When asked about financial risks, farmers usually point to rainfall and crop prices. However, there is a more subtle, systemic threat that is often overlooked: the growing reliance on chemical fertilizers as natural fertility continues to decline.
A major study by MDPI, which surveyed 63 studies, found that organic farming is often more financially successful. The basis for this is that organic farming has fewer long-term input costs and higher prices. Although a study published by Frontiers in Sustainable Food Systems shows that organic fertilizer has to be fermented, which requires more effort and cost, organic farming has more long-term financial benefits.
The surprising fact is that what is more costly in the short-term is actually more costly in the long-term.
The Input Cost Liberation:
The research conducted by ROI Biologicals has revealed that it is possible for farmers to reduce their dependency on costly synthetic fertilizers while still being able to maintain high levels of productivity. The majority of research has revealed that biofertilizers are cheaper alternatives to chemical fertilizers because biofertilizers are derived from natural resources, which are renewable resources that can be sustained for long periods of time.
Additionally, the Agriculture Institute’s published studies examining long-term trials indicate that organic systems utilize between 30% and 50% less energy per unit of production when compared to conventional systems. As a result, reduced fuel and electricity expenditures are considerable. The Rodale Institute’s 40+ year Farming Systems Trial has shown that conventional and organic corn/soybean yield rates are similar, while farmers growing organic crops enjoy greater profitability as a result of receiving a higher price for their produce and having lower input costs.
Research conducted by the MDPI has demonstrated that organic fertilizer costs have a higher initial price (e.g., $632 vs. $260 for broccoli; $910 vs. $382 for lettuce), but when factoring in other benefits such as reduced chemical inputs, improved soil health, and price premiums, organic farms produce lower overall production costs, resulting in higher economic success and profitability.
The Transition Valley of Death:
Here’s the part of the process that is rarely highlighted.
As the conventional system moves away from synthetic inputs, studies done by the Agriculture Institute indicate that there is a 20-30% drop in yield as the soil adjusts. Labor costs increase by 25-40% because of the need for more labor. The transition can take one to three years. And during this time, farmers need to comply with organic standards but cannot sell their crops at a premium. Less yield, no price advantage.
There are economic costs to the transition. Studies done for the International Journal of Current Microbiology and Applied Sciences indicate that conventional systems had higher gross returns for farmers. Meanwhile, studies done for Frontiers indicate that many farmers are stuck with conventional systems because of risk aversion and lack of awareness of the long-term benefits of conventional systems.
The economics of the transition are difficult, but the long-term economics tell a different story.
Why Biologics Win Long-Term?
This is because research conducted by the Agriculture Institute on long-term farm trials has shown that after five to seven years, organic farming yields the same as conventional farming while using lower input costs. Research has also proven that soils rich in organic matter perform better during a drought, thus reducing crop insurance claims and providing a steady income stream.
Analysis of data from several institutions has shown that the price premiums of organic foods are 20 to 50 percent above conventional foods. Research has proven that organic wheat sells for $8 to $10 a bushel compared to conventional wheat selling for only $6 a bushel. Organic vegetables have a 40 to 60 percent price premium or higher.
Short-term, transition costs and yield drops create financial pain.
Long-term, lower inputs, better soil health, and premium prices deliver superior profitability.
