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Organic Agriculture Centre of Canada
Organic farming, in general, is more profitable than conventional farming. This is the conclusion of a paper published by the UN’s Food and Agriculture Organization in 2009. The author, Noémi Nemes, examined the results of more than fifty studies that compared the economics of organic and conventional agriculture.
In the U.S. and Europe, organic farms are generally more profitable because of higher prices and/or lower input costs than conventional farms. In developing countries, the profit margin is greater for organic farms because they have greater yields and higher prices than their non-organic counterparts have.
If yield comparisons took into account the quality of the target crop, this could compensate for lower yields of organic farms in industrialized countries. When comparing relative yield and composition of vegetables over 12 years, conventional farms yielded 24% more, but organic vegetables had 28% higher dry matter. Also, organic produce has also been found to have higher levels of vitamins, minerals, healthy fatty acids and phytonutrients.
Data are based on relatively cheap input costs. The increase in the price of fossil fuels is creating an increase in the cost of related inputs. This will likely have the greatest effect on conventional farms, particularly those that rely heavily on fuel, synthetic fertilizers and pesticides. Among organic farms, the operations that are highly mechanized and dependent on the use of plastic mulch will be most affected.
Labour costs, however, are often greater on organic farms. European studies found labour costs to be 10-20% greater than on comparable conventional operations. Interest on loans is not often considered in calculations of production costs; however, conventional farmers have significantly higher debt loads than organic farmers, particularly those in developing countries.
Profitability, Nemes argues, goes beyond the balance sheet. Farming incurs environmental, health and social costs. The environmental costs include damage from soil erosion, water pollution and destruction of wildlife habitat. In general, conventional agriculture contributes more to these problems but does not pay the associated costs incurred by society at large.
If subsidies and extension services were less biased towards conventional production, organic yields may increase and organic farming could become even more profitable. If the actual costs (i.e., environmental, social and health consequences) of agriculture were considered, the true profitability of organic farming could be measured.
Reference: Nemes, Noémi. 2009. “Comparative analysis of organic and non-organic farming systems: a critical assessment of farm profitability.” Food and Agriculture Organization of the United Nations. Natural resources management environment department. ftp://ftp.fao.org/docrep/fao/011/ak355e/ak355e00.pdf
© 2012, Organic Agriculture Centre of Canada (OACC)