Organic Field Crops in 2008

There has been a lot of excitement lately about the increased prices that are available to conventional field crops. What a difference a year or two can make! Over the last six months, organic crops have also been in short supply and those prices have also gone up. Prices for organic crops are up because:

• demand for organic products continues to grow;
• the organic livestock industry is booming in North America and that is using organic grains for feed;
• China is expanding their organic livestock production and they are importing instead of exporting their grains.

Financial & Non-financial Reasons To Go Organic

Two years ago there were some conventional producers frustrated with low grain prices and they were looking to organic to “save them” financially. That financial need is not as great now, but there are many other reasons to convert to organic. Surveys among organic growers usually list economic benefits as being fairly low among the reasons they switch to organic. The leading reasons to be organic as stated by organic farmers are:

• concerns about the environment
• soil health
• the safety of the farm family; and
• a higher level of personal satisfaction.

The transition to organic takes 2 to 3 crop seasons when you have to use organic production methods but are unable to get an organic price for your crop. Organic and transition yields are often slightly lower than conventional. The lower price and lower yield is a hardship during transition. One strategy is to transition the farm gradually. Some people argue that now is a good time to transition to organic since current conventional prices are excellent for this transition period.

Organic prices have gone up 25-50% for most crops during the past 6 months. These prices are expected to remain high for some time. The volume of retail organic sales are growing 20 - 25% per year. The livestock industry is the fastest growing, with some sectors growing at over 50% per year. Organic livestock must be fed 100% organic feeds.

Gross Margins Compared

Table 1 compares estimated gross margins for various organic and conventionally grown crops, based on expenses from the 2008 OMAFRA Crop Budgets and estimated crop prices as expected at harvest in 2008. Gross margin is the returns over direct costs to cover the cost of land, labour and management. In the current volatile markets, these assumptions are of course subject to change. Organic yields are assumed to be about 75 - 80% of non-organic yields.

The Table 1 shows that organic corn and soybeans are well above non-organic for profitability based on these assumptions. Organic wheat has not kept up with the current very hot non-organic wheat markets.

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