and GMOs

Scientists estimate that we humans—since our earliest ancestors—have been running around the earth for well over two million years. Only within the past century—or 0.005% of that time—have we come to rely so heavily on the use of pesticides to help feed our world's population.

At first, many believed that such chemicals were good things—they helped us feed an ever-growing population. They also helped bring the overall price of food down, making it easier for poorer people to afford a nutritious diet.

But over the last twenty years, many have started questioning the overall benefits of such a production system. The benefits of chemical use—and more recently, genetically modified organisms (GMOs)—have been researched and debated passionately since the start of the new millennium.

A recent meta-analysis of 343 peer-reviewed publications on the matter promises to add even more fuel to the fire with its most basic conclusion: organic food is simply better for you than conventionally grown fare.

The three major conclusions
While those of you who wish to dig into the numbers yourself can click on the link above, the researchers—led by Professor Carlo Leifert of England's Newcastle University—reached three key conclusions from their study.

First, antioxidant levels in organic goods were significantly higher than in conventionally grown food. Using the database of studies, the prevalence of antioxidants was 18-69% higher in organic food. Antioxidants have been shown to have a positive effect on human health, by lowering the incidence of chronic diseases and having anti-inflammatory properties.

Second, levels of cadmium were 48% lower in organic food than they were in conventionally grown food. Cadmium is a toxic and carcinogenic metal that has been linked with numerous health ailments.

And third, food that was conventionally grown was four times more likely to have pesticide residue on it than if it was grown organically.

Why this matters...sort of
While some are already questioning the results of Newcastle's study, the researchers point out that their database was far larger than any previous study, and it was unique in its focus on antioxidants, toxic metals, and pesticide residue.

More importantly—for organic grocers, chemical, and seed companies—is whether or not findings like this could affect the bottom line. When a U.K organization asked people why they buy organic goods, this is what they had to say.

Source: Soil Association, February 2014 

Without a doubt, the ability to avoid chemicals and eat healthier food plays a huge role in the decision to purchase organic food. 

But industry observers should be quick to realize that there's a huge spectrum of reasons people buy organic goods—outside of these health benefits. And they should also be aware that conflicting results have been found—and published—before.

If the Newcastle study was confirmed by further studies in the future, it could be a real coup for organic grocers--and very bad news for big seed and agrochemical companies. But as it is, this single meta-analysis alone probably won't be enough to meaningfully move the needle for any of the major players.

What investors of organic grocers should keep their eyes on
Whole Foods (WFM) has been on the front line of educating consumers about where their food comes from for three decades—whether it be an organic/conventional sticker next to produce, or a map showing exactly where in the world food came from. The Newcastle study only bolsters what many Whole Foods shoppers already believe: organic is better.

But the debate over conventionally vs. organically grown food has also taken on an added dimension over the past ten years as "GMO" has entered the common vernacular. By definition, GM seeds cannot be labeled organic, even if no chemicals are used to treat them once planted. It's unclear if the studies used for the Newcastle report differentiated between conventionally grown food and those which used GMOs.

For its part, Whole Foods will be one of the first nationwide chains to ban GMO products from the shelves by 2018. 

What big agribusiness investors should be watching
As with the grocers, this recent study isn't earth shattering. Instead, its one piece of a long puzzle that will take years--if not decades--to play out. I liken it to the average American's slow-but-steady defection from drinking soda. This didn't happen overnight, but as more and more evidence came out that regular soda drinking was bad for you, purchases plateaued, and actually slipped.

By no means am I saying that's a forgone conclusion with conventionally grown food, but it serves as a warning.

Over the long-run, who could this affect the most? Below are a list of the top five seed and pesticide companies in America, by sales.

Source: Seed info. from 2011, via ETC Group . Pesticides from 2012, via Agronews 

Of the group, Monsanto obviously has the most to lose by a move toward organics. The company has by far the largest seed market share worldwide, and is also one of the leading pesticide producers through its Roundup glyphosate product.

Only time will tell how this plays out. The most important factors for investors to watch--beyond the obvious revenue and profit figures--will be the results of further studies on the topic, and how they are received by the general public.