Is Organic Farming Profitable?



In 2015, a study on organic farming from Washington State University researchers David Crowdera and John Reganold found that organic food accounts for 5% of food sales in the United States. That number has increased to 5.5% in 2017, hitting a record of $45.2 billion worth of food sold in retail channels in the US. Still, the US market lags behind Germany, France, the UK, Italy, Switzerland, Denmark, and Sweden as the leading countries that consume the most organic food.

From the point of view of the farmers, we should be expecting more organic farmers to pop up in the countryside (though that isn’t happening yet and we’ll get to the reason later). The craze for organic products hasn’t been met with the craze for supplying it. Organically managed land makes up just 1% of US farmland. What do you think the problem is? Certainly, it isn’t profitability.

The study from WSU crunched data from 44 studies involving 55 crops grown in five continents over a 40-year period. It found out that organic farming is actually 22% to 35% more profitable than conventional farming.

Organic farmers are able to sell their certified-organic crops for a higher price compared to the products from conventional farms. Organic products are believed to be 30% more expensive than conventionally-grown food.

And even if the price difference dropped to 5%, organic farmers would still make a more handsome profit than conventional farmers. Even the costs of doing the business are equal for these two systems: organic farmers save on spending their capital for chemical fertilizers but they spend more on labor costs as they manually have to remove the weeds from the crops. On the other hand, conventional farmers have an easier time manning the farm, though they spend thousands of dollars on synthetic fertilizers and pesticides.

Although organic farms have lower yields, this fact is offset by the higher price organic farmers get for their products. Conventional farms typically have more yield (somewhere between 10% and 18%) because crop growth is driven by the use of synthetic and mined fertilizers.

But this data is based on organic lands that have not been fully developed. When lavished with more research and development technique, organic lands deliver comparable yields as conventional farms.

The reason, though, why there is little growth in the field of organic farming is because of the three-year transitional period required for conventional farms to turn organic. While they transition to organic practices, these farms cannot sell their crops and products for the price of an organic product.

They will only be able to start earning from the farm by the fourth year, and some farms don’t necessarily have the buffer to shoulder the loss in profits.

Tags: , , ,