[ Editors Note: Darren made a comment to an earlier post that piqued my interest. I wrote him back asking if he would be interested in sharing his thoughts on what he sees as the future of agriculture and the role for sustainable and organic farming systems. He was kind enough to present his views in the post that follows. Considering his academic background and professional expertise, I believe he offers an important perspective for all of us to hear, especially so, to the degree that his views may be divergent from our own.—Fred ]
First, we need to define what we mean by “sustainable” and “viable.” I’ll define sustainable agriculture to mean a system of producing agricultural commodities that maintains the capacity of the resource base (natural, economic, and technological) to indefinitely continue to produce at least the quantities and qualities of products as in the past. Viability, in this context, means workable or capable of continuing (which includes economic viability as well as physical viability). Some people think of sustainability as being synonymous with “organic,” but organic may more realistically be the “upper bound” or most extreme version of “sustainable.” Here, my hope is to bridge the gap between the die-hard proponents and opponents of organic/sustainable agriculture a bit by infusing some realistic logic into the discussion of the future of agriculture.
Costs and Inputs
Let’s start with the most straightforward and most easily documented fact on organic agriculture…it just costs more. For example, a study by Shadbolt et al. in New Zealand suggested that organic dairy production in the European Union was as much as 15-25% higher than conventional dairy production, with cost differences in the U.S. potentially higher. At the same time, according to data provided by the U.S. Department of Agriculture, Economic Research Service (USDA-ERS), organic soybean production cost is around 17% higher than conventionally-grown soybeans.
In processed goods made from underlying agricultural products (like wheat, soy, and corn), these cost differentials are probably less important because the price of the commodity is but a small portion of the final product price (here, I am using cost/price interchangeably; I am assuming the cost differences are covered by price differences…more on that later). But for products like milk, eggs, and vegetables, where the cost of the raw product is a larger proportion of the final consumer price, these price differences may significantly affect their competitiveness in the consumer market.
Organic production uses fewer chemicals, and sustainable production systems are more likely (but not necessarily) to use less chemical inputs than conventional systems(for example, no-tillage crops are more “sustainable” from a water usage/soil erosion perspective, but often require more chemical inputs such as herbicides to be economically viable). But, the fact is that chemicals substitute for labor in production. Reduce the chemicals…increase the labor. Labor shortages create production problems, and further exacerbate the cost of production differentials. This greater reliance on labor, of course, is not universal across all of sustainable agriculture, but is a big enough problem that it substantially affects sustainable competitiveness relative to conventional production practices.
USDA-ERS data suggest that, at least as late as 2005, price premiums for organic produce were holding above the added cost of production relative to conventional practices, leading to increased acreage. Clearly, a major strength of the organic agriculture sector has been its rapid adaptation to consumer demand. Organic producers have taken a large financial risk to get certified through three or more years of reduced yields/profits to then receive future expected premiums. Early adopters, as always, have benefitted the most from the higher relative premiums. But, one has to wonder how long that can last. While a study in Choices magazine (PDF) suggests that demand was growing faster than supply in 2004 and there was little association between income and organic demand (a conclusion not found by other studies), recent economic events may overtake consumer demand and force a movement back toward lower-priced food. A recent report in the Wall Street Journal indicates that spending has definitely declined, which is a combination of lower overall prices, lower consumption, and consumer substitution of lower-priced foods relative to more expensive alternatives.
Organic agriculture has had a major impact on environmental attitudes across agriculture. Consider the following diagram outlining the environmental impact of cotton developed by the Keystone Group (PDF).
Here, moving toward the center is an “improvement” in that category. In all cases (energy use, land use, climate impact, irrigation use, and soil loss), cotton has improved substantially since 1987. In fact, using 2000 as the base year, cotton has improved as much as 40-60% across all categories in the most recent year studied (most agricultural products have seen a similar improvement with the notable exception of wheat which is largely due to yield lags in that crop). So, viewed from this perspective, all of agriculture appears to be becoming more environment-friendly.
