Profitability of organic farming

Nieberg, H. and Offermann, F. 2003. The profitability of organic farming in Europe. In OECD... 

Figure 3.1 Profits of organic farms relative to comparable...

An increase in organic farming area due to direct subsidies for and increased profitability of organic farms may result in an erosion of price premiums. This argument holds as long as demand is consolidated. However, if the bottleneck theory described earlier applies and part of the potential demand can be realised - by political measures, for example -then price premiums can be sustained in the short to medium term. In the... 

OECD (1999b), The Effect of Support Measures on the Profitability of Organic Farming relative to Conventional Farming a Case Study of the Netherlands, unclassified document COM/ENV/EPOC/AGR/CA(99)4/FINAL. 

OlFermann, F. and H. Nieberg (2000), Profitability of organic farming in Europe, paper presented at the Agricultural Economics Society Annual Conference, 14-17 April, Manehester, United Kingdom. 

The comparable conventional farms are of similar size as the organic farms. For a detailed description of the concept of comparable conventional farms, see the paper by Niebeig and Offermaim, The Profitability of Organic Farming in Europe , in Part I, Chapter 3. 

It is usually fairly easy to conclude that there is a problem, more difficult to decide exactly what it is and very hard to identify the appropriate solution (there are always a great many possible solutions). A simple illustration of this point, for conventional livestock production, is disease. Most diseases could, of course, be totally eradicated from a farming system but this might be quite uneconomic. Thus the problem for a veterinarian is commonly not how to prevent or cure a disease but to do so in such a way that the farmer s profit is increased (or at least he is not made bankrupt by the solution). All such requirements have to be part of the definition of the problem. In the case of organic farming, the solution has to be consistent with the principles of organic production. So the relevant applied research may be different. 

A limited, but growing, number of studies in the United States have examined the yields, input costs, profitability, managerial requirements, and other economic characteristics of organic farming. A 1990 review of the U.S. literature at Cornell concluded that the variation within organic and conventional farming systems is likely as large as the differences between the two systems, and found mixed results in the comparisons for most characteristics (Knoblauch et al, 1990). 

A third objective is to compare the profitability of organic and conventional farms in Emilia-Romagna and in Minnesota. 

In this section, I discuss several issues and obstacles faced by farmers profit, yield, crop insurance, contamination fi-om genetically modified organisms (GMOs), input availability, market information, number and size of organic farms, and development pressures near urban areas. Farmers also have concerns, issues, and obstacles related to distribution, marketing, policy, and trade. These issues are discussed in the following sections and not covered in detail in this section. 

OECD (1999a), Comparing Profitability of Organic and Conventional Farming the Impact of Support on Arable Farming in France, unclassified document COM/ENV/EPOC/AGR/CA(99)5/FINAL. 

The analysis of the economic situation of organic farms in Europe shows that on average, profits are similar to those of comparable conventional farms, with nearly all observations l5dng in the range of +/- 20% of the profits of the respective conventional reference groups (Figure 2), but variance within the samples analysed is high. Profitability varies between the countries surveyed, and between different farm types. 

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