Impact
Statement

PDF version
for printing

© 2006 Plant Management Network.
Accepted for publication 21 June 2006. Published 16 October 2006.

Transitioning into Organic Grain Production:
An Economic Perspective

Kathleen Delate, 106 Horticulture Hall, Departments of Agronomy and Horticulture, Iowa State University, Ames 50011-1100; Craig Chase, Black Hawk County Extension Service, Iowa State University, Waterloo 50701; Michael Duffy, 478E Heady Hall, Department of Economics, Iowa State University, Ames 50011-1070; and Robert Turnbull, Department of Entomology, Iowa State University, Ames 50011-3140

Corresponding author: Kathleen Delate. kdelate@iastate.edu

Delate, K., Chase, C., Duffy, M., and Turnbull, R. 2006. Transitioning into organic grain production: An economic perspective. Online. Crop Management doi:10.1094/CM-2006-1016-01-RS.

Abstract

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.

Introduction

Organic agriculture has increased to a $13 billion industry in the US and continues to expand at a 20% annual growth rate (29). The increasing demand for organic products overall has led to escalating requests for research-based organic information at land-grant universities across the country in recent years (8). Factors driving increasing organic food purchases include concerns over pesticide residues; ingredients containing transgenic crops, commonly referred to as genetically-modified organisms (GMOs); and hormones in livestock products (21,43). Organic consumers also cite support of family farms, improving water quality, and other social values as reasons for purchasing organic foods (1,39). The pull on organic crops/ingredients from food manufacturers has translated to increased organic activity on farm and at agribusinesses (22). Worldwide organic production is increasing, in part due to the shift to environmental and technical concerns in trade regulation versus subsidized over-production of commodity crops (3,30). Farmers in the north-central region of the US grew 695,468 acres of organic crops in 2002 (38), with organic grains constituting 37% of all organic croplands in the Midwest. In Iowa alone, reported production for all organic crops increased from 19,000 acres in 1995 to 100,000 in 2000 (18). Due to the increased interest in non-transgenic food ingredients, producers have been able to sell specific organic grain crops grown during the two-year transition period at prices greater than those offered by the conventional market.

Among other incentives, the Conservation Security Program from the 2002 US Farm Bill is supporting the transition from conventional to certified organic production for some producers (6). Scientific studies across the US have demonstrated the economic viability of organic cropping systems (9,11,40) but economic returns during the transition period, which is defined as 36 months from the last application of a prohibited substance (19,37), are of particular importance to farmers contemplating transitioning to organic production. This period refers to two transition years (T-1 and T-2) and a third year — the certified organic year (O-1) — when organic prices can be obtained once certification has been secured.

Decreases in yield during the transition period have been reported (23,24), with yield reductions during conversion to organic ranging from 10% to 40% (42). Pimentel et al. (31) reported a 30% reduction in corn yields during organic transition, but over 22 years of a long-term comparison trial, organic yields were comparable to conventional corn and soybean yields. In order for organic crops to compete with conventional, adequate soil organic matter supply and timely weed management appear to be critical (13,33,36), although weeds were not found to be the limiting factor in a study on former CRP land (7). Mäder et al. (25) obtained organic yields that were 80 to 100% of conventional yields for all crops over 21 years in an organic rotation of wheat, potatoes, and grass-clover hay. Other studies in the Midwestern US have reported similar organic and conventional grain yields (40), including corn yield in an organic system of C-S-O/A and C-S-O/A-A rotations reaching 91.8% of conventional corn yield in the C-S rotation. In the same study, organic soybean yield was 99.6% of conventional soybean yield. Porter et al. (32) reported organic corn yields 7 to 9% lower and organic soybean yields 16 to 19% lower than conventional crop yields. In a survey conducted by the Organic Farming Research Foundation, organic corn yields across the US were found to average 95% of conventional yields (28).

Organic horticultural crops, in general, often yield less than conventional crops (5), but some exceptions exist. Colman (4), for example, obtained organic vegetable yields in European studies comparable to conventional yields. Organic prices for horticultural crops often surpass those for agronomic crops. Returns from organic apples, for example, were up to 259% greater than conventional apples (2).

Regarding economic returns from organic grain crops, Smith et al. (35) obtained higher returns with an organic wheat-peas-flax-sweet clover rotation compared to a conventional wheat-peas-flax-fallow system. Higher net returns over 10 years from a 4-year organic rotation (C-S-O/A-A) with organic prices were obtained compared to returns from a conventional C-S rotation; net returns were equivalent when organic prices were absent (26). Much of the profit in organic systems has been associated with lower production costs due to restrictions on petroleum-based inputs. Lower inputs in the organic system translated to 30% lower energy costs compared to the conventional rotation in Pennsylvania (31).

