The profitability of organic farming in Europe

This paper discusses some methodological aspects important for the analysis of the economic performance of organic farming, and gives an overview of the profitability of organic farming in Europe at the farm level. On the basis of a review of current and previous studies, as well as farm accounting data, the incomes of organic and comparable conventional farms are compared, and the main factors influencing profitability, especially yields, price premia and support payments for organic fanning are discussed. The analysis shows that organic farming has been an economically interesting alternative in many European countries even though yields were generally significantly lower. One of the main determinants of profitability is the realisation of higher farm-gate prices. Premium prices could generally be realised for crop products, while for livestock products marketing was often more difficult. European Union and government support payments for organic farming as well as the design of the Common Agricultural Policy contributed to the success of the farms. While on average the profits of organic farms are very similar to those of comparable conventional farms, there was, however, a wide variation in performance within the samples and between countries and farm types. The development of profits in organic and comparable conventional farms is remarkably similar. This indicates that external, non-system inherent factors influence both farming systems in very much the same way. Comparing financially successful and less successful organic farms reveals that in organic farming too, size and cost-effectiveness of production matter.(2).