Organic farm incomes in England and Wales 2006/07 (OF 0373)

Summary

In the report, we present results of research on the financial performance of organic farms in 2006/07 carried out for the Department for Environment, Food and Rural Affairs (Defra). 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 builds on previous work on the economics of organic
farming carried out at Aberystwyth University (Projects OF0190, covering 1995/96 to 1998/99 and OF0189, covering 1999/00 to 2004/05).
In this report, financial data are shown for the 2005/06 and 2006/07 financial years, including between year comparisons and comparisons with similar conventional farms. For this report only, it has not been possible to produce identical samples for all farm types due to the change in data collection approach between 2005/06 and 2006/07. Identical sample comparisons have only been possible for lowland dairy and lowland and LFA cattle and
sheep systems. The identical farm samples comprise farms that are present in both the 2005/06 and 2006/07 datasets. The total number of organic farms for 2006/07, also
referred to as the full farm sample data, is shown alongside the identical datasets. In the other cases, data for the full samples in 2005/06 and 2006/07 are presented, but comparisons should be treated with caution due to changes in sample composition.
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 although it should be noted that the organic farm samples are not statistically representative of their type. However, the results can be seen as a reasonable indication of farm income levels for comparable organic and conventional
farms. Smaller farm samples should be treated more cautiously as there is a possibility for outliers (especially larger farms) to have a significant influence on the average results.
An additional element of this work is the inclusion of comparable conventional farm data (obtained from the main FBS sample) 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. The indicators included farm type, FBS region, Less Favoured Area (LFA) status, utilisable agricultural area (UAA), milk quota held (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.
The identical samples of organic farms showed a much higher level of net farm incomes for lowland dairy and lowland cattle and sheep in 2006/07 than in 2005/06, with LFA cattle and sheep showing a small decrease over the period. Overall, organic net farm incomes exceeded conventional in all sectors, with most sectors showing an organic NFI
twice that of the comparative conventional NFI. Increased organic prices and only small cost increases have led to substantial increases in organic NFI, especially in the livestock sectors.