A similar long-term cropping systems experiment was established at the Iowa State University Neely-Kinyon Long-Term Agroecological Research (LTAR) site in Greenfield, IA, in 1998 to examine the agronomic and economic outcomes from conventional and organic crop rotations. The LTAR farm is a systems experiment where treatments consist of a suite of farmer-developed practices (soil amendments, tillage, crop selection/rotation) established as complete management strategies (5,12). Replicated conventional corn (Zea mays L.)-soybean [Glycine max (L.) Merr.] (C-S) systems were compared to organic systems of corn-soybean-oat (Avena sativa L.)/alfalfa (Medicago sativa L.) (C-S-O/A) and corn-soybean-oat/alfalfa-alfalfa (C-S-O/A-A), using identical crop varieties, were monitored during the 3-year transition period (T-1, T-2, and O-1 years) to determine which rotation was associated with the lowest risk during transition (6). Our objectives in this study were to (i) conduct an economic analysis of transitioning organic grain rotations, using required organic farming practices, including crop rotation, cover cropping, compost application, and non-chemical weed control compared with a conventional system; and (ii) determine which combinations of organic crops could lower risk, in terms of economic returns, during the transition years.

Analyzing the Economics of Transition to Organic Production

Experimental design. The Long-Term Agroecological Research (LTAR) experimental site is located in Greenfield, IA, on a 17-acre ridge top with a uniform slope of 0 to 2%.

The predominant soil at the LTAR site is a moderately well-drained Macksburg silty clay loam (fine, smectitic, mesic Aquic Argiudolls). Research plots are 140 ft by 70 ft in size. Because of uniform slope and soil type, the experimental design is completely randomized with four replications of four different cropping system treatments. All crops in all rotations are planted each year of the experiment. Cropping system treatments consisted of the following crop rotations: conventional corn-soybean (C-S), organic corn-soybean-oat/alfalfa (C-S-O/A), and organic corn-soybean-oat/alfalfa-alfalfa (C-S-O/A-A). Following harvest in all organic corn plots in 1998 and 1999 (T-1 and T-2), winter rye was planted as a winter cover crop and weed management strategy, per local practices on organic farms.

Identical crop varieties were planted in organic and conventional systems each year, including food-grade soybean to provide the most economical returns (9). A hay crop [alfalfa, red fescue (Festuca rubra L.), and oat] was seeded in 1998 in the 30-ft-strips around each plot and around the perimeter of the experiment to maintain the required buffer between the organic and conventional plots.

Planting operations. Field operations in 1998 and 1999 (Table 1) consisted of moldboard plowing the entire experimental area, followed by disking and field cultivating to prepare a seedbed at the initiation of the experiment in May 1998. Crop varieties were determined on an annual basis, based on the Neely-Kinyon Farm Association’s recommendations for varieties with desired market traits. Varieties were changed annually as improved varieties for yield or pest resistance became available. Identical crop varieties and planting dates were used in all treatments each year to minimize initial differences between systems. Corn varieties included Pioneer Brand 3489 in 1998 and in 1999, a white, food-grade, milling corn (Wilson 1790W) was planted, based on local interest in an alternative crop, in place of the more typical yellow, feed corn variety. Corn was planted at a 1.75-inch depth in 30-inch rows at a rate of 32,000 seeds per acre. Rye (‘Rhymin’) was no-till drilled at a rate of 56 lb/acre as a winter cover crop and weed management strategy in all organic corn plots in the C-S-O/A and C-S-O/A/A crop rotations each year. Soybean varieties were IA 3006 in 1998 and IA 2034 in 1999. Soybean seeds were planted at a 2-inch depth in organic and conventional plots at a rate of 175,000 seeds per acre.

Table 1. Field operations for conventional and transitional organic grain crops, by crop and rotation, 1998-1999.

 ^a Operations varied among years. Operations listed are those typically performed.

 ^b This implement consists of roller bars that compress soil over the oats and alfalfa seed to improve seed-to-soil contact.

 ^c Corn, soybean, and oats were harvested with a combine whereas alfalfa was harvested by a mower, then raked and baled. Oat straw was raked and baled. Alfalfa was harvested 3 times.

The O/A component of the organic rotations was planted to oats with a small grain drill at a depth of 0.5 inch at a rate of 112 lb/acre and underseeded with Pioneer Brand 54H91 alfalfa at 18 lb/acre. Alfalfa in the O/A component of the C-S-O/A rotation remained as a cover throughout the winter of its seedling year and was disked under the following spring, prior to corn planting. Alfalfa in the A component of the C-S-O/A-A rotation was established in the same manner as the O/A component, but alfalfa remained throughout the study as a hay crop and was not disked under until spring of the third year. Thus, alfalfa in the C-S-O-A/A rotation was grown for a total of two growing seasons prior to disking under for corn planting in the third year, in order to provide a hay crop in the second year after establishment. Oat varieties included ‘Jerry’ in 1998 and ‘Don’ in 1999. Alfalfa varieties included ‘Nitro’ in 1998 and Pioneer 53H81 in 1999, the latter variety selected for tolerance to potato leafhopper [Empoasca fabae (Harris)]. Alfalfa plots that would remain as alfalfa the following year (in the C-S-O/A-A rotation) were overseeded with alfalfa at a rate of 14 lb/acre on 4 September 1998 to ensure a satisfactory over-wintering alfalfa stand in the first year of the experiment. In the following years, fall overseeding was not required in the alfalfa plots because of adequate stands. Alfalfa was harvested starting in 1999 from all A plots when sufficient alfalfa biomass accumulated, while the underseeded alfalfa in the O/A component was left unmowed to supply maximal nitrogen to the succeeding corn crop. Alfalfa yields are reported as total amount of hay cut from each plot per year.

