Leopold Center - Moving from conventional to organic: What is the local payoff?

4-18-07

MOVING FROM CONVENTIONAL TO ORGANIC -- WHAT IS THE LOCAL PAYOFF?

AMES, Iowa -- Does it pay locally to help farmers convert their operations from conventional to organic crop production? Iowa State University economists offer some detailed answers, using as their model the unique Woodbury County plan to provide tax abatements for producers who transition from conventional to organic farming. The newly released study shows that the potential regional economic impact of organic crop production exceeds that of conventional crop production.

In work funded by the Leopold Center for Sustainable Agriculture, David Swenson and Liesl Eathington of the ISU economics department and Craig Chase, an ISU Extension farm management field specialist, assess the potential region-wide economic impact of this major switch in production practices. They employ economic models to gauge whether the investment of public tax monies to spur the conversion will yield long-term economic benefits for the area’s population.

The project, “Determining the methods for measuring the economic and fiscal impacts associated with organic crop conversion in Iowa,” affirms existing ISU research which demonstrates that operators who choose organic methods will receive greater economic returns than those who opt for conventional practices. Next, the economic impact of that difference was measured considering all linkages with the regional economy. The study found that the economic impacts of the organic alternative were substantially larger than the conventional configuration, a significant observation for those engaged in rural and regional economic development.

Specifically, organic rotation farming produced 52 percent more gross sales revenue, 110 percent more value added, and 182 percent more labor income than from the same 1,000 acres farmed using conventional corn-soybean rotation practices. According to Swenson, “the organic alternative requires greater mechanical inputs, more labor and yields a higher return to the operators. All of these factors combine to yield greater amounts of income-based economic impacts in the study region.” These outcomes will hold up, he adds, even with the recent spike in corn prices as the spread between organic and conventional crop prices has remained relatively constant.

The analysis for the effective economic use of property tax abatements as an incentive for farmers to shift from conventional to organic production is not as promising. The study concludes that over a reasonable period of time, the county is not likely to recover the forgone property tax revenue used to fund the original program with sufficient new, economic impact-driven, property tax collections, as well as fund the county and public school services needed by additional workers (along with their household members) in all impacted economic sectors of the organic conversion. However, there may be important non-economic criteria in favor of a property tax inducement to alter farming practices. These would include environmental benefits, diversifying agricultural production, and supporting the development of organic foods production, processing, and consumption in the region.

The executive summary and full report can be found on the Leopold Center’s web site at: www.leopold.iastate.edu/research/marketing_files/woodbury.htm.