Economic, Social, and Environmental Benefits Associated With U.S. Organic Agriculture

This case study reviews the economic, social, and environmental benefits associated with organic agriculture in the United States. Measurable impacts are quantified by comparing indicators of benefits in counties with organic farms and counties without. Statistical differences across counties with and without organic farms provide preliminary evidence that organic farms may generate a variety of direct and indirect benefits. Of 36 indicators tested across a range of economic, social, and environmental benefits, 26 favor organic systems, three favor conventional systems, and seven are neutral. Even though organic farmers are not a large percentage of the total number of U.S. farmers, they may be influencing mainstream agriculture to shift toward greater sustainability

Benefits of U.S. organic agriculture

This case study reviews the economic, social, and environmental benefits associated with organic agriculture in the U.S. These benefits include measurable impacts and unmeasurable impacts that affect both agricultural and consumer systems in fundamental ways. Both are discussed in this study. Measurable impacts are quantified in two ways – by comparing characteristics of organic and conventional farmers and by comparing indicators of benefits in counties with organic farms and counties without. Statistical differences in counties with and without organic farms are strong evidence that organic farms need not be numerous to generate benefits. There were 1,208 counties containing 4,868 organic farms in the U.S. in 1997, the last year for which location data are available. Findings of measurable impacts include: • Organic farmers are more likely to be female, hold a college degree, and be full-time farmers. The average organic farmer is 7 years younger than the average U.S. farmer. • Retail price premiums for organic foods average 10% to 30% higher than conventional. Farm price premiums are 70% to 250% more than what conventional farmers receive. • Counties with organic farms have stronger farm economies and contribute more to local economies through total sales, net revenue, farm value, taxes paid, payroll, and purchases of fertilizer, seed, and repair and maintenance services. • Counties with organic farms have more committed farmers and give more support to rural development with higher percentages of resident full-time farmers, greater direct to consumer sales, more workers hired, and higher worker pay. • Counties with organic farms provide more bird and wildlife habitat and have lower insecticide and nematicide use. • Watersheds with organic farms and have reduced agricultural impact and lower runoff risk from nitrogen and sediment. Findings of unmeasurable impacts include: • Organic farming under current standards avoids social and economic costs such as pesticide poisonings and costs of testing for genetically engineered foods. • The market in organic foods is more efficient than for conventional foods, because prices reflect more of the cost of producing socially desirable outputs, such as clean water, as a byproduct of food production activities. This reduces the need for government intervention through taxes or subsidies to obtain these benefits. • Innovation and openness to new ideas are necessary for growth in knowledge-based organic systems, and result in rapid development and dissemination of information on nonchemical production methods that benefit all farmers. Overall, the findings of this study are surprising in the strength of support for the hypothesis that organic farming produces more benefits than conventional farming. Nearly every indicator tested across the range of economic, social, and environmental benefits favors organic systems. Even though organic farmers are not a large percentage of the total number of U.S. farmers, their influence is felt through their innovation of management techniques and leadership in meeting the organic standards.organic farming; water quality; employment; tax base; farm value; input purchase; t-test

WELFARE EFFECTS OF ECO-LABEL PROLIFERATION: TOO MUCH OF A GOOD THING?

Given that existing food eco-labels are still not well defined in consumers' experience, there is potential for new labels to generate more confusion. Consumers incur fixed costs to learn about a label's meaning. Market shares for existing certifications may be eroded by perceptions that new products are good substitutes for them. The eco-label certifier must respond with information that reduces these costs or lose consumer and producer confidence in the label. Using a model of spatial competition in attribute space, the effect of search costs and educational expenditures on market share and price for competing certifiers is simulated. The results show that educational spending and/or improvements in efficiency of educational spending increase market share when consumer search costs are positive. Underspending on consumer education reduces the price a firm is able to charge within its market niche. The consumer and producer surplus effects of new certifier entry are calculated using a simulation model of market segmentation. Under the assumptions made, segmentation reduces producer surplus while keeping consumer surplus about the same. Market prices decline due to associated search costs as share is captured from the conventional segment by eco-labels. Within segments, consumers gain at the expense of producers, even if market share is maintained by existing eco-labelers after entry of new labels, and even if consumer search costs decline.eco-labeling, market segmentation, organic agriculture, product differentiation, search costs, simulation, spatial competition, Environmental Economics and Policy, Marketing,

THE IMPORTANCE OF THE CONSERVATION SECURITY ACT TO US COMPETITIVENESS IN GLOBAL ORGANIC MARKETS

This briefing paper reviews the role that the proposed Conservation Security Act plays in improving US competitiveness in global markets for organic agriculture products. The European Union provides direct payments to organic farmers through an agri-environmental program that is considered a "Green Box policy" by the World Trade Organization and not subject to funding limits. US organic farmers are falling behind due to aggressive production conversion campaigns in the EU. The Conservation Security Act, which would pay farmers for environmentally sound practices, would counterbalance the EU subsidy program. With a level field for production support, the US organic industry could be expected to become a dominant market force in the $102 billion global organic sector.Agricultural and Food Policy, Environmental Economics and Policy, International Relations/Trade,

