The Structure and Profitability of Organic Field Crop Production: The Case of Wheat

Results from long-term experimental trials suggest that similar yields and lower costs are possible from organic compared with conventional field crop production, but there is little information about the relative costs and returns on commercial farms. This study examines the structure and profitability of commercial wheat production using a nationwide survey of wheat producers for 2009 that includes a targeted sample of organic growers. Treatment-effect models were specified to isolate the impact of choosing the organic approach on various levels of wheat production costs. Average organic wheat yields were much lower than for conventional wheat, but per acre operating plus capital costs were also lower. Estimated operating costs per bushel for organic wheat were lower than for conventional wheat, but operating plus capital costs and total economic costs were about $2 to $4 per bushel higher. The average organic price premium in 2009 was $3.79 per bushel, enough to cover the difference in operating plus capital costs of organic versus conventional wheat production, but was short of the difference in total economic costs. *The authors are with the U.S. Department of Agriculture, Economic Research Service. The views expressed herein are those of the authors and do not necessarily reflect the views or polices of the U.S. Department of Agriculture. Direct any correspondence to: [email protected] , (202) 694-5577. The Structure and Profitability of Organic Field Crop Production: The Case of Wheat Organic cropping systems rely on ecologically based practices, such as biological pest management and composting, and exclude most synthetic chemicals. Under organic cropping systems, the fundamental components and natural processes of ecosystems—such as soil organism activities, nutrient cycling, and species distribution and competition—are used as farm management tools (Greene and Kremen). For example, crops are rotated, food and shelter are provided for the predators and parasites of crop pests, animal manure and crop residues are recycled, and planting/harvesting dates are carefully managed. Crop acres under certified organic systems have grown rapidly during the past decade. Organic crop acres were more than 4 times higher in 2008 than in 1995, as acreage increased from 638,500 to over 2.6 million acres (USDA, Economic Research Service, a.). A large part of this growth was in major U.S. field crops, corn, soybeans, and wheat. Certified organic production of corn, soybeans, and wheat increased from about 200,000 acres in 1995 to about 736,000 acres in 2008. Sustained higher prices for conventional corn, soybean, and wheat since 2008 (NASS, Agricultural Prices) may have limited organic acreage in more recent years. Despite the interest in organic field crop production there is little information about the relative costs and returns of organic and conventional production systems, and the characteristics of farms that are choosing the organic approach. Several researchers (e.g., Delate et al.; Mahoney et al.; Hanson et al.; Pimentel et al.; Smith et al) have examined organic crop production in a long-term experimental setting, but little has been reported about the commercial production of