Fertilization and pest management regime. Organic corn plots were amended in early spring (1 month before corn planting) with composted swine manure. The compost was made from a mixture of manure and corn stover that was removed from deep-bedded swine "hoop-house" structures located at the ISU Armstrong Research and Demonstration Farm in Lewis, IA. The manure mixture was composted for a one-year period prior to application in the organic system. Average nutrient content of the compost was 3-2-4 N, P, and K, respectively, over the course of the experiment. Compost was applied with a manure spreader (New Holland Type 856, New Holland, PA) to organic corn plots at rates intended to apply 150 lb of N per acre in 1998 and 120 lb of N per acre in 1999, based on stalk nitrate results each season. Organic oat plots received compost at a rate to apply 70 lb of N per acre. Conventionally managed corn was fertilized at or immediately before planting with anhydrous ammonia in 1998 and with 28% urea ammonium nitrate at rates matching the organic corn plots.

Pests (weeds and insects) were managed in conventional fields following Iowa State University recommendations. As an example, the pest management regime for conventional corn included the following practices: Harness (1.8 lb/acre), Atrazine (1 lb/acre), Buctril (0.25 lb/acre), Accent (0.004 lb/acre), AMS (2.5 gal/100 gal), and NIS (2 pt/100 gal). Prowl (1.25 lb/acre), Galaxy (0.75 lb/acre), Prestige (0.25 lb/acre), COC (2 pt/100 gal), and AMS (2.5 gal/100 gal) were applied to conventional soybean plots. Only in 1998, Force 1.5 G was applied for corn rootworm control at a rate of 9 lb/acre at planting in the conventional corn plots, but not warranted after the first year, based on sampling results. No pest management applications were needed in the organic fields during the T-I and T-2 years (6).

Field operations and hours. The primary tillage implement at the initiation of the transition was a moldboard plow followed by a tandem disk and field cultivator. In 1999, pre-plant tillage consisted of a field cultivator in the conventional corn rotation and a disk in the soybean rotation. Fertilization was applied in the spring with either a manure spreader (organic) or a fertilizer spreader (conventional). Pre-emergence and post-emergence pesticide applications were made each year in conventional fields. Post-emergent mechanical weed control using a row cultivator was common, per local conventional practices, in conventional as well as organic fields. Alfalfa and surface-applied compost were incorporated simultaneously with moldboard plowing prior to annual corn crops in the organic fields.

Post-emergent mechanical weed control in organic plots included a harrow, rotary hoe, row cultivator, and propane flame cultivator according to stage of weeds and weather conditions. Corn and soybean plots in the organic rotations were rotary-hoed and cultivated in the row. An average of two row cultivations occurred each year. An additional weed management tool, a propane flame-burner was used in the organic C-S-O/A and C-S-O/A-A corn plots in 1999. Corn was flamed at 12-inch height using a Red Dragon propane flame burner run at 40 p.s.i. and a tractor speed of 5 m.p.h. Corn stalks were disked and rye planted in the organic rotations following the corn harvest in September-October of each year.

The organic soybean weed-management program began with disking and field cultivating rye prior to soybean planting. Post-emergence weed control consisted of rotary hoeing, row cultivating, and "walking" in the organic fields before harvest, when large weeds above the soybean canopy were hand-pulled while walking across each plot, per regional practices for organic soybean crops. Alfalfa was seeded with the oat crop for both organic rotations. The choice and timing of all cultural practices were decided through recommendations of area organic farmers and by the research farm manager. All labor requirements excluding hand labor was estimated from engineering estimates provided by Iowa State University (14,15).

Economic analysis. Iowa transitional organic soybean prices were received by a local elevator source (Heartland Organic Marketing Cooperative, Stuart, IA). Transitional organic soybean prices were $6.70/bu (60 lb) for 1998 and 1999. Transitional organic oat prices were received by a local source at $1.24/bu (32 lb) both years and alfalfa at $85/ton in 1998 and $75/ton in 1999. Transitional organic oat straw average price was $50/ton. Gross revenues were calculated by multiplying annual commodity prices by annual yields. Statistical significance among yield and system returns was tested using ANOVA and Tukey’s multiple range test (HSD) for differences among individual treatments, with significance noted at P-values ≤ 0.05 (SAS Institute Inc., Cary, NC).

