Recent reports show potentially significant economic gains for diverse farm operations. The new studies, discussed and linked to below, reveal the potential profitability for both organic production and local marketing. A USDA report, “Direct and Intermediated Marketing of Local Foods in the United States,” provides a more complete picture of the growing demand for local food by combining direct-to-consumer sales with sales to intermediate channels, such as local restaurants, to show grossed local sales of $4.8 billion in 2008. This is significantly higher than the $1.2 billion in local sales to consumers alone. A recent report from the Union of Concerned Scientists also demonstrates the benefits of local and regional food systems on the health and economic well-being of the surrounding community.

The Leopold Center for Sustainable Agriculture posted a press release on the findings of a long-term experiment to monitor the yields and profitability of organic production compared to conventional farming.  According to the release, The Long-Term Agroecological Research Experiment (LTAR), led by ISU Agronomy and Horticulture Professor Kathleen Delate, found:

Chart Comparing Organic and Conventional Yields

Leopold Center Chart

Averaged over 13 years, yields of organic corn, soybean and oats have been equivalent to or slightly greater than their conventional counterparts. Likewise, a 12-year average for alfalfa and an 8-year average for winter wheat also show no significant difference between organic yields and the Adair County average.

Organic crops fetch a premium price on the market and eliminate the need for expensive inputs like herbicides and synthetic fertilizers. As a result, they are far more profitable than conventional crops. Craig Chase, interim leader of the Leopold Center’s Marketing and Food Systems Initiative and extension farm management specialist, calculated the returns to management—that is, the money left over for family living after deducting labor, land and production costs—for both systems. He based his calculations on actual LTAR data from 1998 to 2004, as well as scenarios modeled with enterprise budgets.

Organic versus Conventional Returns

Leopold Center Chart

Both methods gave the same result: On average, organic systems return roughly $200 per acre more than conventional crops.

In addition to its profitability, organic agriculture helps build healthy soils. While conventional LTAR plots receive synthetic herbicides, pesticides and fertilizer, organic plots receive only local, manure-based amendments. Total nitrogen increased by 33 percent in the organic plots, and researchers measured higher concentrations of carbon, potassium, phosphorous, magnesium and calcium. The results suggest that organic farming can foster greater efficiency in nutrient use and higher potential for sequestrating carbon.

Its important to recognize distinctions between organic and local production and what is commonly referred to as conventional agriculture. Both organic and local production can require distinct management skills, production methods, equipment, and marketing techniques. “The transitioning years are the hardest years,” Delate said, explaining that the organic project was originally designed to help farmers make the shift into an organic system. Further, the USDA study shows that small and medium sized farmers selling locally devoted more time to the farm operation and the value of locally sold food was highest near metropolitan areas and on the coasts.

Its also worth noting that other recent reports highlight record land prices and cash rents for what’s commonly referred to as conventional agriculture.  However, despite indications that a farmland bubble is not developing there are concerns from agricultural economists that changes in global productivity, biofuels policy, and crop insurance could negatively impact commodity prices.

Thus, while there is potential for increased profits from organic and local operations, its important for landowners to understand the concerns and risks of tenant operators. For more information on how landowners can assist in mitigating their tenant’s risk see “Key Considerations for a Sustainable Farm Lease.”