Financial Competitiveness of Organic Agriculture on a Global Scale

Proc Natl Acad Sci U S A. 2015 Jun 16;112(24):7611-6. doi: 10.1073/pnas.1423674112. Epub 2015 Jun 1.

Abstract

To promote global food and ecosystem security, several innovative farming systems have been identified that better balance multiple sustainability goals. The most rapidly growing and contentious of these systems is organic agriculture. Whether organic agriculture can continue to expand will likely be determined by whether it is economically competitive with conventional agriculture. Here, we examined the financial performance of organic and conventional agriculture by conducting a meta-analysis of a global dataset spanning 55 crops grown on five continents. When organic premiums were not applied, benefit/cost ratios (-8 to -7%) and net present values (-27 to -23%) of organic agriculture were significantly lower than conventional agriculture. However, when actual premiums were applied, organic agriculture was significantly more profitable (22-35%) and had higher benefit/cost ratios (20-24%) than conventional agriculture. Although premiums were 29-32%, breakeven premiums necessary for organic profits to match conventional profits were only 5-7%, even with organic yields being 10-18% lower. Total costs were not significantly different, but labor costs were significantly higher (7-13%) with organic farming practices. Studies in our meta-analysis accounted for neither environmental costs (negative externalities) nor ecosystem services from good farming practices, which likely favor organic agriculture. With only 1% of the global agricultural land in organic production, our findings suggest that organic agriculture can continue to expand even if premiums decline. Furthermore, with their multiple sustainability benefits, organic farming systems can contribute a larger share in feeding the world.

Keywords: economic; food security; meta-analysis; organic premiums; sustainable agriculture.

Publication types

  • Meta-Analysis

MeSH terms

  • Agriculture / economics
  • Conservation of Natural Resources / economics
  • Cost-Benefit Analysis
  • Costs and Cost Analysis
  • Crops, Agricultural / economics
  • Ecosystem
  • Food Supply / economics
  • Organic Agriculture / economics*