The Economics of Transition to Organic Production

Fieldwork hours. The conventional C-S rotation incurred lower fieldwork requirements than the transition rotations at 1.10 h/acre (Table 2). The C-S-O/A and C-S-O/A-A rotations incurred 2.45 h/acre and 2.16 h/acre, respectively. Within each of the transition rotations, corn and soybean used the most hours to grow and harvest crops. The application of compost at 12 tons/acre and mechanical weed control for corn comprised the majority of fieldwork, whereas hand labor (2 h/acre) and mechanical pest control contributed to the soybean hours.

Table 2. Estimated fieldwork hours for conventional and transitional organic grain crops, by crop and rotation, 1998-1999.

 ^x Based on Duffy and Smith (14,15).

Yields and price. Individual year yields and average yields by crop and rotation (Table 3) represent the average over the 2-year transition period. The exception in this analysis is the alfalfa crop in the C-S-O/A-A rotation; in the initial year of the study, an oat crop was planted as a nurse crop with the alfalfa and harvested as grain. No alfalfa was harvested in the initial year to allow for adequate growth to assure winter survival.

Table 3. Conventional and transitional organic grain yields by crop and rotation, 1998-1999.

 ^x Means followed by the same letter for the same year and same crop among the different rotations are not significantly different at P = 0.05.

 ^y Alfalfa was not harvested in the O/A component but was plowed under for green manure for the succeeding corn crop.

 ^z Alfalfa was not harvested from the A plots in the first year of establishment; the nurse crop of oats was harvested from the A plots at 47 bu/acre, however.

Variation in weather and varietal selection affected yield response in the transition years (1998-1999). The average conventional corn yield was 165 bu/acre compared to the average transitional organic yield of 133 bu/acre (C-S-O/A rotation) and 129 bu/acre (C-S-O/A-A rotation). Due to high variability in organic corn yields in the first year (T-1), no statistical differences between organic and conventional corn yields were observed in T-1, but in T-2, when a white, food-grade corn variety was planted, the conventional yields were 39 bu/acre greater than the average organic yield (Table 3). In the certified organic year of the trial in 2000 (O-1), however, the organic corn yields in the C-S-O/A-A rotation were greater at 148 bu/acre than the conventional yields at 141 bu/acre (9).

Soybean yield averages were equivalent in organic and conventional rotations, ranging from 47 bu/acre (C-S-O/A) to 49 bu/acre (C-S O/A-A). Oat yield averages ranged from 64 bu/acre (C-S-O/A) to 59 bu/A (C-S-O/A-A), with a reduction in oat grain and straw yields in 1998 due to a lower-yielding variety and excessive rain in early spring. Changing varieties in 1999 resulted in substantially higher grain and straw yields. Alfalfa yield averaged 3.2 tons/acre in second-year alfalfa fields in the C-S-O/A-A rotation.

Transitional organic prices were available for organic soybeans in the transition years of this study (Table 4). Average conventional corn and soybean prices were below the average corn and soybean loan rates as determined by the government program in 1998 and 1999. Thus, potential loan deficiency payments were used in the analysis, using a corn loan rate of $1.80/bu and a soybean loan rate of $5.20/bu (Table 4). Iowa average annual prices were used for oat and alfalfa crops as reported by Iowa Agricultural Statistics. Straw prices were set at $50/ton, which was a typical price in 1998-99.

Table 4. Crop prices for conventional and transitional organic grains, 1998-1999.

 ^x Crop prices are in $/bu except straw and alfalfa, which are $/ton. Average Iowa loan rates were used for corn and soybean prices. Iowa Agricultural Statistics (1998-1999) average annual prices were used for oat and alfalfa. Oat straw prices were based on local prices.

Production costs. Machinery and input cost of production were determined by applying standardized cost estimates (14,15) to the cultural practices in each rotation (Table 5) to eliminate differences from purchasing discounts of inputs and machinery repairs and depreciation, and focus specifically on practices. Herbicide and insecticide price data were obtained from unpublished price lists. The compost application in the C-S-O/A and C-S-O/A-A system was calculated at the cost of application only. No cost was assessed for the compost since the compost was received from an Iowa State University farm, which is typical of organic farms in the area having their own livestock operations.

Table 5. Costs of production ($/acre) for conventional and transitional organic grains, by crop and rotation, averaged over the transition years (1998-1999).

 ^x Alfalfa costs of production equal the average oat (nurse crop) grain and straw production costs from 1998 ($118/acre) and alfalfa hay production costs from 1999 ($67/acre).

