The market for organic food production has grown at 12% annually for the past 15 years. Supply of organic crops, particularly organic grain, in the U.S. has not kept pace with consumer demand. In 2016, only 20% of domestic organic soybean consumption was produced in the United States, with the remaining 80% being imported from eastern Europe, South America, and Asia. As a result, organic row crops command a significant price premium to conventionally grown crops, and the gap is steadily rising.
Price per Bushel as of June 21, 2017
|Commodity||Conventional||Organic||Organic Price Premium|
Organic Price Premium (as % of Conventional Price)
Source: USDA National Agricultural Statistical Service, Compiled by LandFund Partners
The opportunity for environmentally conscious, enterprising farmers is ripe for the picking. Performing a simple analysis of organic versus conventional profit margins illustrates the value proposition. While the price per bushel of organic grain is 2-3x greater than conventional, profit margins are 3-6x higher for organic row crop production.
Unit Economics Comparison of Conventional & Organic Soybean Annual Production
Many farming operations that see the profit potential in organic production face barriers of entry to the organic market. One of the most significant obstacles is the 36-month transition period. During the transition period, the producer must use organic approved cultivation methods, but the crops still have to be sold at conventional prices. Additional hurdles include advanced record keeping, awareness of organic farming best practices, and grain marketing logistics. LandFund Partners is working with premier organic operators across the country to help navigate the transition from conventional to organic.
Organic farming practices are not only more profitable, but are significantly better for the environment. According to scientific studies, organic farming produces 35% less carbon dioxide (CO2) per year than a conventional farm. This translates into saving roughly 247 tons of CO2 per 1,000 acres of farmland, every year. The absence of lab-created conventional fertilizers also drastically reduces the chance that nitrous oxide – a greenhouse gas 300 times as harmful as CO2 – is a byproduct of farm operations.
In addition to a reduced carbon footprint, organic farming promotes soil ecology, biodiversity, water protection, a robust food production framework, and long-term agricultural sustainability.