Study: Organic Can Make Money With Right Price
Seattle — Researchers have long studied the sustainability and health benefits of organically grown food versus conventional agriculture.
Now a study by two Washington State University professors shows organic agriculture can be much more profitable than conventional — as long as price premiums on the crops are high enough.
The research of David Crowder and John Reganold was released last week in Proceedings of the National Academy of Sciences. The idea for the work originated more than two years ago, Crowder said.
“All the focus really had been on yield at that point,” he said. “But yields are really just one component of the actual economic performance of an organic farming system.”
Crowder and Reganold found 44 studies looking at the economics of organic and conventional farming spanning 40 years.
From these they analyzed the financial performance of organic and conventional systems of 55 different crops grown across five continents.
Much of the study deals with the price premiums on organic agriculture. The crops cost more to grow, so consumers end up paying more at the store.
The study showed that organic crops provided farmers with significantly lower value compared with traditional crops.
But when price premiums were applied, the crops and the cropping systems (which look at the use of land over a period of years) both had significantly higher values.
“We were quite surprised that the profitability was as high as it actually was,” Crowder said.
Consumers on average pay 32 percent more for organic produce, though that premium would only have to be about 5 percent for farmers to have the same profit as with traditional crops, the study shows.
“The goal of an organic farmer is not to break even with the conventional farmer,” Crowder said. “Just like any business, they’re out to make a profit.”
Reganold said the environmental benefits of organic farming — less soil erosion, pesticide use and nitrates leaching into groundwater — make up for the price premium.
“I think that as long as that is happening, we should pay the premium, and I think people are willing to do it,” Reganold said. He added that the growth of companies such as Whole Foods, plus expanding organic sections of regular supermarkets, show that consumers are willing to pay more.
The balance between farmers’ profits and consumers’ costs needs to be addressed further, said Navin Ramankutty, a food security and sustainability professor at the University of British Columbia.
“We know when food becomes cheaper, there is less malnutrition,” he said. “If people are consumers, then food should be cheaper for them, they should be able to access food.
“Organic could become cheaper and still be profitable,” he added.
Organic farming makes up only 1 percent of all global agriculture, the study shows. Crowder said future organic expansion likely could lower store prices.
“Hopefully we can show that this is a market that is available to (farmers), if they’re willing to put in the time and effort,” he said.
The study also showed that labor costs for organic crops were 13 percent higher, though those costs are offset by not having to pay for synthetic fertilizers and pesticides.
Profitability is one of four objectives that agriculture must fulfill to be called “sustainable.” The others are enriching the environment, enhancing the well-being of farmers and producing large yields of high quality.
Though conventional agriculture by far outdoes organic methods in yields, organic is better at balancing all those factors, Reganold said.
“There are other systems with more sustainability benefits too,” he said, referring to other popular systems like community-supported agriculture. “But honestly, I think organic is leading the way.”