Conventional corn production costs averaged $202/acre, substantially above the transitional organic corn production costs of $119/acre (Table 5). The transition rotations did not incur any pesticide or fertilization costs, but did incur higher machinery expenses as weed management was handled mechanically. Seed expense was higher in the transition rotations due to higher seeding rates. Transitional organic soybean production costs were below conventional soybeans at $108/acre versus $118/acre. Thus, the cost of chemical weed management outweighed the cultural and mechanical weed control costs in the organic transition rotations. Seed expense was higher in the transition rotations due to the seeding of rye following corn and prior to the soybean planting. The cost of seeding the alfalfa crop was included with the oat production costs since these crops were seeded at the same time. Average production costs for the conventional C-S rotation were $48/acre higher than the average organic rotation ($160 versus $112/acre). Average production costs between the two organic rotations varied only by $6/acre. Overall, the increased machinery and seed costs in the organic rotations were not greater than fertilization and pesticide costs in the conventional rotation.

Returns. In the analysis of returns, an analysis of returns to land, labor, and management (Table 6) is compared against an analysis with a labor charge subtracted to estimate a return to land and management (Table 7). Because of the state ownership of farmland in this study, equal debt charges, equity charges, real estate taxes, and other land ownership costs in both conventional and organic systems are assumed, with no effect from the rotation system selected. Farm labor is typically provided by the owner/operator on Iowa farms. The value associated with this labor will depend upon the types of enterprises and operations involved, outside opportunities available, among other variables. For our analysis, we used a typical family labor charge of $10.00/h. One farm manager implemented operations for the conventional and transition systems and three rotations in this study. We assumed in this analysis there were no differences among systems and rotations in managerial ability required or utilized.

Table 6. Returns ($/acre) to land, labor, and management for conventional and transitional organic grains, by crop and rotation, 1998-1999.

 ^x Means followed by the same letter for the same year and same crop (corn/soybean) in different rotations are not significantly different at P ≤ 0.05. Oat and alfalfa returns are not compared between rotations because these crops are not grown in the C-S rotation.

 ^y Average returns are compared among the three rotations; means followed by the same letter in different rotations are not significantly different at P ≤ 0.05.

 ^z Alfalfa was not harvested in 1998 in the establishment year. Oats (nurse crop) were harvested in alfalfa plots in 1998 and sold for $58/acre. The average alfalfa returns included the oat returns from 1998 and alfalfa hay returns from 1999.

Table 7. Returns ($/acre) to land and management using $10.00/h for labor for conventional and transitional organic grains, by crop and rotation, 1998-1999.

 ^x Means followed by the same letter for the same year and same crop (corn/soybean) in different rotations are not significantly different at P ≤ 0.05. Oat and alfalfa returns are not compared between rotations because these crops are not grown in the C-S rotation.

 ^y Average returns are compared among the three rotations; means followed by the same letter in different rotations are not significantly different at P ≤ 0.05.

 ^z Alfalfa was not harvested in 1998 in the establishment year. Oats (nurse crop) were harvested in alfalfa plots in 1998 and sold for $58/acre. The average alfalfa returns included the oat returns from 1998 and alfalfa hay returns from 1999.

Economic returns were calculated by subtracting production costs from gross revenues on an annual (by replication) basis. The 2-year average returns over both transitional organic rotations ($114/acre) were similar to the conventional C-S returns ($117/acre). Organic corn returns, averaged over the two transition years and both transitional organic rotations, were greater ($121/acre) than the conventional corn returns in the C-S rotation ($101/acre). Average returns from the transitional organic soybean crops at $205/acre in the C-S-O/A rotation and $220/acre in the C-S-O/A-A rotation were also greater than the $133/acre soybean returns from the C-S rotation.

Returns to the transitional C-S-O/A and C-S-O/A-A rotations could have been improved in the initial year of transition if alfalfa hay was harvested in 1998, but in order to allow for adequate over-wintering stands, alfalfa was not harvested that year. The 1998 oat variety was also not adapted to local conditions and resulted in a lower yield (grain and straw). In the second year of transition, however, rotational average organic returns were improved, with the C-S-O/A and C-S-O/A-A rotations returning $125/acre and $138/acre, respectively, compared to the C-S rotation at $109/acre. Based on previous research (9), the average returns in the organic C-S-O/A and C-S-O/A-A rotations were predicted to increase well beyond the average C-S rotation returns following the transition to organic status.

Because of the wide variability in opportunity costs for labor in the region of this study, an hourly rate of $10.00 was selected to represent a typical wage for farm labor in the analysis of returns to land and management (Table 7). With a labor charge of $10.00/h, the 2-year average C-S rotation produced the highest return at $106/acre. The C-S-O/A and C-S-O/A-A rotations over both years of transition produced returns of $94/acre and $87/acre, respectively. The returns for conventional C-S corn, however, were lower at $89/acre compared to $100/acre for the corn in the C-S-O/A and C-S-O/A-A rotations. The transitional organic C-S-O/A-A rotation also produced the highest average returns for soybeans, at $184/acre, compared to the conventional soybean returns in C-S rotation at $123/acre. Thus, on average, the transitional organic soybean crop garnered 70% higher returns than the conventional soybeans. As was the case with the returns to land, labor, and management, the C-S-O/A-A rotational returns to land and management were higher than the C-S rotation in 1999 ($116/acre versus $100/acre). The increase in oat grain and straw yields due to variety change, and harvesting of alfalfa in T-2 were major factors in this increase in revenue.

