New study shows organic farmers earn 22% to 35% more than conventional farmers
Here's why we shouldn't worry that this study found a slightly lower average yield from organic farming:
EXCERPT: “Public perception is that if you’re doing organic, maybe you’re sacrificing financial sustainability, but we show that’s really not the case,” says Crowder. “If you’re getting a 30% margin on your competitors, that would be the envy of almost any business.”
Why it might actually pay to be an organic farmer
TIME, 1 June 2015
* Organic farmers earn 22% to 35% more than their non-organic counterparts
Growing organic food can be significantly more profitable than traditional farming, netting organic farmers 22% to 35% more than their conventional counterparts, according to new research published in the journal PNAS.
In the meta-analysis of more than 120 studies on the economics of organic farming, Washington State University professor of entomology David Crowder and his co-author found that organic farming typically yields 10 to 18% less than conventional farming. That lower output may be why some farmers doubt the benefits of going organic, but economic measures besides crop yield seem to play an important role. The premium prices customers pay for organic products more than make up for the lower yield; while only a 5 to 7% premium is required to break even, organic products typically have a 29 to 32% premium, the analysis found. Going organic requires farmers to spend 5 to 7% more on labor, but besides labor, costs are largely the same.
“Public perception is that if you’re doing organic, maybe you’re sacrificing financial sustainability, but we show that’s really not the case,” says Crowder. “If you’re getting a 30% margin on your competitors, that would be the envy of almost any business.”
Crowder says that organic farming provides a host of environmental benefits, including improved soil quality, along with benefits for biodiversity and ecology.
The process of becoming an organic farmer isn’t necessarily quick and easy. Land must be pesticide free for three years; during that time, farmers can’t yet market their product as organic. But in spite of the drawbacks, Crowder says the huge and growing demand for organic food is unmatched by the current supply: only about 1% of farming currently utilizes organic methods.
“We’re definitely not saying 100% should be organic,” Crowder says. “But there’s a really high demand for organic that isn’t being met right now.”
Financial competitiveness of organic agriculture on a global scale
David W. Crowder and John P. Reganold
PNAS June 1, 2015
To promote global food and ecosystem security, several innovative farming systems have been identified that better balance multiple sustainability goals. The most rapidly growing and contentious of these systems is organic agriculture. Whether organic agriculture can continue to expand will likely be determined by whether it is economically competitive with conventional agriculture. Here, we examined the financial performance of organic and conventional agriculture by conducting a meta-analysis of a global dataset spanning 55 crops grown on five continents. When organic premiums were not applied, benefit/cost ratios (−8 to −7%) and net present values (−27 to −23%) of organic agriculture were significantly lower than conventional agriculture. However, when actual premiums were applied, organic agriculture was significantly more profitable (22–35%) and had higher benefit/cost ratios (20–24%) than conventional agriculture. Although premiums were 29–32%, breakeven premiums necessary for organic profits to match conventional profits were only 5–7%, even with organic yields being 10–18% lower. Total costs were not significantly different, but labor costs were significantly higher (7–13%) with organic farming practices. Studies in our meta-analysis accounted for neither environmental costs (negative externalities) nor ecosystem services from good farming practices, which likely favor organic agriculture. With only 1% of the global agricultural land in organic production, our findings suggest that organic agriculture can continue to expand even if premiums decline. Furthermore, with their multiple sustainability benefits, organic farming systems can contribute a larger share in feeding the world.