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THE ECONOMICS OF ORGANIC AGRICULTURE:
DOES CLIMATE MAKE A DIFFERENCE?
E. Canler* and W. Arden Colette
Staff Paper 156
Presented as a selected paper at the Annual Meeting
of the American Agricultural Economics Association,
University of Illinois, Urbana, Illinois, July 27-30,
Staff Papers are circulated without formal review by
the Food and Resource Economics Department. Content
is the sole responsibility of the author.
*The authors are Graduate Research Assistant and Associate
Professor, respectively, in the Food and Resource Economics
Department, University of Florida.
Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611
The Economics of Organic Agriculture:
Does Climate Make a Difference?
Previous studies favorably compare organic with conventional pro-
duction techniques, but do not consider climatic impacts on organic crop
response. Organic vegetable production is analyzed under rigorous
climatic conditions in Florida. Unit production cost was reduced by
organic methods in only one of seven crops. Labor-intensive organic
production is commercially infeasible in the study area.
The Economics of Organic Agriculture:
Does Climate Make a Difference?
Organic agricultural production practices have been a focus of pub-
lic interest and attention in recent years. This form of production ex-
cludes the use of commercial fertilizer formulas and synthetic pesticides.
This rising interest can be attributed to three basic reasons. First,
the environmental social movement has focused attention on the release of
fertilizer and pesticide residues into the environment. Concern has also
been expressed about the wholesomeness of food produced with the use of
commercial fertilizers and pesticides. "Health food" stores have opened
up in many places retailing organically grown products. Second, the en-
ergy shortage has focused attention on production alternatives which sub-
stitute other forms of energy, including human energy, for fossil fuel
energy inputs. Third, an increasing number of individuals desirous of
more natural work and surroundings are interested in entering farm pro-
duction. Organic production is often seen as a low cost, nonpolluting
way to produce wholesome foods.
The increased public interest has been followed by economic studies
of organic production. Klepper, et.al., reported that crop production
returns on the average were not very different between organic and con-
ventional farms in a Midwest sample. However, energy intensiveness
measured either on a per dollar of output or on a per acre basis was low-
er for the organic group. Oelhaf reported little difference in farm
prices for organic fruits and vegetables in California compared to those
conventionally produced. Farm prices for grains were ten percent higher
for the organically grown. The study estimated the cost of conversion
to organic production would total about $4 billion for the farm sector.
This cost was translated to a 3.3 percent average rise in food prices.
Most of these studies dealing with the biology and/or economics
of organic production have limited themselves to investigations in tem-
perate climates. The long frost periods in the temperate zones act as a
natural restraint in the reproduction of insect and disease agents. On
the other hand, warm and semi-tropical areas of the country face an
almost continuous presence and reproduction of these agents. Thus, the
potential for yield reducing infestations is higher, and production suf-
fers differentially higher damage as a result of any deficiencies in or-
ganic pest and disease control. The economic feasibility of organic pro-
duction in warm and semi-tropical areas and its comparative advantages
relative to both conventional and organic production in temperate zones
would depend largely on the effectiveness of organic pest and disease
In order to assess the economic performance of organic production
in more rigorous climates, a comparative analysis was undertaken for one
organic system relative to conventional practices. The biodynamic/French
intensive system of horticulture was selected for organic production,
since its cultural practices facilitate entry into production by those
interested in organic techniques. Its labor intensive practices greatly
reduce capital requirements by eliminating the use of almost all
machinery. Organic matter and compost are the sole sources of fertil- ;
ization. Pest control techniques rely on the avoidance of monoculture in the
planting area and on proper soil fertility and conditioning. The system's
cultural practices are purported to give the cultured plant pest and
disease resistant health (Jeavons, pp.70-71), thereby eliminating the
need for synthetic chemicals. High plant populations in planting beds
prepared with hand tools are also purported to reduce land requirements.
Production relationships represent the climatic and agricultural
conditions observed in Manatee County, Florida. Located in southwest
Florida, the area is subject only to a short frost period during the
mid-winter months and is one of the most important late fall and early
spring vegetable producing regions of the United States. The crops
included in the study are tomatoes, green peppers, cucumbers, squash,
collards, cabbage and strawberries. All are grown commercially in the
The analysis incorporates a producing unit of nine acres. Nine
arces correspond to the upper limit of the smallest physical category
reported by the Census of Agriculture. This small-scale unit is assumed
to be a more likely alternative than larger units for those considering
entry into organic vegetable production.
Data on conventional cultural practices for small-scale producers
were obtained from Levins and Downs. Additional data was obtained from
surveys of area producers and production and marketing publications
(Colette; Florida Crop and Livestock Reporting Service).
