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United States Department of Agriculture

Agricultural Research Service

Title: Profitability of Organic Cropping Systems in Southwestern Minnesota

Authors
item Mahoney, Paul - UNIVERSITY OF MINNESOTA
item Olson, Kent - UNIVERSITY OF MINNESOTA
item Porter, Paul - UNIVERSITY OF MINNESOTA
item HUGGINS, DAVID
item Perillo, Catherine - WASHINGTON STATE UNIV.
item Crookston, R - BRINGHAM YOUNG UNIV.

Submitted to: Renewable Agriculture and Food Systems
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: September 1, 2003
Publication Date: March 1, 2004
Citation: Mahoney, P.R., Olson, K.D., Porter, P.M., Huggins, D.R., Perillo, C.A., Crookston, R.K. 2004. Profitability of organic cropping systems in southwestern minnesota. Renewable Agriculture and Food System. 19:1-12.

Interpretive Summary: Currently there is interest in organic cropping systems and how they compare economically with conventional systems. This study compares the profitability and risk of long-term organic and conventional production systems in Minnesota. Three management strategies (high purchased input (HI), low purchased input (LI), and organic input (OI) and two crop sequences (corn-soybean and corn-soybean-oat/alfalfa-alfalfa) were analyze for a study established in 1989, near Lamberton Minnesota. Net returns were based on the actual field inputs, operations and yields. When all management strategies were analyzed using conventional market prices, the 4-year strategies had greater net returns than the 2-year strategies. When historical average organic price premiums were applied to corn, soybeans, and oats grown under the 4-year OI strategy, its average net return was significantly higher than the average net returns of the other management strategies which received the conventional market prices. If only half of the historical average organic premiums were received (or only half of the production received the premium), the 4-year OI strategy still had a higher average net return than other management strategies and crop sequences. Under the 2-year sequence with all input strategies receiving conventional market prices, the HI strategy dominated the OI and LI strategies. With either the full or half of the historical average organic premium, the 4- year OI strategy dominated all other input strategies and cropping sequences in the study.

Technical Abstract: This study was conducted to compare the profitability and risk of long-term organic and conventional production systems in Minnesota. Three management strategies (high purchased input (HI), low purchased input (LI), and organic input (OI) and two crop sequences (corn-soybean and corn-soybean- oat/alfalfa-alfalfa) were analyzed. Data from the Variable Input Crop Management System Study (VICMS) established in 1989, near Lamberton Minnesota, were used. Net returns were based on the actual field inputs, operations and yields. When all management strategies were analyzed using conventional market prices, the 4-year strategies had greater net returns which were statistically equal to each other but significantly greater than the 2-year strategies. When historical average organic price premiums were applied to corn, soybeans, and oats grown under the 4-year OI strategy, its average net return was significantly higher than the average net returns of fthe other management strategies which received the conventional market prices. If only half of the historical average organic premiums were received (or only half of the production received the premium), the 4-year OI strategy still had a higher average net return than other management strategies and crop sequences. With the 4-year sequence and all conventional prices, the OI strategy dominates the HI strategy by First- degree Stochastic Dominance (FSD), but there was neither FSD nor Second- degree Stochastic Dominance (SSD) between the OI and LI strategies or between the LI and HI strategies. Under the 2-year sequence with all input strategies receiving conventional market prices, the HI strategy dominated the OI and LI strategies. With either the full or half of the historical average organic premium, the 4-year OI strategy dominated all other input

Last Modified: 9/10/2014
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