Organic farm incomes in England and Wales 2002/03

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 2002/03 are presented in this report. This report is the second from the OF0189 series of three economic reports on organic farm incomes from 2001/02 through to 2003/04.
A fundamental 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 1995/962 to 1998/99). Here, time series data is shown using an identical farm analysis technique for the 2001/02 and 2002/03 financial years covering the economic performance of 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 2001/02 and 2002/03. The total number of organic farms for 2002/03, also referred to as the full farm sample data, is shown alongside the identical datasets for 2002/03.
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 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 they can be seen as a reasonable indication of farm income levels between organic and conventional data. 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 identifiers/variables of individual organic farms. Broadly speaking, the identifiers/variables included farm type, FBS region, LFA status, utilisable agricultural area, milk quota holding (where applicable) and farm business size. The cluster farm data was 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 2002/03 than in 2001/02 with the exception of the identical sample of cropping farms, which decreased. On comparing the organic data with the comparable conventional data, the greatest differences in performance were seen in the lowland dairy and lowland cattle and sheep farm types where organic farms performed significantly better in 2002/03. Horticultural and LFA cattle and sheep farm types performed similarly to the comparable conventional farm samples. The organic mixed identical farm sample achieved lower net farm incomes than the conventional farm sample, but the full sample of mixed organic farms in 2002/03 showed a higher net farm income than the conventional farm sample.
Gross margin data is 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 in addition to breeding pig and layer gross margins. Crops shown include winter and spring wheat, spring barley, spring and winter oats, triticale, beans, ware potatoes, sugar beet and leek crops. Where applicable, 2001/02 gross margin data is shown alongside the 2002/03 data. Benchmarking data is shown for milk, beef and lamb production enterprises.