Market Overview

Will Stanford Study Hurt Organic Food Stocks?

Is it true that organic foods don't carry the healthy upside that the general public has been led to believe? An article in the Annals of Internal Medicine (via The Los Angeles Times) suggests that there is no significant difference -- in terms of nutrition -- between organically grown food and conventionally grown foods.

“We did not find strong evidence that organic foods are consistently more nutritious than conventional foods,” Smith-Spangler, an instructor at Stanford's medical school and first author of studies, told The Los Angeles Times.

“For pesticides residues, the authors found a 30 percent lower rate of detectable contamination in organically grown produce. Studies generally found that levels of contamination were within safe ranges and may not differ much between organic and conventionally grown food.”

This news may not bode well for the organic foods sector, including some retail chains like Whole Foods Market (NASDAQ: WFM) and The Fresh Market (NASDAQ: TFM). Natural food manufacturers and distributors such as SunOpta (NASDAQ: STKL), United Natural Foods (NASDAQ: UNFI), and Hain Celestial (NASDAQ: HAIN) could suffer as well.

Whole Foods Market may see the largest effect as it is the paradigm of natural and organic food supermarkets, with 329 stores around the United States. Whole Foods is up almost 40 percent year-to-date. Distributors like United Natural Foods and Hain Celestial have also been riding the trend, with both companies trading up nearly 48 and 96 percent year-to-date, respectively. SunOpta is up a more modest, but nonetheless impressive, 23 percent year-to-date.

According the Thomson Reuters' NPR Health Poll, “58 percent of Americans say they choose organic over conventionally produced foods when they have the opportunity, a number that spikes higher among both young and highly educated respondents. Sixty-three percent of respondents under the age of 35 prefer organic foods, as do 64 percent of those with a bachelor's degree or more.”

With the supposed benefits of organic foods under the microscope, the market could be influenced by the media's newfound perspective on organic foods. It is not breaking news that organic foods cost more than the alternative option, but if the price premium of the product does not live up to the perceived benefits, the change in public opinion could lead to a decrease in demand for natural and organic products.

Posted-In: News Trading Ideas General

 

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