Transitioning into Organic Grain Production: An Economic Perspective

Scientific studies across the US have demonstrated the economic viability of organic cropping systems. Of particular interest to farmers contemplating organic production is the economic viability of the farm during the transition-to-organic period, which is defined as 36 months from the last application of a prohibited synthetic fertilizer or pesticide. This period generally refers to two transition years (T-1 and T-2) and a third year where organic prices can be obtained once certification has been secured. Due to the increased interest in non-transgenic food ingredients, organic transition prices have recently been offered for specific non-transgenic organic crops during the two-year transition period. Here we report the results of an economic analysis of two rotations accepted under organic regulations: corn-soybean-oat/alfalfa (C-S-O/A) and corn-soybean-oat/alfalfa-alfalfa (C-S-O/A-A) during T-1 and T-2 compared with a conventional corn-soybean (C-S) rotation. Average production costs for the conventional C-S rotation were $48/acre higher than the average organic rotation ($160 versus $112/acre) during the transition. Returns from individual crops varied, depending upon variety and year, with the organic returns to land, labor and management less than conventional in the T-1 year, but greater than conventional returns in the T-2 year. The 2-year average returns over both transitional organic rotations ($114/acre) were similar to the conventional C-S returns ($117/acre). Transitional organic soybean returns were greater than transitional corn, oat, and alfalfa because the demand for non-transgenic soybean in T-1 and T-2 supported higher than conventional farm gate pricing. Soybean and corn returns in the transitional organic rotations were also greater than conventional corn and soybean returns in T-1 and T-2, whereas organic alfalfa returns competed favorably with conventional corn and soybean returns in T-2 only. The transitional organic oat crop generated the lowest revenue of all crops in both transition years. Transitional average returns from the organic soybean crops at $213/acre were greater than the $133/acre soybean returns from the C-S rotation. Assuming equivalent conventional and organic yields and organic prices in the first certified organic year (O-1), an even greater return would be obtained for organic crops following transition.