Economics of organic farming (extension to OF0125)(0F0190)

Summary

This project OF0190 was an extension to OF0125 to cover completing the comparison data for 1997/98 and to extend the data collection by one further year (1998/99). The final reports for the two projects are therefore being submitted jointly. The OF0125 report covers the period 1995/96-1997/98, for which a detailed report was submitted to MAFF in July 1999, and a revised detailed report including a complete set of comparisons with conventional farms was submitted to MAFF, after revisions, in July 2000. That report has now been published at www.organic.aber.ac.uk/library/organic farm incomes.pdf. A detailed report for 1998/99 has been submitted to MAFF in March 2001, and will be published at the same internet site once accepted.
The report presents results from research work carried out for the Ministry of Agriculture, Fisheries and Food (MAFF) on the financial performance of organic farms in 1998/99. The aim of the research was to assess the financial performance of organic farms differentiated by farm type, in order to inform MAFF policy-making with respect to 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. To provide an idea of the trends over time, where possible data for continuous samples of farms are presented for 1997/98 and 1998/99.
The specific objectives were to extend the previous project (OF0125, covering 1995/96 to 1997/98) to collect and collate data on the financial performance of organic farms, differentiated by farm type . This was achieved through the collation of financial data collected under three different MAFF-funded research projects supplemented by data collected on other farm types. The samples of organic farms are small because of the limited number of organic holdings over 8 ESU (European Size Units) with identifiable holding numbers in 1996, when the previous study was started. As the sample is small there is limitation on how the results may be extrapolated to the wider population of organic farms, especially as the structure and objectives of those converting to organic production in the late 1990s may be different from those that converted in the 1970s and 1980s.
Detailed financial input, output, income, liabilities and assets and some physical performance measures are presented for 1998/99. Where an identical sample of five farms is available, data are presented for 1997/98 and 1998/99 for the sample.
The organic farm samples are so small that outliers (especially larger farms) have a large influence on the average. If the samples were larger, general trends would be more apparent and less influenced by individual farms; despite this, some explanation has been attempted of trends and changes in inputs, outputs and incomes. However, great care must be taken in extrapolating results.
Of those farm types for which a continuous identical sample of five farms was available, Net Farm Incomes (NFI) increased for cropping (£281/ha) and dairy farms (£487/ha) in 1998/99 compared with 1997/98; in both cases outputs as well as inputs increased between years. Mixed farms showed an average reduction in outputs and increase in inputs, lowering the average NFI to £15/ha in 1998/99. The five lowland cattle and sheep farms improved a negative NFI of £161/ha in 1997/98 to a positive £7/ha in 1998/99 through an increase in livestock outputs with a similar level of inputs to that of 1997/98.
Due to the high level of farmer and spouse labour on horticultural holdings, the average Management and Investment Income (MII) of the sample was negative, but the average NFI was £1,836/ha. On four holdings, 1998/99 average outputs were 92%, and inputs were 97% of the previous year, resulting in an average NFI in 1998/99 for that group of 75% of the 1997/98 result.
The group of LFA farms, consisting of four cattle and sheep and one mixed farm, achieved an average NFI of £72/ha in 1998/99.