Organic farming isn’t that much of a boon

I happen to have some in-laws in Germany who are biodynamic farmers. And they tell me that one good thing about organic farming in Germany is that you can charge more for your produce and thus the farm is more profitable. Given how much organic food costs compared to conventionally farmed food, that makes sense to me, but a study of German organic farmers indicates that the farmers aren’t the ones who reap most of the benefits.

A team of researchers from UC Davis and the University of Kiel analysed the revenues of almost 55,000 farms in Germany between 1995 and 2018. This allowed them to examine whether converting a conventional farm to an organic farm increases revenues and profitability. To do this, they compared farms that converted to a group of farms in the same state in Germany and of similar size. Here is the average revenue five years before conversion, one year before conversion and five years after conversion.

Revenues of farms converting to organic vs similar conventional farms

At first glance, the farms turning organic seem to get a real boost to their revenues, but if you look closely, that revenue boost was there already one year before they changed to organic farming practices.

A more dynamic chart shows that there was a much smaller gap and that there is a divergence in revenues between organic and conventional farms, which is not statistically significant. It seems like farmers who change to organic farming are making more money, but they still are being squeezed by distributors like supermarkets to the degree that their revenues aren’t that much higher than the revenues of conventional farmers.

To me, this looks like a case where the economic benefits of organic farming accrue to the most powerful organisations in the supply chain. And that tends to be the distributors, not the individual farmers.

Revenues of farms converting to organic vs similar conventional farms