The absence of organic commercial vegetable production in Florida
presented informational problems, since no data were available on or-
ganic cultural practices or yields. Interviews were conducted with
users of the biodynamic/French intensive system in California to facil-
itate a thorough knowledge of its practices. But it was necessary to
determine the limitations of organic production in semi-tropical Florida,
the necessary modifications of the system for Florida conditions, and
the yields to be expected in the study area in association with the
The Delphi technique was used to generate this information. The
Delphi technique is an approach for systematically developing expert
consensus. The concept is based on the premises that 1) the opinions
of experts are justified inputs to decision making where absolute answers
are unknown or impossible and 2) a consensus of experts will provide a
more accurate response than a single expert (Fusfeld and Foster) Inter-
views were conducted with experts in nematology, entomology, soil sciences
and vegetable crops. Additional interviews were conducted with personnel
in the Agricultural Research and Education Center in Manatee County. A
consensus became readily available.
The information generated with the Delphi technique made possible
the formulation of production budgets for the organic practices of the
biodynamic/French intensive system. The previously cited sources pro-
vided the necessary information for the formulation of production budgets
for conventional practices. A cost comparison analysis and activity
analysis were performed.
Linear Programming Activity Analysis
A linear programming model is used to estimate the income generating
potential of the organic and conventional systems under various levels
of resource availability. The objective function is the maximization of
Max NR = E P.q. c.q.
Subject to 1) E c.q. < K 2) Z d.q. < L 3) E f.iq < N
i i i
Where: P. = output price of the ith cropping activity
c. = total cash cost of the ith cropping activity
q = output of the ith cropping activity
d. = land use coefficient of the ith cropping activity
f. = labor use coefficient of the ith cropping activity
K = operating captial constraint
L = land constraint
N = labor constraint
This objective function represents the maximum cash on hand the farm fam-
ily would have at the end of a year of production after paying all cash
expenses. No allowance is made for either payments to family labor, or
returns to investment in land, machinery, buildings or operating capital.
Furthermore, 100 percent equity in all farm capital is assumed so that no
interest payments are included.
Output prices represent five year average prices during the harvest
period. All costs are adjusted to represent 1976 prices.
The resources analyzed include land, family labor, and operating
capital. Eight acres are assumed to be available for production. One
acre is reserved for homestead and wasteland. The three levels of family
labor correspond to one, two, and three man-years of 2000 hours each.
The three levels of operating capital considered are: $1,000, $5,000 and
Nine model variations are considered for both the biodynamic/French
intensive system and conventional practices. Each of the three levels
of capital is combined with each of the three levels of labor.
Information obtained through the Delphi technique identified inad-
equacies in organic pest and disease control. These deficiencies expose
the crops to the severe pest and disease conditions of semi-tropical
Manatee County resulting in differentially lower yields compared to con-
Perhaps the most salient example of ineffective organic control are
nematodes. The sandy soils of much of Florida are a conducive habitat
for these pests. There are two popular organic means of control. One
is compost, which is purported to contain nematode-trapping fungi (Rodale,
p. 272). A Florida experiemnt incorporated organic matter into the soil
at rates as high as 50 tons per acre, but detected no fungal predation of
nematodes (Tarjan). Another popular organic control measure is the inter-
planting of marigolds with the crop (Jeavons, p. 68). In another exper-
iment African marigolds (Tagetes erecta) were interplanted among citrus
trees infested with the burrowing nematode (Radopholus similis) (Suit,
et. al.). The nematodes were not substantially eliminated although the
marigolds themselves did not suffer from nematode damage.
The interviewed panel of experts concluded that yields under organic
production practices would approximate the yields prevalent in commercial
production prior to World War II. Before 1941 little or no pesticides
were recommended for Florida vegetable crops while organic fertilization
was common (Spencer). Therefore, the yields assumed for organic production
of all crops except collards are state averages for the years 1935-1940.
Because no historical data were available for collards, a 35 percent
reduction from current yields was suggested.
Although organic production may benefit from some of the technolog-
ical and genetic changes that have occurred since the 1940's, there exist
no empirical means for adjusting yields for these factors. The reader
is free to adjust yields according to his evaluation of what the positive
effects might be.
Table 1 reports the comparative yield and cash cost data for organic
and conventional practices. Production costs for the organic system
are consistently lower in relation to conventional practices. However,
the suppressed yields of the organic system tend to result in a higher
cost per unit output. Only green peppers have a lower per unit cost
for organic compared to conventional production. The cost for collards
is the same for both systems.
These comparisons are not indicative of the total cost differentials
between the two systems, since labor, an unpaid factor of production
is much more intensively used in the biodynamic/French intensive system.
