The profitability of organic soybean production

Abstract

AbstractResults from long-term experimental trials suggest that similar yields and lower costs are possible with organic compared to conventional soybeans, but there is little information about the relative costs and returns of these systems on commercial farms. This study examines the profitability of commercial soybean production using a nationwide survey of soybean producers for 2006 that includes a targeted sample of organic growers. Treatment-effect models are specified to characterize adopters of the organic approach and to isolate the impact of organic choice on operating, operating and capital, and total economic costs of soybean production. Organic soybean producers tend to be younger, have less crop acreage, and are less likely to work off-farm than conventional producers. Organic soybean production costs range from about $1 to $6 per bushel higher than those for conventional soybeans due to both lower yields and higher per-acre costs, while the average organic price premium in 2006 was more than $9 per bushel. Long-term cropping systems data suggest significant returns to organic systems result from similar yields and lower costs than conventional systems, but the high returns to commercial organic production found in this study can only be attributed to the significant price premiums paid for organic soybeans. Average organic soybean price premiums have remained high since 2006 despite much higher conventional soybean prices as users of organic soybeans attempt to retain and attract more acreage. However, increases in conventional soybean prices and fuel prices reduce the incentive for planting organic soybeans by improving returns to conventional production and increasing the relative costs of organic production.