Another positive impact of the organic/environmental movement has been an increased attention to nutrition and local production. A review of literature in the online magazine Medical News Today shows the extent of research that has been undertaken to evaluate the nutritional impacts of organic food. A point that appeared in the same Wall Street Journal report shows that in the last quarter, consumers shifted to what many might consider a “healthier” set of food purchases. This is a short time period for evaluation, but does suggest that consumers are thinking about eating healthier foods even in the face of a significant economic downturn. And, these data do not include food that is grown at home, which has seen a revival in recent years according to The Economist.
A popular misconception, however, is that organic farming, or even sustainable farming, is synonymous with “small farms” and “family farms.” This has been one of the biggest obfuscations by the movement and should be abandoned. I know 3,000 acre wheat farms, 16,000 acre cotton farms, as well as 150 acre vegetable farms that are all “family” farms and may or may not be corporate. A more precise definition of “non-family” farms used by the U.S. Department of Agriculture (PDF) reveals that around 2% of all farms can be classified as not being held strictly by family members. (Interestingly, where non-family farms tend to have the largest influence is in livestock and high value crops such as vegetables, which is perhaps why the organic/sustainable movement tends to encounter them more often).
The term “corporate farms” is largely created to demonize large scale production agriculture. It is “technically” correct because they are classified as a corporation for tax purposes, but the “company” consists of a father, son, and grandson…or two brothers…or a husband and wife. They are making a living and wanting good educations for their kids, they are worried about making mortgage payments and paying production loans, etc., just like everyone else. The local production benefits from small farms that many organic advocates suggest (such as supporting friends and neighbors, fresher produce, our children being able to relate with their food production processes, etc.) are real, but are achievable without demonizing other “family farmers” that do not share their zeal for cow poo on their tomatoes.
Keeping It Real
With the above in mind, it is important to keep things in perspective. As of 2005, USDA-ERS data indicated that organic farms were 0.51% of total farm acreage. And, while demand for organic food is growing, it is still only a small part of overall consumption. But, it is obvious that there is some segment of the population that has preferences for these goods and that this segment will continue to grow along with demand. Here are some things I think will contribute to the long-run success of organic/sustainable agriculture:
Focus on Information
– The quality of food labels and the strength of labeling laws is absolutely essential to successful product differentiation. Food labels that provide adequate, verifiable information (but not too much) will help consumers make decisions. Inaccurate and misleading health/nutrition/content claims are ferreted out quickly in the information age and lead to consumer cynicism about products associated with those claims.
Organic is not “THE” answer
, but it has a place in the market. The fact is that we cannot produce enough food to feed the world “organically.” But, that is not to say that reducing our environmental impact is not desirable or achievable. In fact, the cotton story above is largely based on increased productivity with the same inputs. But, to achieve these gains, we are going to have to recognize the role of biotechnology and research as well as recognize that there is a real demand for organic products.
In the broader scheme, “sustainable” may have both a more realistic opportunity a being economically viable on a larger scale as well has having a broader audience with consumers. But, how “sustainable” is defined will have a lot to do with its potential success.
A closing thought that may be a bit disheartening for some: As these markets continue to develop and mature, the laws of economics will mean that the differentials in prices between organic and conventional products will move toward the differences in the average cost of production. That is, production will eventually increase enough so that the price differences between organic and conventional equals the cost differences between the two. The overall conclusion is that while total conversion to organic production is neither viable nor sustainable, but a viable, sustainable agricultural production system most likely includes a share of organic production.
Darren Hudson is the Larry Combest Endowed Chair of Agricultural Competitiveness and the Director of the Cotton Economics Research Institute at Texas Tech University. In addition he is Farm Foundation Fellow for Globalization with the non-partisan Farm Foundation based in Chicago, IL. Hudson earned his Ph.D. in Agricultural and Applied Economics at Texas Tech University in 1997. He then worked at Mississippi State University from 1998-2008, when he returned to Texas Tech. Hudson is author of one textbook on agricultural prices and markets, over 50 refereed publications, 6 other books or chapters in books, and over 200 other publications and presentations. His main research areas are in consumer behavior and demand, policy, and international trade.