About a year ago, a commercial aired on TV with a woman lamenting the high cost of organics:
“I don’t understand why organics cost more when you’re getting less.”
She was referring to less chemicals and additives. Thankfully, I haven’t seen that commercial air again… it makes no sense! But it raises the more important issue of why organics cost more than conventionally grown and raised produce and meats. As I scoured the web for facts and figures, I discovered some interesting findings:
Organic farming is often more cost effective than conventional:
1. Farms that switch from conventional farming practices to organic reportedly have lower yields in the first 5 years. But as the soil health recovers and nitrogen levels increase, yields improve. Over time, organic farms have greater yields than conventional farms, especially in drought conditions.
2. Because organic farms utilize sustainable farming practices like crop rotation, composting and cover-cropping, the inputs (such as water, fertilizer and insecticides) can be less expensive, one study reporting 28% less.
Nonetheless it is more expensive at the supermarket. The reasons are numerous, and several relate to the infamous “Farm Bill”
1. Labor on organic farms is higher, anywhere from 15% – 35% higher, depending on which study you reference. The higher labor cost, in part, results from implementing sustainable farming practices such as crop rotation and cover cropping. These farming practices require year-round labor. Further, organic farmers are more likely to work on their own land without “billing” the farm.
2. For farmers raising livestock, the cost of organic feed is more expensive. Commercially raised grains are less expensive due to the subsidies in the farm bill that keep the cost of “commodity crops” artificially low.
3. For processed foods like frozen dinners or baked goods, incorporating commodity crops into the production keeps the costs low.
The 2008 Farm Bill is over 1,700 pages, and covers a range of topics including the infamous “commodity” crops: wheat, corn, grain sorghum, barley, oats, upland cotton, long grain rice, medium grain rice, pulse crops, soybeans, and other oil seeds. Farmers receive payments for these crops when prices fall below a certain threshold. The more the farmer grows, the greater the payment. And with more commodity crops flooding the market, the price drops further – a simple function of high supply with level demand.
To bring it full circle, many farmers, food producers and other large companies are figuring out ways to use these less expensive commodity crops in the normal course of operation to save money. For example, cattle farmers feed their animals corn instead of grass and grain, even though it is not part of their evolutionary developed diet, because it is cheaper.
Recent changes made to the farm bill have made organic farming more financially viable.
1. Previous versions of the Farm Bill dictated that organic farms must pay a 5% surcharge for crop insurance. This has been revoked.
2. Up until recently, organic certification could cost on average $750, plus .5% of revenues, with the farmer bearing the cost of the certification process. For farmers raising livestock, there’s an additional cost based on the number of heads. In the current version, funds have been allocated to reimburse 75% of the cost of certification, up to $750 per farm.
The 2008 Farm Bill is over 1,700 pages, and covers the following “commodity” crops: wheat, corn, grain sorghum, barley, oats, upland cotton, long grain rice, medium grain rice, pulse crops, soybeans, and other oil seeds. Farmers receive payments for these crops when prices fall below a certain threshold. The more the farmer grows, the greater the payment. And with more grains on the market, the price drops further.
Given the wealth of information about the costs of organic, I had hoped to offer you a clear reason for the price discrepancies. But the best I can argue would be that the cost-savings in fertilizers and other inputs is erased by the increased labor costs. As more farms transition to organic and realize the increased yield potential, prices may drop.
Resources
Biotechnology Fails to Increase Farm Yields
Organic vs. Conventional Farm Yield Study Overview
Cornell Study evaluating the costs of organic vs. conventional farming
The 2008 Farm Bill
Organic Farm Certification
Farm Bill Programs and Grants for Organic Farmers
Don’t most people perceive organics to be expensive because they see unusually high prices at the supermarket? My experience has been that affordable organics come through a CSA share. I am absolutely rolling in food and the cost of membership was low comparednto the yield.
Fascinating article Julia, some provocative data here.
I’d be curious if these findings scale up to the mega-farms that represent the bulk of our food production, or if this relationship between organic production and yields only holds for the small- to mid-scale farming represented in the studies.
One other thing I find very striking about the organic food debate is how organic foods are one of the largest incremental profit drivers at almost all grocery stores. I’m not sure what the answers are, but it seems clear that if consumers don’t seek out retail sources outside the traditional groceries, they will never capture much of the value of organic foods.
Dan
Casual Kitchen
We get very good and affordable organics (top grade to with the label starting with 9’s)from the CSA’s we augment this with purchasing the occasional organic item from grocery stores. I have noticed a great increase in shelf space given to items and new SKU’s showing up, such as Compliments (Sobeys house brand) now has free run eggs and they are right next to the Braeburn Farms free run. The best thing is that Braeburn is $1 cheaper per dozen. It shows that increased competition will greatly benefit the consumer and with more consumers actually seeing organics as a viable option the prices will start to lower. I do not believe it will ever be a huge drop in price as there are other cost contributors as pointed out above.
What I do see as a major opportunity is for mega corps to start adopting organics. For instance in Canada Unilever which owns Hellmanns switched to free run eggs in their light dressing! its small but its a start. If more corps start demanding free runs, organic produce and such there will be an increase in producers which will gently start a shift in the overall quality of food in our food chain. It may be a pipe dream for wide spread adoption but you never know.
Ira
TW – it’s great to hear that CSA’s are definitively cost effective!
Dan – There’s definitely a “branding” effect that allows supermarkets to charge a higher price for organics.
Ira – very interesting how mega-corps are expanding into organics to increase market-share (I wish they were doing it do be altruistic)- I’ll be curious to see its effect on the economy.