Comparison of Long-Run Net Returns of Conventional and Organic Crop Rotations

Michael R Langemeier,Michael O’Donnell,Xiaoyi Fang

doi:10.3390/su12197891

Abstract

This study compares the long-run net returns to land of conventional corn/soybean and corn/soybean/wheat crop rotations to that of an organic corn/soybean/wheat crop rotation. The net returns to land for the organic crop rotation were found to be approximately $68 and $74 per acre higher than those of the conventional corn/soybean and conventional corn/soybean/wheat crop rotations, respectively. Average net return estimates are sensitive to price, yield, and cost assumptions. Organic crop prices would have to drop more than 17.8 percent and organic crop yields would have to drop more than 16.8 percent before the conventional corn/soybean crop rotation was more profitable than the organic corn/soybean/wheat crop rotation. These percentage changes are relatively small compared to the historical relationships between organic and conventional crop prices and yields. A risk model was used to examine the trade-off between expected net returns and downside risk. Converting even a small proportion of acreage to an organic corn/soybean/wheat crop rotation improves net returns and reduces downside risk compared to only utilizing conventional crop rotations.

Highlights

Due to continued increases in demand for certified organic grains, crop farmers that have transitioned from conventional grains to certified organic grains report higher net returns per acre [1–3]
The gross revenue for the organic crop rotation was significantly higher than the gross revenue for the conventional corn/soybean and corn/soybean/wheat crop rotations
Variable cost per acre was relatively lower for the organic crop rotation, but fixed costs were relatively higher

Summary

Introduction

Due to continued increases in demand for certified organic grains, crop farmers that have transitioned from conventional grains to certified organic grains report higher net returns per acre [1–3]. Certified organic land accounts for less than two percent of U.S farmland [4]. There are several factors for potential organic farms to consider when they are examining the transition from conventional to organic production. Peterson et al [5] indicated that this transition may be related to profitability, environmental stewardship, an organic lifestyle, or a combination of these three motivations. Crop producers that are considering transferring acreage to organic production need to examine each of these factors. The variability of net returns to farm operations that results from fluctuating yields, costs, and prices is an important factor when examining organic crop production

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Results

Conclusion