Results from research work carried out for the Department for Environment, Food and Rural Affairs (Defra) by the Organic Research Group at the Institute of Rural Sciences, Aberystwyth University on the economic performance of organic farms in 2005/06 are
presented in this report.
The main aim of this work is to assess the financial performance of organic farms differentiated by farm type, in order to inform Defra policy-making with respect to economics of organic farming, and to provide a basis for assessments by farmers, advisers and other interested parties of the farm-level implications of conversion to and continued organic farming. This research builds on previous work on the economics of organic farming carried out by the Institute of Rural Sciences at Aberystwyth University (Projects OF0190, covering 1995/96 to 1998/99 and OF0189, covering 1999/00 to 2004/05).
In this report, time series financial data are shown for an identical farm sample for the 2004/05 and 2005/06 financial years, covering seven organic farm types including cropping, horticulture, lowland and LFA dairy, lowland and LFA cattle and sheep and mixed farming systems. The identical farm samples comprise farms that are present in both 2004/05 and 2005/06. The total number of organic farms for 2005/06, also referred to as
the full farm sample data, is shown alongside the identical datasets.
Summarised and detailed financial input, output, income, returns to labour and capital, liabilities and assets and some physical performance measures are presented based on current Farm Business Survey (FBS) data collection and collation guidelines1. The full samples of organic farms per robust farm type are sufficiently large to give some reasonable level of confidence in the data; however, it should be noted that the organic farm samples are not statistically representative of their type, although the results can be seen as a reasonable indication of farm income levels for comparable organic and
conventional farms. Smaller identical farm samples should be treated more cautiously as there is a possibility for outliers (especially larger farms) to have some influence on he average results.
An additional element of this work is the inclusion of comparable conventional farm data (obtained from the main FBS sample) for the farm types shown. Each organic farm within this study was matched with an appropriate cluster of conventional farms based on the resource endowment indicators for individual organic farms. Broadly speaking, the indicators included farm type, FBS region, Less Favoured Area (LFA) status, utilisable agricultural area (UAA), milk quota holding (where applicable) and farm business size. The cluster farm data were averaged for each farm type to derive the comparable conventional farm (CCF) data based on the organic farms from the identical and full farm samples.
Overall, the identical samples of organic farms showed similar or lower levels of net farm incomes for all farm types in 2005/06 than in 2004/05, with the exception of cropping farms and arable farms with field vegetables, which increased over the period. Although market conditions were starting to improve for many enterprises during this period, cost increases cancelled out many of the gains. However, compared with similar conventional farms, organic farms performed as well or better on average, and bstantially better for the cropping and mixed farm types