Therefore, the costs reported for organic production only partially re-
flect its level of resource use. Since all the variable costs of capital
are included, it follows that a more mechanized organic system would
compare more unfavorably with conventional practices.
To further compare the two systems, an analysis of year-to-year
yield variance was performed in order to assess risk differentials.
Table l.--Yields and costs for organically and conventionally produced vegetables in
Manatee County, Florida.
Cost of Organic
Organic Production Conventional Production Production Relative
Cash Cost Yield Cash Cost Cash Cost Yield Cash Cost to Conventional
Vegetable Per Acre Per Acre Per Unit Per Acre Per Acre Per Unit Production
Dollars Dollars Dollars Dollars Percent
Tomatoes 696.88 183 ctns. 3.81 1639.91 818 ctns. 2.00 191
Cabbage 524.08 215 crates 2.44 801.11 490 crates 1.63 150
Squash 314.45 59 bu. 5.33 481.87 150 bu. 3.21 166
Cucumbers 337.11 104 bu. 3.24 583.74 265 bu. 2.20 147
Peppers 898.02 272 bu. 3.30 1629.74 435 bu. 3.75 88
Collards 215.30 975 boxes 0.22 331.46 1500 boxes 0.22 100
berries 1144.48 272 flats 4.21 2716.86 1410 flats 1.93 218
Equally sized samples were used for the organic crop and its conventional
counterpart. The results are reported in Table 2. The variance for
organic peppers is found to be significantly higher (a = 0.10) relative
to conventional peppers. The variance for organic strawberries is found
to be lower relative to conventional strawberries. No significant differ-
ence is found between the two systems for all other crops. However, the
variation coefficient is higher for all organic yields. Thus, whether
risk differentials exist between systems will depend on a producer's
risk evaluation of absolute versus relative yield variability. If risk
is evaluated on a basis relative to mean yield, organic production will
be the higher risk alternative. If risk is evaluated on an absolute
variability basis, no generalized conclusions can be drawn.
In addition to these comparative results, the activity analysis
remains important because of the great differences in input mix between
systems. The analysis indicates the economic performance of the two
systems under a particular resource endowment. Potential organic pro-
ducers may be also willing to engage in organic production despite a
lower economic payoff. A great deal of satisfaction may be derived
from what is perceived as a more wholesome lifestyle and producing more
wholesome food. The activity analysis indicates the returns they can
expect with organic and conventional production, Table 3.
The results in Table 3 suggest that operating capital can be
severely constraining where conventional practices are used. Between
$5,000 and $10,000 are needed on a nine-acre farm to meet Florida's
1976 non-metropolitan median money income of $9,740 (Thompson, p. 135).
More than $5,000 in operating capital are needed to exceed the 1977
Table 2.--Variances and variation coefficients for organic and conventional yields.
Organic Yield Conventional Yield Organic Yield Conventional Yield
Crop Variance Variance Variation Coefficient Variation Coefficient
Tomatoes 6,487 22,077' 0.441 0.232
Cabbage 1,514 2,294 0.169 0.106
Peppers 6,985a 1,358 0.307 0.081
Cucumbers 1,314 371 0.318 0.075
berries 1,635a 18,796 0.148 0.099
a0rganic and conventional yields for the crop are significantly different at a = 0.10.
Table 3.-- Nt revenue naxirma, labor and operation capital use as a proportion of availability and shadow prices of operating
capital, labor and land using tie conventional cultural practices and the biodyntmic/French intensive system.
Operating Ilaximum Revenue Labor Use As A Operating capital use Maximum Shadow
Capital Labor Net Revenue Less Proportion Of As a Proportion of I'rce of Oper- Maximum Price Maximum Sha!ow
Constraint Constraint Maximum Depreciation Availability Availabllity acting Capital Price of Labor Price of Land
Man-vears Percent Percent Per hour Per acre
$ 1,000 1 $ 1,892.82 176.18 19.2 100.0 $ 1.70 $ 1.16 0
1,000 2 2,087.15 18.15 15.2 100.0 1.70 1.16 0
1,000 3 2,281.49 212.49 13.9 100.0 1.70 1.16 0
5,000 1 2,457.67 5388.67 17.5 100.0 1.30 2.87 0
5,000 2 8,332.55 6263.55 38.8 100.0 .1.31 2.12 $ 94.54
5,000 3 8,835.93 6766.93 25.6 100.0 1.31 2.12 94.54
10,000 1 8,195.06 6126.06 60.9 56.1 0 20.27 0
10,000 2 12,927.11 10,858.11 52.5 89.6 0 13.17 416.37
10,000 3 14,398.63 12,329.63 43.8 100.0 0.51 2.45 336.46
Biodynamic/French Intensive System
$ 1,000 1 246.50 246.80 55.8 34.8 0 0.60 0
1,000 2 495.09 495.09 55.8 69.8 0 0.60 0
1,000 3 723.00 723.00 54.3 100.0 0.42 0.50 0
5,000 3 743.38 743.38 55.8 21.0 0 0.60 0
aColette  has estimated the depreciation of a one-row equipment complement for small vegetable farms to be $2,069.
