Organic crops are more profitable, but take-up is slow

Despite significant profit potential, growth of organic field crop acreage in the US has been slow, according to a recent report by the United States Department of Agriculture’s Economic Research Service.

According to the authors of the study, organic crop acres more than doubled in the US between 2002 and 2011 from 1.3 to more than 3 million acres. Among soybean, corn and wheat, organic acreage increased by roughly 264,000 acres over that time. Still, acreage for organic corn, soybeans and wheat represent less than 1 percent of total US acreage for each crop, according to the study.

The study relies on data from the USDA’s Agricultural Resource Management Survey (ARMS) to measure differences in cost, revenues and productivity associated with producing organic rather than conventional field crops.

The data shows similar overall per-acre costs for organic and conventional production, translating to significantly higher per-bushel costs for organic production, due to lower yields. Despite long-term cropping system experiments that have found similar yields and lower production costs for organic production, the USDA producer survey data show yields for organic corn, wheat and soy were 22 to 29 percent lower than their conventional counterparts. The report cites differences in weed control challenges and the use of potentially higher yielding genetically modified seeds in survey farms as possible reasons for the difference between experimental and survey results. Organic transition and certification costs also contributed to the gap in production costs.

Despite higher net production costs, the ERS found price premiums for organic corn and soybeans handily exceeded increased production costs. Increased returns for organic corn exceeded additional production costs by $55 to $62 an acre. The difference between return and cost increases for organic soybeans was $22 to $41 per acre. Organic wheat was the only one of the three crops to show increased costs above increased returns, amounting to a difference of between $2 and $9 per acre.

According to the study, increases in prices for organic corn between 2011 and 2013 matched those of conventional corn. As conventional corn prices pushed upward to between $6 and $8 per bushel, organic prices rose above $16 a bushel, a difference of between 100 and 166 percent.

According to the ERS, organic corn and soybean acreage increased between 2011 and 2014, while organic wheat acreage decreased. Still, in the case of corn and soy, US field crop producers have been slow to adopt potentially profitable organic growing practices, according to the ERS.

The study suggests relative difficulty in adopting organic soil and pest control management, as well as in accessing seed and markets for sale –such as consumers of organic feed crops – as possible reasons US growers have been slow to adopt organic growing practices. An aversion to the sunk costs of transition to certified organic, in the face of potential changes in price or consumer tastes, may also explain the dearth of acreage dedicated to organic field crops in the US.