Agriculture Reference
In-Depth Information
Output prices and premiums
In relation to price premiums, it is important to discuss the more recent studies, as this variable
is rather dependant on time. Nieberg and Offerman (2002) reported on premium prices on
wheat, milk and beef between 1994 and 1997 in several European countries. For wheat, typical
premiums were between 50% and 200%; for dairy, between 8% and 36%; and for beef,
premiums tended to be between 20% and 30%. For the last two categories, the average
premiums were low, at least partly because some of the product was sold on the conventional
market without premiums.
Hamm
et al
.
(2004) estimated that premiums for cereals in the EU countries in 2001
reached just over 100%. For oilseeds, the premiums were recorded as 70%, for potatoes 166%
and for wine 32%.
In Australia, Halpin and Brueckner (2004, p.70) reported average price premiums of all
organic goods to be 80%. Several products scored over 100%, such as wholemeal f lour, muesli,
olive oil, spaghetti (the highest was 287%), several vegetables (beans, zucchini, carrots), hard
cheese and minced beef.
However, not all organic products are sold on the organic market, and percentages of
produce receiving a premium can vary considerably. For example, the range in Australia was
estimated to be between 10% (sheep meat) and 95% (fruit and vegetables) being sold in the
organic market in 2000 to 2001, with almost three-quarters of the total grains sold as organic,
two-thirds of beef, and half of the organic milk supply (Wynen 2003).
Profitability
A general picture emerges of lower yields and productivity per farm, lower input costs and
higher output prices on organic farms than those on conventional comparisons. The results in
the different studies included in Lampkin and Padel (1994) ranged from lower net returns in
the studies in the USA, UK and Switzerland, similar in Australia and higher in studies from
Germany, Denmark and Wales.
Inclusion of premiums is, of course, an important determinant of the results. In some
countries, such as those in Europe, premiums were more common than in others. In the Aus-
tralian study (Wynen and Edwards 1990), for example, very few farmers received premiums at
the time of the first survey in the mid-1980s. In a later study, all farmers received premiums
though the net farm returns were variable, being similar to those of conventional neighbours
in one year and considerably lower in the next (Wynen 2001). Obviously, factors other than
price premiums may be of greater significance in the total picture.
In several different studies on both arable and dairy farms in ten European countries, net
profits per hectare on organic farms were mainly within 20% of conventional farms (Nieberg
and Offermann 2002). When the measure was profit per family work unit, the results for
organic farmers were found to be similar or better than for conventional farmers. Profits varied
considerably both by locality (country) and type of enterprise. Arable organic farms in partic-
ular were doing well, though specialised, highly intensive farms were generally not profitable
under organic management. The figures included premium prices and subsidies for organic
and conventional farming, which were important contributory factors in the profit figures.
Not many data were available for horticultural, pig and poultry farms, possibly indicating that
few farmers had converted to organic management in those industries.
In a time series analysis of data for five countries (Switzerland, Germany, Austria, the
Netherlands, Denmark) between 1990 and 2001, this same study showed mainly higher profits
per hectare on organic farms. Annual results on organic and conventional farms follow very
similar patterns, indicating that outside factors such as climate, prices and policies are rather
more important for the profitability of the farm than the difference between the two systems.
