Comparison of Long-Run Net Returns of Conventional and Organic Crop Rotations
Abstract
:1. Introduction
2. Materials and Methods
2.1. Enterprise Budgets
2.2. Downside Risk Model
3. Results
3.1. Net Returns per Acre and Break-even Prices and Yields
3.2. Trade-Off between Risk and Return
4. Discussion
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
References
- McBride, W.D.; Greene, C.; Foreman, L.; Ali, M. The Profit Potential of Certified Organic Field Crop Production; USDA-ERS: Washington, DC, USA, 2015.
- Greene, C.; Ferreira, G.; Carlson, A.; Cooke, B.; Hitaj, C. Growing Organic Demand Provides High-Value Opportunities for Many Types of Producers; USDA-ERS: Washington, DC, USA, 2017.
- Greene, C.; Vilorio, D. Lower Conventional Corn Prices and Strong Demand for Organic Livestock Feed Spurred Increased U.S. Organic Corn Production in 2016; USDA-ERS: Washington, DC, USA, 2018.
- 2017 U.S. Census of Agriculture. United States Department of Agriculture, National Agricultural Statistics Service. Available online: https://www.nass.usda.gov/AgCensus (accessed on 31 May 2020).
- Peterson, H.H.; Barkley, A.; Chacon-Cascante, A.; Kastens, T.L. The motivation for organic grain farming in the United States: Profits, lifestyle, or the environment? J. Agric. Appl. Econ. 2012, 44, 137–155. [Google Scholar] [CrossRef] [Green Version]
- Center for Farm Financial Management; University of Minnesota. FINBIN Web Site. Available online: https://finbin.umn.edu/ (accessed on 31 May 2020).
- Chase, C.; Delate, K.; Johanns, A. Making the transition from conventional to organic. Ag. Decis. Mak. Newsl. 2015, 13, 3. [Google Scholar]
- Klein, R.N.; Wilson, R.K.; Grosskopf, J.T.; Jansen, J.A. 2017 Nebraska Crop Budgets; EC-872; University of Nebraska, Institute of Agriculture and Natural Resources: Lincoln, NE, USA, 2016. [Google Scholar]
- Langemeier, M.R.; Dobbins, C.L.; Nielsen, B.; Vyn, T.; Casteel, S. 2020 Crop Cost and Return Guide; Department of Agricultural Economics, Purdue University: West Lafayette, IN, USA, 2019. [Google Scholar]
- Center for Commercial Agriculture; Purdue University. Comparison of Conventional and Organic Crop Rotations web site. Available online: https://ag.purdue.edu/commercialag/home/ (accessed on 24 July 2020).
- Kay, R.D.; Edwards, W.M.; Duffy, P.A. Farm Management, 8th ed.; McGraw-Hill: New York, NY, USA, 2016. [Google Scholar]
- Hardaker, J.B.; Huirne, R.B.M.; Anderson, J.R.; Lien, G. Coping with Risk in Agriculture, 2nd ed.; CABI Publishing: Cambridge, MA, USA, 2004. [Google Scholar]
- Tauer, L. Target MOTAD. Am. J. Agric. Econ. 1983, 65, 606–610. [Google Scholar] [CrossRef]
- Watts, M.J.; Held, L.J.; Helmers, G.A. A comparison of target MOTAD to MOTAD. Can. J. Agric. Econ. 1984, 32, 175–186. [Google Scholar] [CrossRef]
Crop | Year 1 | Years 2–10 |
---|---|---|
Conventional Corn | $3.00 | $3.60 |
