Sunday, November 20, 2011

The Profitability of Organics

This report  (Iowa State) at the extension site says organic field crops are as productive as conventional.
The LTAR [Long-Term Agroecological Research Experiment] experiment shows that organic crops can remain competitive with conventional crops even during the three-year transition. Averaged over 13 years, yields of organic corn, soybean and oats have been equivalent to or slightly greater than their conventional counterparts. Likewise, a 12-year average for alfalfa and an 8-year average for winter wheat also show no significant difference between organic yields and the Adair County average.
Because of higher returns for organic grains, the study showed a $200 per acre premium over conventional. Given these results, I would think there'd be a lot of acreage being converted from conventional to organic; that's what economics says should happen, isn't it?. On the other hand:

I assume doing organic requires a different set of knowledges and perhaps skills, creating an entry hurdle.  A farmer who is beginning farming and who wants to begin as an organic farmer faces a major challenge.  An established farmer who want to switch to organic faces a major transition, which few people like to do when they're established.

As I've written before, I think the biggest problem for organic farmers is they produce crops for which the market is small.   Note these rotations:
Organic corn-soybean-oat/alfalfa (3 year)
Organic corn-soybean-oat/alfalfa-alfalfa (4 year)
Organic soybean-wheat/red clover (2 year)
 A farmer who converts from corn/soybeans now needs to find a market for oats, alfalfa and clover. In the old days the horses would eat those, but not any more, except for the Amish.

Think about the process of marketing these organic outputs. The transportation costs are going to be the same regardless of how the crop was raised, but because the markets are smaller on average the crop is going to have to travel a longer distance.  So the costs facing a possible organic chicken farm will mount up. 

Looking at the brochure, there's also the question of inputs. "Organic corn and soybean plots receive an average of two rotary-hoeings and two row cultivations per season for weed management."  and "The organic plots receive local compost made from a mixture of corn stover and manure"  Now the cost accounting would cover the costs, but on an operational farm four trips over the land is going to require more labor, which might be a limiting factor.  There's also the question of where the manure, and maybe the corn stover, comes from.  Once again, if we go back to the sort of farming done pre-WWI or on Amish farms, everything works together; the crop rotations include feed for the livestock; the livestock produce manure for the land, etc. But the challenges of integrating  organic operations on a large scale with today's patterns of marketing and consumption are great.

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