The use of gross and net margins in the economic analysis of organic farms

In order to assess the technical and economic efficiency of conventional farm businesses a variety of management techniques have been developed. These include gross and net margin analysis and full cost accounting. This paper reviews their effectiveness in organic farming systems and finds that all of the techniques can be useful in helping to assess the economic efficiency of individual enterprises within an organic farming business, although they have their limitations. Organic systems require the integration of a number of usually complementary enterprises and therefore gross and net margins for particular enterprises taken out of the rotational or whole farm context can be misleading. Consequently it is important that any economic investigation of an organic system also includes whole farm economic analysis.