Schools and hospitals should be encouraged to serve more organic food, according to a report published today.

Increasing orders from the public sector is seen as an important way of further boosting sales of organic produce, particularly for British farmers, says the report from the Organic Action Plan Group, adding that steps were needed to overcome current obstacles - whether perceived or not - preventing the "procurement" of organic food by public institutions.

The group aims to identify ways to ensure the "stable and strategic" growth of the organic sector by setting out practical measures which the government, food and farming industries can take.

The group's report - a follow-up to one published in 2002 - demonstrates the organic sector's rapid rate of growth.

Almost 700,000 hectares of UK farmland was taken up with organic production by the start of this year - compared with just 30,000 hectares in 1993, it says. The proportion of UK organic food in shops has increased significantly in the past two years and now accounts for 44% of total organic sales.

According to the report, the UK is one of only three countries in the world where sales of organic food exceed £1bn a year. The others are the US and Germany.

Peter Melchett, policy director of organic charity the Soil Association and a member of the action plan group, said: "The proportion of UK-produced organic food is up and UK demand and supply continues to grow.

"This report is further proof of the government's commitment to supporting the organic sector. Local food outlets such as box schemes and farmers' markets have been recognised as viable alternatives to supermarkets.

"There is a clear message that farmers can capitalise on supplying local markets. The report notes the work the Soil Association has done to grow local markets, and particularly to improve access to organic food in disadvantaged communities."

The farming minister, Ben Bradshaw, said: "The original action plan was an excellent example of the whole food supply chain working together to develop a long-term sustainable action plan for the sector.

"The Two Years On report shows that much has been achieved. For instance there has been a big rise in the amount of organic produce provided by UK farms, from only 30% when the Plan was written to 44% today. This is a great achievement for all in the industry and for the retailers."