Limitations of this study include the issue of managerial ability. Performance of any production system (transitional or conventional) is highly dependent on farmer management skills. In this study, we assumed a high level of managerial ability in the transitional organic system, as was the case at the experimental farm, where the farm manager conducted routine evaluations of weed and insect pest populations, followed diverse crop requirements, and applied compost-all additional management aspects compared to the conventional system. Also in this study, composted manure was assumed to be readily available, as is typical of Iowa organic farms (8), and applied to the corn and oat crops at the cost of application only. Because all crops were sold at market prices and not fed to livestock, returns may have been substantially different if the final destination of the crops was livestock. In a related study (Table 8), we determined that certified organic prices and equivalent organic and conventional yields in the O-1 year (2000) would return an average of $340/acre for the organic rotation versus $231/acre in the C-S rotation (9).

Table 8. Returns ($/acre) to land, labor, and management for conventional and organic grains, by crop and rotation, in the certified organic year 2000^x.

 ^x Derived from a study by Delate et al. (8).

Conclusions

Continued demand for organic products in Europe and the US is predicated on increasing supply of organic crops (16). Based on the assumptions in this study, several conclusions can be drawn that may assist producers interested in undertaking the transition to certified organic status. Despite the lack of statistical differences in corn yield in T-1, overall, conventional corn yields were higher than transitional organic corn crops. Similar findings from Pennsylvania (31) indicated transitional yields becoming higher than conventional yields in the fourth year after conversion to organic. However, higher returns from transitional organic corn crops resulted primarily from lower costs of production in our study. Mahoney et al. (26) also found that a 4-year organic rotation (C-S-O/A-A) incurred lower costs and provided greater returns than the conventional C-S rotation. In a related study in Iowa, third-year (O-1) organic corn yields were equivalent to conventional yields (9) and returned a larger profit than transitional crops. Similarly, organic corn yield in the T-2 year of an organic comparison study in California was not significantly different from conventional corn fertilized with synthetic N (27). Over the first nine years of this study, however, organic corn yields were lower than conventional, often attributed to delayed organic corn planting due to late plow-down of the legume cover crop (10).

Adequate soil fertility is often mentioned as the key limiting factor during the organic transition years, and for crops with greater N demands, some form of compost and/or cover crop additions may help improve yields (20). The role of alfalfa in the organic C-S-O/A and C-S-O/A-A rotations may have included both soil improvement and contributing to higher rotational returns, similar to findings by Singer et al. (34). In a California study, however, organic tomato crops, with a high demand for N, produced equivalent yields in T-1 and 9-year organic plots, where soil inorganic N content was similar between plots (27). The organic tomato yields in both plots were superior to the conventional yields where synthetic N was incorporated, thus attributing much of the organic yield response to high initial soil fertility plus N additions from cover crops. Planting N-fixing crops, such as soybean, during organic transition are generally thought to reduce risks, as transitional organic soybean yields in our study and others were equivalent to conventional yields throughout the transition and returned the highest revenue for any one crop during the transition years (11,40).

Returns to land, labor, and management across all crops were similar between conventional and organic rotations during the transition. As Hanson et al. (17) determined, the lower inherent production costs for the transitional organic rotations combined with similar organic corn and soybean yields can compensate for lower revenues from the other transitional crops. Soybean and corn returns were higher for the transitional organic rotations, whereas alfalfa competed favorably with conventional corn. The revenue drag for the transitional organic rotations was associated with the oat crop, as observed in previous research (11,17). Planting higher yielding, taller oats (higher straw yields) allowed the oat crop to be more competitive with conventional corn returns in 1999, however. From a purely economic viewpoint, choosing oat varieties based on revenue generation could make the transition years more profitable for a 3- or 4-year rotation compared to a conventional C-S rotation. Including a labor charge of $10.00/h did affect the rankings of the rotations’ returns, with the additional labor required by the transition rotations widening the gap between conventional and transition rotations, similar to findings by Hanson et al. (17). Recently, organic flax has been suggested as an alternative to an oat crop in the organic rotations. Preliminary analysis has demonstrated a return of $300/acre, comparable to certified organic soybean (6).

