Whole Foods isn’t the only one selling organic fruits, vegetables and other products to hungry shoppers as it seems just about everywhere these days has shelves full of organic ingredients, even big corporations like Wal Mart.
The rise in shelf space corresponds to a rise in demand from consumers, who are rejecting food tainted with things like antibiotics, hormones, pesticides and genetic modifications. This trend means that fully five percent of U.S. food sales is organic.
Yet only 1 percent of U.S. farmland is rated as organic, leading to the practice being 22 to 35 percent more profitable, according to a new paper from Washington State University researchers David Crowdera and John Reganold.
The authors examined crop data from 44 studies involving 55 crops grown on five continents over 40 years. The reason, according to the researchers, for the increased profitability is the higher price farmers get when they sell certified-organic crops. The premium paid for organic food has been around 30 percent over the past three decades and looks set to continue as demand for the healthier food outstrips supply.
Even if that premium were to narrow to just five percent, organic farmers would still be equally as profitable as conventional farmers because they use fewer chemical inputs, which they replace with labor. For example rather than using Monsanto’s cancer causing pesticide Roundup, organic farmers pay for weeding. If they get just five percent more from consumers for the healthier end product they make just as much money as conventional farmers.
And while the study showed that organic farmers have a 15 to 18 percent lower yield, organic farming receives virtually zero research and development while conventional farming gets billions per year. In the few cases where organic farming has received such R&D that yield difference shrinks to almost zero.
The lack of chemicals used in the fields also leads organic farming to have “greater energy efficiency; enhanced soil carbon and quality; greater floral, faunal, and landscape diversity; and less pesticide and nutrient pollution of ground and surface waters,” they write.
These externalities “likely make up for price premiums awarded to organic products,” the authors note. When consumers pay up for organic food, they’re essentially paying farmers a little extra to maintain healthy soil and avoid damaging pesticide runoff.
With all the profit out there why aren’t more farmers going organic?
There’s a three year transition to go organic, where farmers will use the more expensive organic processes yet receive no extra payout because the certification only comes into play in year four and beyond.
This investment leads most farmers to continue to farm as-is.
Due to this switching cost and increased consumer demand, the authors see the premium for organic foods continuing for some time to come.
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