Conventional Soybeans | $8.00 | $8.85 |
Conventional Wheat | $4.90 | $4.85 |
Transition Soybeans | $8.00 | $8.85 |
Transition Wheat | $4.90 | $4.85 |
Organic Corn | $6.90 | $8.30 |
Organic Soybeans | $16.80 | $18.60 |
Organic Wheat | $9.25 | $9.70 |
Crop | Year 1 (bu/acre) | Annual Increment (bu/acre) |
---|---|---|
Conventional Corn | 176.0 | 2.00 |
Conventional Soybeans | 54.0 | 0.50 |
Conventional Wheat | 77.0 | 0.35 |
Transition Soybeans | 36.3 | 0.35 |
Transition Wheat | 58.5 | 0.25 |
Organic Corn | 118.8 | 1.50 |
Organic Soybeans | 36.3 | 0.35 |
Organic Wheat | 58.5 | 0.25 |
Enterprise | Conv | Org | |
---|---|---|---|
C/S | C/S/W | C/S/W | |
Gross Revenue | 442.86 | 392.16 | 505.56 |
Variable Cost | 253.88 | 212.02 | 196.35 |
Contribution Margin | 188.97 | 180.14 | 309.21 |
Fixed Cost | 233.25 | 230.79 | 285.71 |
Earnings | −44.28 | −50.65 | 23.50 |
Net Return to Land | 115.13 | 108.75 | 182.90 |
Crop. | Base Case | C/S NR | C/S/W NR |
---|---|---|---|
Organic Crop Prices, Years 2–10 (per bushel) | |||
Corn | $8.30 | $6.82 | $6.68 |
Soybeans | $18.60 | $15.29 | $14.97 |
Wheat | $9.70 | $7.97 | $7.81 |
Transition and Organic Crop Yields, Year 1 (bushels per acre) | |||
Corn | 118.8 | 98.8 | 96.9 |
Soybeans | 36.3 | 30.2 | 29.6 |
Wheat | 58.5 | 48.7 | 47.7 |
Scenario | Expected Net Return | Negative Deviations | Conventional C/S | Conventional C/S/W | Organic C/S/W |
---|---|---|---|---|---|
1 | 182.90 | 133.73 | 0.000 | 0.000 | 1.000 |
2 | 178.51 | 125.00 | 0.065 | 0.000 | 0.935 |
3 | 173.49 | 115.00 | 0.139 | 0.000 | 0.861 |
4 | 168.46 | 105.00 | 0.213 | 0.000 | 0.787 |
5 | 163.43 | 95.00 | 0.287 | 0.000 | 0.713 |
6 | 158.40 | 85.00 | 0.362 | 0.000 | 0.638 |
7 | 153.37 | 75.00 | 0.436 | 0.000 | 0.564 |
8 | 148.35 | 65.00 | 0.510 | 0.000 | 0.490 |
9 | 143.32 | 55.00 | 0.584 | 0.000 | 0.416 |
10 | 138.29 | 45.00 | 0.658 | 0.000 | 0.342 |
11 | 133.19 | 35.00 | 0.700 | 0.031 | 0.269 |
12 | 126.92 | 25.00 | 0.224 | 0.550 | 0.226 |
C/S = 1 | 115.13 | 72.98 | 1.000 | 0.000 | 0.000 |
C/S/W = 1 | 108.75 | 99.75 | 0.000 | 1.000 | 0.000 |
Org = 1 | 182.90 | 133.73 | 0.000 | 0.000 | 1.000 |
L Org | 121.91 | 41.37 | 0.900 | 0.000 | 0.100 |
© 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Langemeier, M.R.; Fang, X.; O’Donnell, M. Comparison of Long-Run Net Returns of Conventional and Organic Crop Rotations. Sustainability 2020, 12, 7891. https://doi.org/10.3390/su12197891
Langemeier MR, Fang X, O’Donnell M. Comparison of Long-Run Net Returns of Conventional and Organic Crop Rotations. Sustainability. 2020; 12(19):7891. https://doi.org/10.3390/su12197891
Chicago/Turabian StyleLangemeier, Michael R., Xiaoyi Fang, and Michael O’Donnell. 2020. "Comparison of Long-Run Net Returns of Conventional and Organic Crop Rotations" Sustainability 12, no. 19: 7891. https://doi.org/10.3390/su12197891