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Organic agriculture more profitable than conventional farming says US study

Organic agriculture more profitable

Demand for organic produce is growing and organic farming has a lot of benefits, from better soil quality to not having to work with highly toxic pesticides or herbicides.

But a lot of farmers who are thinking about switching to organic are worried about the financial implications: on average yields in organic agriculture are lower than under a conventional regime – can organic agriculture compete financially?

A comparative study done by scientists at Washington State University shows: yes it can! And not just that: they are up to a third (22 – 35%) more profitable than conventional farms.

What the study looked at

The authors, David Crowder and John Reganold, have done a meta-analysis of existing studies that compared the financial performance of 55 organically and conventionally grown crops from 14 countries on five continents. Previous studies have compared individual crops, but this study also looks at cropping systems, e.g. crop rotation cycles. The scientists quote a number of studies that establish the significant benefits of organic farming: it improves soil quality, it can help mitigate droughts and floods because good soil retains more water, it enhances biodiversity and it uses less energy. And the authors point out the wider, sociocultural benefits or organic practices ‘such as more humane animal production conditions (...) and greater employment of farm workers and cooperation among farmers’. But whether in future more land will be farmed organically hinges on one factor only: is it profitable?

Costs and returns 

Organic farmers have 7 – 13% higher labour costs: mechanical pest and weed control, anything from checking pheromone traps to weeding, needs more man (and woman) power than getting the sprayer out. And organic farms are also often more diverse and therefore more labour intensive than conventional farms. The good news: the higher labour costs are offset by the lower input costs – organic farmers don’t need to buy chemical fertilizer, chemical herbicides, fungicides, pesticides...

But: organic yields are 10 – 18% lower than conventional ones.
What makes organic farming profitable nevertheless is the premium paid for organic crops. The most profitable crops for farmers were cereals, fibre (like cotton) and oil crops (for example rapeseed). Vegetables, meat and dairy did less well.

Is organic produce too expensive?

The Washington State University study shows that the premium on organic produce makes organic farming not just as profitable as conventional farming but more profitable.

Is that justified at a time when so many people have to manage on a tight budget and politicians, pundits and farm lobbyists will tell you that cheap food is what’s needed while organic is a privileged lifestyle choice? What becomes clear from the study is that there is a price to be paid for cheap food, we just don’t pay it at the supermarket check out. In more scientific terms: ‘Studies in our meta-analysis accounted for neither environmental costs nor ecosystem services from good farming practices, which likely favor organic agriculture’. In other words: when conventional farming causes soil erosion or when nitrate leaches into the groundwater the costs won’t be reflected in the price of the food we buy. But in the end we all will pay the costs – in higher water prices because of higher filtration costs or higher insurance premiums because of increased flood risks.

Organic farming provides what Crowder and Reganold call ‘ecosystem services’, from good soil structure to biological pest control and crop pollination. They conclude: ‘Factoring in such differences in economic comparison studies would likely make up for a price premium awarded for organic products. (...) Conventional farming has provided increasing supplies of food and other products, but often at the expense of other sustainability goals. Although organic agriculture produces lower yields than conventional agriculture, it better unites human health, environment, and socioeconomic objectives than conventional systems’.

Why aren’t farmers lining up to switch to organic?

Just 1% of agricultural land worldwide is farmed organically. A UN report concluded several years ago that small-scale organic farming is the only way to ‘feed the world’, now there is good evidence that organic makes economic sense for farmers too. Why are farmers not switching in droves? One of the biggest hurdles might be the three-year conversion period. To know that your yields will drop while the first organic premium is three years away – that’s a big risk to take. What’s needed are political solutions, say Crowder and Reganold. ‘The challenge facing policymakers is to develop government policies that support conventional farmers converting to organic and other more sustainable systems, especially during the transition period’. In the meantime maybe we all need to ask what the real cost of our food is.

David W. Crowder, John P. Reganold: Financial competitiveness of organic agriculture on a global scale. May 2015, PNAS, vol.112, no.24
IAASTD Report 2009: Agriculture at a Crossroads