In summary, this study indicates that returns to organic rotations in transition are similar to conventional C-S rotations, with the potential for increased returns in the organic system when greater than conventional prices for transitional soybean crops are obtained. The small grain crop remains the key to maximum profit in the organic rotation, along with maximizing corn yield through proper varietal selection and nutrient management during the first two years of conversion to organic production. As in all areas of agricultural production, limiting costs through on-farm production of inputs, such as compost and manure, for example, will improve profitability on organic farms. Organic farmers can also improve their competitiveness through several methods: integrating all crops in their rotation with market demand; locating buyers in close proximity to the farm in order to minimize transportation costs; coordinating storage and delivery (i.e., increase storage capacity to sell into the future); and maintaining grain in ideal condition (i.e., proper moisture, temperature, and screened for insects and foreign material). Yields may be lower during the transition but organic prices and support payments have created more profitable returns for organic producers. In the European Union, government support payments significantly increased farmers’ participation in transitioning to organic production, allowing the agricultural sector to derive higher returns for organic dairy and mixed crops compared to conventional counterparts (4). Finally, organic livestock production may offer a means to mitigate risk during the transition, as organic prices can be obtained for organic livestock (41), which can be produced during the transition years if organic feed or pasture is provided. Because farmers are more likely to remain in organic farming after becoming certified organic (21), producers interested in transitioning some of their land into organic production should investigate this potential.

Literature Cited

1. Allen, P., and Kovach, M. 2000. The capitalist composition of organic: The potential of markets in fulfilling the promise of organic agriculture. Agric. Hum. Val. 17:221-232.

2. Bertschinger, L., Mouron, P., Dolega, E., Höhn, H., Holliger, E., Husistein, A., Schmid, A., Siegfried, W., Widmer, A., Zürcher, M., and Weibel, F. 2004. Ecological apple production: A comparison of organic and integrated apple-growing. Acta Hort. 638:375-385.

3. Campbell, H. 1997. Organic food exporting in New Zealand: sustainable agriculture, corporate agribusiness and globalizing food networks. Pages 51-72 in: Sustainable Rural Development. B. Kasimis and H. De Haan, eds. Ashgate Publishing Co., Burlinton, VT,

4. Colman, D. R. 2000. Comparative economics of farming systems. Pages 42-58 in: Shades of Green: a Review of UK Farming Systems. P. B. Tinker, ed. Dept. of Agric. Econ., Manchester, UK.

5. Delate, K., and Cambardella, C. 2004. Agroecosystem performance during transition to certified organic grain production. Agron. J. 96:1288-1298.

6. Delate, K., and DeWitt, J. 2004. Building a farmer-centered land grant university organic agriculture program: A Midwestern partnership. Renew. Agric. Food Syst. 19:1-12.

7. Delate, K., Cambardella, C. A., Karlen, D. L. 2002. Transition strategies for post-CRP certified organic grain production. Online. Crop Management doi:10.1094/CM-2002-0828-01-RS.

8. Delate, K., Duffy, M., and Chase, C. 2003. An economic comparison of organic and conventional grain crops in a long-term agroecological research (LTAR) site in Iowa. Am. J. Altern. Agric. 18:1-11.

9. Delate, K. M. 2002. Using an agroecological approach to farming systems research. HortTechnology 12:345-354.

10. Denison, R. F., Bryant, D. C., and Kearney, T. E. 2004. Crop yields over the first nine years of LTRAS, a long-term comparison of field crop systems in a Mediterranean climate. Field Crops Res. 86:267-277.

11. Dobbs, T. L., and Smolik, J. D. 1996. Productivity and profitability of conventional and alternative farming systems: A long-term on-farm paired comparison. J. Sust. Agric. 9:63-79.

12. Drinkwater, L. E. 2002. Cropping systems research: Reconsidering agricultural experimental approaches. HortTechnology 12:355-361.

13. Drinkwater, L. E., Wagoner, P., and Sarrantonio, M. 1998. Legume-based cropping systems have reduced carbon and nitrogen losses. Nature 396:262-265.

14. Duffy, M., and Smith, D. 1999. Estimated costs of production in Iowa - 1999. Iowa State Univ. Ext. Comm., Coll. of Agric., Iowa State Univ., Ames, IA.

15. Duffy, M., and Smith, D. 1998. Estimated costs of production in Iowa - 1998. Iowa State Univ. Ext. Comm., Coll. of Agric., Iowa State Univ., Ames, IA.

16. Hallam, D. 2003. Organic agriculture: Sustainability, markets, and policies. Pages 179-186 in: Organization for Economic Co-operation and Development (OECD), ed. OECD Workshop on Organic Agriculture, Washington, DC, September 23-26, 2002. CABI Publishing, Wallingford, UK.

17. Hanson, J. C., Lichtenberg, E., and Peters, S. E. 1997. Organic versus conventional grain production in the mid-Atlantic: An economic and farming system overview. Amer. J. Altern. Agric. 12:2-9.

18. Iowa Department of Agriculture and Land Stewardship (IDALS). 2000. Annual survey on organic production. IDALS, Des Moines, IA.

