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
