PULLMAN, Wash. – A comprehensive study finds organic agriculture is more profitable for farmers than conventional agriculture. In spite of lower yields, the global study shows that the profit
margins for organic agriculture were significantly greater than for
conventional agriculture. The results show that there’s room for organic
agriculture to expand and, with its environmental benefits, to
contribute a larger share in feeding the world sustainably. Organic
agriculture currently accounts for only one percent of agriculture
globally. The study, published this week in the Proceedings of the National
Academy of Sciences, was authored by Washington State University
scientists David Crowder and John Reganold. To be sustainable, organic agriculture must be profitable. That
motivated Crowder and Reganold to analyze dozens of studies comparing
the financial performance of organic and conventional farming. “The reason we wanted to look at the economics,” said Crowder, an
entomologist who studies organic systems, “is that more than anything,
that is what really drives the expansion and contraction of organic
farming – whether or not farmers can make money. It was kind of
surprising that no one had looked at this in a broad sense.” Organic price premiums give farmers an incentive to adopt more
sustainable farming practices. The authors suggest that government
policies could further boost adoption of organic farming practices and
ease the transition for conventional farmers.
Room to grow
The actual premiums paid to organic farmers ranged from 29 to 32
percent above conventional prices. Even with organic crop yields as much
as 18 percent lower than conventional, the break-even point for organic
agriculture was 5 to 7 percent. “That was a big surprise to me,” said Reganold, a soil scientist and
organic agriculture specialist. “It means that organic agriculture has
room to grow; there’s room for premiums to go down over time. But what
we’ve found is that the premiums have held pretty steady over the 40
years represented in the study.” Out of 129 initial studies, 44 met Crowder and Reganold’s criteria
for inclusion in the meta-analysis of costs, gross returns, benefit/cost
ratios and net present values – a measure that accounts for inflation.
The analysis represented 55 crops in 14 countries on five continents.
The published article provides the criteria used to select the studies
as well as a list of studies that were rejected. “This is the first large-scale synthesis of economic sustainability
of organic farming compared to conventional that we know of,” Crowder
said. The authors consulted with three agricultural economists to
confirm their findings. To be sure, past performance is not an indicator of future outcomes –
particularly if there is a major shift to organic production, which
could result in lower prices due to increased supply. The study did not
attempt to forecast future scenarios. Unique to the analysis was inclusion of yield and economic data for
crops grown as part of a rotational system, in addition to data for
single crops. The study included profit data for multiple crops grown
over several seasons, a more accurate reflection of how farmers profit
from agriculture. None of the comparison studies accounted for the environmental costs
and benefits of farming. Environmental costs tend to be lower and
benefits higher in organic agriculture. But for consumers who believe
that organic farming is more environmentally friendly, organic premiums
may serve as a stand-in for the monetary value of such costs and
benefits.
Incentive to change
Organic premiums offer a strong incentive for farmers to transition from conventional to organic farming. “Most growers that we work with, and probably in the United States in
particular, do a little bit of organic and lot of conventional,”
Crowder said. “If they make a little bit of money on that organic
acreage, they might convert more of their farm.” But farmers converting to organic are in a vulnerable position. The
transition period for organic certification exposes farmers to financial
risk when their yields drop but they are not yet receiving premiums. “The challenge facing policymakers,” the authors write, “is to
develop government policies that support conventional farmers converting
to organic and other sustainable systems, especially during the
transition period, often the first three years.” As long as environmental degradation, population growth and climate
change remain challenges, farming practices that are profitable to
farmers while offering additional benefits of sustainability are needed,
they said. Citation: Crowder, D. and J. Reganold. 2015. Financial
competitiveness of organic agriculture on a global scale. Proceedings of
the National Academy of Sciences. June 1, 2015, doi:
10.1073/pnas.1423674112. Contacts:
David Crowder, WSU Department of Entomology, 509-335-7965, dcrowder@wsu.edu
John Reganold, WSU Department of Crop and Soil Sciences, 509-335-8856, reganold@wsu.edu
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