19. Iowa Department of Agriculture and Land Stewardship (IDALS). 2000. Organic certification standards-State of Iowa. IDALS, Des Moines, IA.

20. Kelly, W. C. 1990. Minimal use of synthetic fertilizers in vegetable production. HortScience 25:168-169.

21. Klonsky, K. 2000. Forces impacting the production of organic foods. Agric. Hum. Val. 17:233-243.

22. Krisoff, B. 1998. Emergence of U.S. organic agriculture - Can we compete? Am. J. Agric. Econ. 80:1130-1133.

23. Liebhardt, W. C., Andrews, R. W., Culik, M. N., Harwood, R. R., Janke, R. R., Radke, J. K., and Rieger-Schwartz, S. L. 1989. Crop production during conversion from conventional to low-input methods. Agron. J. 81:150-159.

24. MacRae, R. J., Hill, S. B., Mehuys, G. R., and Henning, J. 1990. Farm-scale agronomic and economic conversion from conventional to sustainable agriculture. Adv. Agron. 43:155-198.

25. Mäder, P., Fließach, A., Dubois, D., Gunst, L., Fried, P., and Niggli, U. 2002. Soil fertility and biodiversity in organic farming. Science 296:1694-1697.

26. Mahoney, P. R., Olson, K. D., Porter, P. M., Huggins, D. R., Perillo, C. A., and Crookston, R. K. 2004. Profitability of organic cropping systems in southwestern Minnesota. Renew. Agric. Food Syst. 19:35-46.

27. Martini, E. A., Buyer, J. S., Bryant, D. C., Hartz, T. K., and Denison, R. F. 2004. Yield increase during organic transition: improving soil quality or increasing experience? Field Crops Res. 86:255-266.

28. Organic Farming Research Foundation (OFRF). 2001. OFRF Newsletter, vol. 10. OFRF, Santa Cruz, CA.

29. Organic Trade Association (OTA). 2004. OTA Newsletter. OTA, Greenfield, MA.

30. Padel, S., Lampkin, N. H., Dabbert, S., and Foster, C. 2002. Organic farming policy in the European Union. Pages 169-194 in: Economics of Pesticides, Sustainable Food Production and Organic Food Markets, Vol. 4. D. C. Hall and L. J. Moffitt, ed. Elsevier Science Ltd., NY.

31. Pimentel, D., Hepperly, P., Hanson, J., Douds, D., Seidel, R. 2005. Environmental, energetic and economic comparisons of organic and conventional farming systems. BioScience 55:573-582.

32. Porter, P. 2003. Organic and other management strategies with two- and four-year crop rotations in Minnesota. Agron. J. 95:233-244.

33. Reganold, J. P., Glover, J. D., Andrews, P. K., and Hinman, H. R. 2001. Sustainability of three apple production systems. Nature 410:926-929.

34. Singer, J. W., Chase, C. A., and Karlen, D. L. 2003. Profitability of various corn, soybean, wheat, and alfalfa cropping systems. Online. Crop Management doi:10.1094/CM-2003-0130-01-RS.

35. Smith, E. G., Clapperton, M. J., and Blackshaw, R. E. 2004. Profitability and risk of organic production systems in the northern Great Plains. Renew. Agric. Food Syst. 19:152-158.

36. Temple, S. R., Somasco, O.A., Kirk, M., and Friedman, D. 1994. Conventional, low-input, and organic farming systems compared. Calif. Ag. 48:14-19.

37. U.S. Department of Agriculture -Agriculture Marketing Service (USDA-AMS). 2003. National Organic Program. Online. Final Rule: 7 CFR Part 205. USDA-AMS, Washington, DC.

38. U.S. Department of Agriculture, Economic Research Service (USDA-ERS). 2003. Data sets, organic production. Online. USDA-ERS, Washington, DC.

39. Vanzetti, D., and Wynen, E. 2002. Does it make sense to buy locally produced organic products? Pages 195-206 in: Economics of Pesticides, Sustainable Food Production and Organic Food Markets, Vol. 4. D. C. Hall and L. J. Moffitt, ed. Elsevier Science Ltd., NY.

40. Welsh, R. 1999. The economics of organic grain and soybean production in the midwestern United States. Policy Studies Rep. No. 13. Henry A. Wallace Inst. for Altern. Agric., Greenbelt, MD.

41. Wheatley, W. P. 2003. The natural and organic pork market: A sustainable niche for small-scale producers? A review and analysis of the evidence. Am. J. Altern. Agric. 18:18-26.

42. Wynen, E. 1997. Impact on Australian broadacre agriculture of widespread adoption of organic farming. Centre for Resource and Environmental Studies-Publication 64, Canberra, Australia.

43. Zygmont, J. 2000. Organic markets offer U.S. agriculture current and future sales opportunities. Online. USDA, Foreign Agric. Serv. (FAS). Washington, DC.