The Organic Opportunity: A System That Supports Farmer Profitability and Rural Prosperity
No one said farming was easy and the agricultural sector has suffered its fair share of setbacks over the years. But over the last decade a number of factors have made farmer profitability particularly elusive. More than half of all farmers have lost money every year since 2013, farm bankruptcies are steadily increasing, and the US lost more than 100,000 farms between 2011 and 2018. Most farmers rely on off-farm jobs to supplement on-farm income. The USDA’s 2020 pre-pandemic projections forecasted farm household income to be -$1,840, but the year turned out to be anomalous for many reasons. While the average farm income did end up improving from 2019, federal aid payments accounted for more than a third of farm income last year. Perhaps the most harrowing representation of the struggles facing farmers in the US is that farmers are among the most likely to die by suicide compared to other occupations.
A Solution for Farmer Profitability
While there are a number of drivers, at the end of the day declining farmer profitability comes down to the artificially low price of food in the US, the shrinking share of the food dollar that the farmer receives, and the growing cost of farm inputs. All these factors mean that profit margins for farmers are miniscule if they exist at all. The National Farmers Union estimates that in 2020 farmers lost $0.29 per bushel of corn, $0.21 per bushel of soybeans, and an astonishing $0.53 per pound of pork. And while food prices at grocery stores were up by 5.6 percent in 2020 from the year before, farmgate prices still dropped by 4.8 percent.
But for organic farms the story has been different. Researchers at Washington State University analyzed data from 44 studies involving 55 crops grown on five continents over 40 years and found that organic farming is somewhere between 29 to 32 percent more profitable for farmers than conventional agriculture. In row crops specifically with a corn, soy and wheat rotation, Purdue found that gross revenue was 24% higher. With similar fixed and variable costs, net revenue for organic production was 40% higher over conventional.
The authors in the study from WSU found this is due to the “organic premium”. This premium remained consistent at around 30 percent over the four decade period. Organic food sales hit $65 billion in 2020, more than twice the 5% rate in 2019 and easily outpacing the general market growth rate of around 2 percent. Considering that organic is the fastest growing sector of the US food economy and accounts for almost 6 percent of total food sales and only 1 percent of farmland, there is substantial opportunity for increasing supply of organic products. Even with organic crop yields as much as 18 percent lower than conventional, the break-even point for organic agriculture was a 5 to 7 percent premium. This means there is substantial room for organic to grow and still maintain a premium for farmers.
Economic Prosperity that Radiates
Organic agriculture is not just a boon to farmers and their families, but research has shown that the wealth spreads to surrounding communities, a finding which is especially relevant at a time when many rural areas are on the decline. Nearly 35% of rural counties in the US are experiencing protracted and significant population loss and the median age in rural areas is 43, seven years older than city dwellers. Rural poverty is over 3 percentage points higher than urban poverty, and high-poverty counties are disproportionately rural. Rural communities have also not recovered the jobs they lost in the recession and census data shows that the rural job market is 4.26% smaller than it was in 2008.
One of the most exciting aspects of organic agriculture is that it has the potential to reverse some of these trends. Researchers have termed this cumulative effect “organic hotspots,” and they happen when a number of organic producers carve out a space in a community which leads to more markets, infrastructure and a rising of all ships. Research conducted by OTA and Edward Jaenicke found that counties with a high concentration of organic production that were surrounded by similar counties were linked to median income increases of over $2,000 a year. Being an organic “hotspot” also led to a 1.3 percent point reduction in the overall poverty rate in the country. While this may seem like a small improvement, it is on par with prominent government programs. For example, the Supplemental Nutrition Assistance Program was found to be responsible for a 1.5 percentage point reduction in the overall poverty rate.
Farmers are the backbone of our food system. If farming is not a profitable profession--if the people who grow our food can’t afford to put food on the table--the system is inherently flawed. Organic farming has presented farmers with a promise of viability--a way to provide for their families, help sustain their communities, and pass their farms onto the next generation. At Clear Frontier, we support farmers in their transition to organic and beyond, because we see farm profitability as essential to a thriving and resilient food system. We hope to help shift the paradigm for success in agriculture from one focused on yield to one centered around farm profitability and sustainability.