ATTRIBUTES OF IDEAL SOIL SUBSTITUTES: RESULTS OF A SURVEY OF DEMAND SECTORS

This paper describes preferences for attributes of ideal soil substitutes reported by industry demand segments, and relates those attributes to willingness to pay for soil substitutes. Regression results on principal components indicate that concern over product stability, safety and environmental protection induce higher willingness to pay for ideal soil products.compost, markets, principal components, product attributes, Demand and Price Analysis, Farm Management,

CONSUMER EFFECTS OF HARMONIZING INTERNATIONAL STANDARDS FOR TRADE IN ORGANIC FOODS

Even if governments agree on equivalency of organic standards across countries, consumers may still believe domestically produced organic foods are superior to imports. We simulated a partial equilibrium model of trade in organic wheat between the United States and Germany to illustrate the welfare gains and losses associated with international harmonization of organic standards. Six cases were examined - no equivalency in standards (the status quo), equivalency of standards with complete and incomplete import acceptance, exporters certifying in importing country with complete and incomplete import acceptance, and exporters paying educational costs, with incomplete import acceptance. Results demonstrate that importing country consumers are better off if they are willing to accept imports as equivalent to domestically produced organic foods. Strategies to reduce resistance such as educational programs or foreign certification add costs to production that reduce quantity traded and impose welfare losses on exporting country producers and importing country consumers.International Relations/Trade,

CONVERSION SUBSIDIES FOR ORGANIC PRODUCTION: RESULTS FROM SWEDEN AND LESSONS FOR THE UNITED STATES

Environmental and social justifications for organic conversion subsidies are as pervasive in the United States as in Europe, but national policy does not explicitly support organic agriculture. Using Sweden's experience, we analyze factors that affect whether a subsidy is required to motivate organic conversion. We use a utility difference model to compare farmers who converted before and after the subsidy. Significant factors in conversion without subsidies are greater livestock diversity and more sales outlets. Farmers requiring subsidies manage larger farms, are more concerned with organic inspection quality and adequacy of technical advice, and reside in areas with more organic farms. Results suggest that a subsidy induces mainly those already inclined toward organic agriculture to convert. Limited exposure to organic systems and a marketing and technical information infrastructure designed to support conventional agriculture restrict the potential effect of a conversion subsidy in the United States.Organic agriculture, utility difference model, public policy, Agricultural and Food Policy, Production Economics,

RECONCILING ATTITUDES AND BEHAVIOR IN ORGANIC FOOD RETAILING

For organic food to reach the average consumer will require greater penetration into conventional supermarkets. Product placement can be expanded into more stores by altering attitudes that lower the probability of selling organic foods. This study identified significant factors in the retail decision to sell organic foods and quantifies the effects of retailer attitudes on behavior. We used a probit model to quantify the effect of customer demographics, store characteristics, manager characteristics, and profitability of organic retailing on the decision to sell organic foods. The model was based on interview data collected in Atlanta, Georgia from 66 retailers who sell organic foods and 21 who do not. Our research indicates that organic education programs can be a cost-effective way to expand market penetration without requiring changes in price or cost premiums. If properly composed and targeted, such programs can alter underlying attitudes and increase the probability of selling organic foods.Marketing,

Testing Nonlinear Logit Models of Performance Effectiveness Ratings: Cooperative Extension and Organic Farmers

Survey evidence from U.S. organic farmers is evaluated to identify the factors influencing effectiveness ratings of cooperative extension advisors by organic farmers. A nonlinear logit model is specified for the ratings provided by organic producers, and critical demographic and management factors that influence the ratings are identified. The impact of the organic farmers’ status in transitioning to organic production is highlighted. The results indicate that part-time, newer adopters of organic farming methods are more likely to rate extension service providers as effective providers of information. Scenarios to predict extension effectiveness when interacting with specific groups of organic farmers are developed.cooperative extension, nonlinear logit model, organic farming, performance ratings, Agribusiness, Farm Management, Productivity Analysis, C25, Q16, Q01,

Assessing the Technical and Allocative Efficiency of Marketing Decisions by U.S. Organic Producers

We develop measures of technical and allocative efficiency of producers in marketing certified organic products. A stochastic output distance frontier and the associated revenue share equations are estimated using comprehensive U.S. data on certified organic producers. Farm-level measures of technical efficiency are calculated and factors which enhance performance are identified. Factors that systematically influence allocative efficiency are assessed. The revenue mix of organic producers is systematically inefficient as both male and female producers rely too heavily on revenue from organic markets relative to conventional outlets.organic farming, stochastic frontier, technical efficiency, allocative efficiency, Farm Management, Marketing, D21, C31, Q01,