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Meta-Analysis
. 2015 Jun 16;112(24):7611-6.
doi: 10.1073/pnas.1423674112. Epub 2015 Jun 1.

Financial Competitiveness of Organic Agriculture on a Global Scale

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Free PMC article
Meta-Analysis

Financial Competitiveness of Organic Agriculture on a Global Scale

David W Crowder et al. Proc Natl Acad Sci U S A. .
Free PMC article

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.

Conflict of interest statement

The authors declare no conflict of interest.

Figures

Fig. 1.
Fig. 1.
Financial performance of organic compared with conventional crops and systems. Shown are the median log response-ratios (RR; ±SE) for costs, gross returns, and benefit/cost (B/C) ratios (A), median Hedges d values (±SE) for net present values (B), and organic premiums awarded and breakeven premiums needed for organic net present values to match conventional net present values (C). In A and B, asterisks indicate significant differences from 0. Positive values indicate financial parameters were higher in organic agriculture compared with conventional agriculture.
Fig. 2.
Fig. 2.
Sensitivity of net present values and benefit/cost ratios in organic (Org) compared with conventional (Conv) crops. Variables that affected net present values or benefit/cost ratios were crop type (A and B), crop diversity (C and D), length of rotation (E and F), annual or perennial crop (G and H), and leguminous or nonleguminous crop (I and J). Values shown are the median log response-ratios (±SE) comparing organic with conventional crops. In each panel, different letters indicate significant differences between values of the explanatory variables.
Fig. 3.
Fig. 3.
Gross returns without premiums (which mirror yields) in organic compared with conventional agriculture. Log response-ratio effects (median ± SE) comparing gross returns without premiums in organic compared with conventional crops (A) and systems (B). Data are presented separately for (i) studies that only included the transition period, (ii) studies that only included the posttransition period, and (iii) studies that only included both periods. Gross returns without premiums in organic compared with conventional crops (C) and systems (D) plotted against the year studies were initiated.

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