A Comparative Analysis of Organic and Conventional Farming Profitability

Summary

The objective of this article is to determine the economic performance of organic farms compared with conventional farms. The analysis included a set of farms the concentration of which is in natural and climatic conditions typical for this type of farming high. The outputs may be therefore considered representative and generalised.
In order to determine the performance of these farms, their production basis was first assessed by using the indicators of available assets and assets coverage resources. Consequently, their efficiency was assessed based on the profit. For the purposes of comparison, the profit was (in various forms) converted to a hectare of agricultural land. The economic results were also compared with the average level achieved in the EU. The final part of the research focused on the evaluation of the economic and financial standing of the farms using selected return, liquidity, debt, and activity related ratio indicators. The established results show that the situation of organic farms on the national level tends to be economically more favourable. This is demonstrated by the higher share of profit-making farms and more favourable values of certain ratio indicators, i.e. those concerning profitability, liquidity, and interest coverage. The comparison with the average values achieved in the EU revealed a significantly more favourable situation in the Czech Republic.