Australia's certified organic industry is expected to be worth more than $2 billion by next year but it is fighting to ensure fake organic claims do not damage its reputation.

Export volumes rose nearly one-fifth last year, and demand for Australian organic products continues to outstrip supply both at home and abroad, according to the latest report from industry and certifying group Australian Organic Ltd.

But Australian Organic chairman Andrew Monk said the industry faced two big challenges:

Fixing chronic shortages of organic grain, which is restricting the growth of cereal markets and the supply of organic pigs, chickens and eggs

Fixing chronic shortages of organic grain, which is restricting the growth of cereal markets and the supply of organic pigs, chickens and eggs Fighting for tighter labelling laws to ensure only certified products can be sold as organic

"It's the one missing chink in the armour to protect consumers outright in terms of claims for organic," Mr Monk said.

We are "absolutely concerned about greenwashing" and the use of words such as organic, sustainable, natural and free-range by non-certified producers, he said.

Greenwashing is the practice used by companies to make unsubstantiated claims about the origin and the environmental sustainability of their products.

Certified organic producers demand stricter labelling laws

In Australia, companies do not have to be certified to label their products as "organic".

The market report said that "two-thirds of organic shoppers rely on the word 'organic' on the product label to assure them it was organic".

However, it said that "an increasing percentage check for a certification logo on the product (44 per cent, up from 34 per cent in 2014)".

Certified producers and processors are concerned that consumers are getting ripped-off and paying premium prices for products that do not meet Australian organic standards.

Jamie Ferguson from the Arcadian Organic and Natural Meat Company, a red meat processor in Toowoomba in southern Queensland, wants only certified organic businesses to be able to use the word "organic".

"You're either organic or you're not," Mr Ferguson said.

Mr Ferguson says the organic market in Asia is surging. ( ABC News: Alexandra Blucher )

Quentin Kennedy, managing director of Kialla Pure Foods, an organic grain processor south of Toowoomba, agreed that current laws were too weak.

"I think it would be much clearer for the consumer if there were mandatory requirements around the use of the word organic," Mr Kennedy said.

Australian Organic chairman Andrew Monk said the Federal Government has resisted the industry's long-term lobbying to legislate changes to labelling laws.

"I think the challenge is that the [Federal] Government wants to push back on that … claiming that the industry is self-regulating very well and there is no systemic market failure," Mr Monk said.

"Our response to that is there are still parts of the market that are not complying with those requirements and we would like the ACCC to take a more active stance in that space."

A spokesman for the Federal Agriculture Minister Barnaby Joyce said it was incumbent on the industry to build a case for further regulation "given that labelling of organic products is already governed by truth in labelling laws".

"The question these elements of the organic farm sector needs to answer is why a farmer running a genuinely organic production system should be restricted from honestly claiming they are organic just because they haven't been certified by one of the six organic certification organisations in Australia," he said.

Bakery items, sheep meat see major export growth

Beef remains Australia's largest certified organic export. ( Supplied: Australian Organic Market Report )

Australia accounts for more than half of the world's organic farmland, most of which is used to produce beef and lamb.

Organic sheep and lamb meat exports grew 80 per cent last year, while beef — the largest single export item — declined 14 per cent.

Other sectors showing strong growth were cosmetics, wine and dairy products, while bakery items rose four-fold, with growing demand from South Korea.

North America and East Asia were Australia's largest organic markets. ( Supplied: Australian Organic Market Report )

North America and East Asia were Australia's largest organic markets, with Hong Kong showing the greatest growth.

Andrew Monk said there was plenty of opportunity for growth, as the red meat sector had shown over the years.

Arcadian Organics began processing 66 organic cattle each fortnight in 2005 and now processes as many as 900 cattle a week.

Sales Manager Jamie Ferguson said the organic market was growing strongly in Asia with young families wanting to buy healthy food for their children and elderly parents.

"Our most innovative new product is around organic and paleo sausages," he said, adding that it was just about to launch a grass-fed organic hot-dog in Australia.

Chronic undersupply of organic grains a big challenge

The added costs of growing grain organically without the use of traditional chemicals and pesticides makes growing grain one of the biggest challenges in the organic industry.

"Ultimately weed management is one of the biggest challenges," Andrew Monk said.

"That can add really considerably to the price, we're talking double, maybe even triple the cost of production (of conventional growers)."

He added: "It had downstream ramifications" for organic pig, chicken and egg producers who need organic grain for feed.

Quentin Kennedy thinks current labelling laws are too weak. ( ABC News: Alexandra Blucher )

Organic grain miller Quentin Kennedy said the grain industry needed to spend grower levies on research and development of weed control measures to encourage farmers into organics.

"Supply has been an issue with us forever," said Mr Kennedy, the owner of Kialla Pure Foods.

"We are regularly knocking back export quotes," he said.

His business mills 20 different organic cereal grains for the domestic and export market, but one of the biggest growth areas of his business is providing organic feedstock.