Economics of organic farming: economic modelling OF0125

Summary

This report represents results from research work carried out for the MInistry of Agriculture, Fisheries and Food (MAFF) on the financial performance over the years 1995/96 to 1997/98. The work was initially funded under the code OF0125 and was extended into Project OF0190, with this reported representing both satges of the project. 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 assessents by farmers, advisers and other interested parties of the farm-level implications of conversation to, and continued organic farming.
The specific objectives were the provision of information on different organic farm types. 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, including data on dairy farms in the process of converting to organic production. Organic farm data is presented for LFA cattle and sheep farms for 1997/8 only. The samples of organic farms are small because of the limited number of organic holdings over 8 European Size Units with identifiable holding numbers in 1996 and farms with more than 50% of their land under organic management in 1997/98.
Although the organic sample is small, it represents nearly 14% of organic farms with identifiable holding numbers registered with UKROPFS in 1996, and this work gives an indication of the relative profitability of diferent organic and conventional farms of different types in the late 1990s.
Detailed financial input, output, income, liabilities and assets and some physical performance measures are presented for each of the years studied.
Outputs on organic dairy, horticulture and mixed farms increased each year. Outputs on organic lowland cattle and sheep farms were stable, but increasing inputs reduced Net Farm Income (NFI) each year in the study period. Outputs from organic cropping farms increased in 1996/97 and decreased in 1997/98, but results rom this group are affected by the high levels of conventional cropping (25% of land area on average) and reduced conventional prices.
To provide an indication of the likely performance of the organic farms if they were under conventional production, data from conventional farms are given. Conventional farms wereselected by cluster analysis from the Farm Business Survey (FBS).
In 1997/98 the average NFI (pounds sterling/farm) of the organic farms exceeded that of the conventional farms for all farm types except cattle and sheep farms.