United States poverty income of $4,980 for a farm family of four (Thompson,
.p. 150)- It is also indicated that more labor than one person can pro-
vide is needed for production work during peak seasons in order to meet
the median income. Given these requirements under the condition of 100
percent equity, the result indicates that an above poverty to medium
range income can be achieved on a nine-acre vegetable farm using con-
ventional techniques. Surplus labor is available during the off-seasons
for possible off-farm part-time employment.
Table 3 also reports the solutions obtained for the organic prac-
tices of the biodynamic/French intensive system. The labor and capital
combinations not appearing for the biodynamic/French intensive system
led to redundant solutions and were thus excluded. No reductions to
net revenue are made because the manual techniques of the system make
capital depreciation almost inexistent.
The economic infeasibility of labor-intensive organic production
in the study area is indicated by the fact that the highest net revenue
maximum is less than $750. The maximum shadow price of an hour of labor
is $0.60. Even when ignoring returns to other inputs, net revenue per
hour of labor averages only $0.22 for all solutions.
Any off-farm employment would be much more remunerative. The earn-
ings of a 2,000 hour man-year of labor paid at the 1976 minimum wage of
$2.20 per hour is $4,400. For the net revenue of the labor-intensive or-
ganic enterprise mix to equal this income level, output price levels
would have to increase almost eightfold. Alternatively, yields would
have to increase five to sixfold.
It is interesting to note that despite the labor-intensive practice
of the organic system, no solution uses more than 56 percent of the
The comparative analysis indicates that semi-tropical agricultural
conditions impose a rigorous environment for vegetable crops. Inade-
quacies in the organic control of pests and diseases place severe re-
strictions on crop productivity, and thereby, tend to result in a higher
cost per unit of output. These results contrast to those reported by
Klepper, et.al., and Oelhaf for conditions in temperate zones. An
analysis of yield variance also indicates a higher risk associated with
organic production if risk is evaluated relative to variation around
the mean yield.
The activity analysis indicates that labor-intensive organic vege-
table production is economically infeasible in the study area. The bio-
dynamic/French intensive system would be viable only as a form of hobby
farming where there exist adequate outside sources of income and only
recreational or leisure time is used. The small capital requirements
would preclude the need for large investment in order to initiate pro-
duction. As a hobby, the system can be used to produce low cash cost
organic vegetables which may be difficult to acquire elsewhere.
A final conclusion is that a low to medium range income can be
achieved from eight acres of production in the study area. The warm
climate generates a long crop season which allows an intensified use
of land resources. However, satisfactory income levels of income can
be achieved only if insect and disease pests are kept under control.
Experience in the area has shown that this can be achieved only through
chemical as well as biological control.
Colette, W. Arden. Economic Evaluation of the Agricultural Cooperative
Concept as Proposed by the Southern Development Foundation for the
Manatee County Area in West Central Florida. Gainesville, University
of Florida, 1978.
Florida Crop and Livestock Reporting Service. Vegetable Summary, Florida
Fusfeld, A.R. and R.N. Foster, "The Delphi Technique: Survey and Comment",
Business Horizons, 14 (1971).
Jeavons, John. How to Grow More Vegetables. Palo Alto: Ecology Action
of the Midpeninsula, 1974.
Klepper, Robert, et.al. "Economic Performance and Energy Intensiveness
on Organic and Conventional Farms in the Corn Belt: A Preliminary
Comparison", AJAE 59 (February 1977).
Oelhaf, Robert C. The Economics of Organic Farming. PhD Dissertations
University of Maryland, 1976.
Rodale, Robert, ed. The Basic Book of Organic Gardening. New York:
Ballantine Books, 1971.
Spencer, A.P. Vegetable Crops in Florida. University of Florida,
Agricultural Experiment Station Bulletin, 58, 1937.
Suit, R.F. et.al. "Control of Spreading Decline of Citrus", Florida
Agricultural Experiment Stations. State Project 773, 1956.
Tarjan, A.C. "Attempts at Controlling Citrus Burrowing Nematodes
Nematode-Trapping Fungi", Soil and Crop Society of Florida, 21
Thompson, Ralph B. Florida Statistical Abstract. Gainesville, The
University Presses of Florida, 1978.