Organic Farm incomes in England and Wales 2004-05(OF 0189)

Summary

Results from research work carried out for the Department of Environment, Food and Rural Affairs (DEFRA) by the Organic Research Group at the Institute of Rural Sciences, UWA on the economic performance of organic farms in 2004/05 are presented in this report. This report is the last of a series1 of four on organic farm incomes from 2001/02 through to 2004/05 as part of project OF0189.
The main aim of this work is to assess the financial performance of organic farms differentiated by farm type, in order to inform DEFRA policy-making with respect to economics of organic farming, and to provide a basis for assessments by farmers, advisers and other interested parties of the farm-level implications of conversion to and continued
organic farming. This research area builds on previous economics work on organic farming carried out by Institute of Rural Sciences, UWA (Project OF0190, covering 1995/96 to 1998/99).
In this report, time series financial data are shown for an identical farm sample for the
2003/04 and 2004/05 financial years, covering seven organic farm types including cropping, horticulture, lowland and LFA dairy, lowland and LFA cattle and sheep and mixed farming systems. The identical farm samples comprise farms that are present in both 2003/04 and 2004/05. The total number of organic farms for 2004/05, also referred to as the full farm sample data, is shown alongside the identical datasets.
Summarised and detailed financial input, output, income, returns to labour and capital, liabilities and assets and some physical performance measures are presented based on current Farm Business Survey (FBS) data collection and collation guidelines. The full samples of organic farms per robust farm type are sufficiently large to give some reasonable level of confidence in the data; however, it should be noted that the organic farm samples are not statistically representative of their type, although the results can be seen as a reasonable indication of farm income levels for comparable organic and conventional farms. Smaller identical farm samples should be treated more cautiously as there is a possibility for outliers (especially larger farms) to have some influence on the average results.
An additional element of this work is the inclusion of comparable conventional farm data for the farm types shown. Each organic farm within this study was matched with an appropriate cluster of conventional farms based on the resource endowment indicators for
individual organic farms. Broadly speaking, the indicators included farm type, FBS region,
Less Favoured Area (LFA) status, utilisable agricultural area (UAA), milk quota holding (where applicable) and farm business size. The cluster farm data were averaged for each farm type to derive the comparable conventional farm (CCF) data based on the organic farms from the identical and full farm samples.
Overall, the identical sample of organic farms showed a similar or higher level of net farm income for all farm types in 2004/05 than in 2003/04 with the exception of lowland dairy farms, which decreased over the period. On comparing the organic data with the comparable conventional data, the greatest differences in performance were seen in the cropping, lowland cattle and sheep and mixed farm types where organic farms performed significantly better in 2004/05. LFA cattle and sheep farm types performed similarly to the comparable conventional farm samples while LFA organic dairy farms achieved lower net farm incomes than the conventional comparison farms. The full sample datasets compared similarly to the identical datasets for both organic and conventional farms in 2004/05.
Gross margin data are presented for organic dairy herds on a herd size and top five performing herd basis. Cattle and sheep gross margins are shown for lowland and LFA farm types. Crops shown include winter and spring wheat, spring barley, winter and spring oats, beans, ware potatoes, calabrese, cauliflower and cabbage crops. Where applicable, 2003/04 gross margin data are shown alongside the 2004/05 data.
Benchmarking data are shown for organic milk, suckler store, finishing beef and lamb production enterprises. The results for the beef and lamb enterprises show the significance of support payments in making these enterprises viable, raising questions about the possible impact of the single farm payment on producer perceptions of their profitability.