Conventional vs Organic Crop Production Financial Analysis

Organic crop demand has continued to increase over the last two decades. Some crop producers have transitioned at least part of their land to organic production. Those crop producers have reported higher net returns. (Table 2) One of the issues though is the transition period that organic growers must go through. This transition period leads to lower net returns than either organic or conventional production due to the lower yields during the transition period which are sold at conventional prices. Long run organic returns are important to recoup reduced returns during the transition period.

Recent articles using real farm data were published at the University of IL Farmdoc DAILY web site. The data comes from the University of Minnesota’s Center for Farm Financial Management (CFFM) FINBIN web site. FINBIN is an aggregation of several state’s farm financial data, which is searchable and sortable based on the needs of the analysis. The authors of the recent articles compared corn/soybean and corn/soybean/wheat rotations of conventional, transition and fully certified organic crop production. Enterprise budgets were produced for all three crops and all three production methodologies. Transition yields would have to be about 17% lower for the transition and organic years to breakeven with conventional cropping. Organic prices would need to be 17.8% lower for the conventional cropping system to be equal in net returns. (Table 3) But organic crop producers show a much wider range of net returns, in the FINBIN data, than do conventional producers. Likely this wider range is due to management that conventional producers don’t experience. (See Figures 1 and 2 below)

Organic corn producers in all cases had higher net returns than One aspect of the variation of conventional versus organic soybeans is that the lowest 20% of organic soybeans do not perform better than conventional soybean production. (Figure 3) Some 70% of conventional soybean producers have positive net returns while 80% of organic producers have positive net returns.

Langemeier, M. and X. Fang. “Comparison of Conventional and Organic Crop Rotations.” farmdoc daily (10):103, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, June 5, 2020.

Langemeier, M. and M. O’Donnell. “Conventional and Organic Enterprise Net Returns.” farmdoc daily (10):161, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 4, 2020.


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