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April 18th, 2016 by sfp

Organic Economics

agri

Organic economics by Guest Writer on 14 APRIL 2016 in Commentary, Guest commentary Harn Soper, the founder of Sustainable Farm Partners, first saw the advantages of organic production when he converted his family farm. Here, he walks us through the cost advantages – and some of the risks – of converting to organic. He also explains the history of GM crops, and how the industry’s reaction to super-weeds is driving customers to organics.

Harn Soper, the founder of Sustainable Farm Partners, first saw the advantages of organic production when he converted his family farm. Here, he walks us through the cost advantages – and some of the risks – of converting to organic. He also explains the history of GM crops, and how the industry’s reaction to super-weeds is driving customers to organics.

In 2010, while managing my family’s farm in north-west Iowa, I began the transition from genetically-modified (GM) corn and soybeans to organic corn and oats. That laid the foundations for Sustainable Farm Partners (SFP), which was launched in November 2015.

Costs on our farms fell by as much as 40 percent once we were certified organic, because we didn’t need expensive patented seed or synthetic inputs. Over time our soil health will improve, further decreasing costs.

At the same time the prices we receive for our certified organic crops have increased two and threefold compared with our previous crops. In 2014, our last reported corn harvest, our organic corn sold for $12 a bushel compared with conventional GM corn selling at $3.50. In 2015 our certified organic oats sold for $7 a bushel compared with $2.85.

We plant corn with an alternating hay crop rotation of oats, alfalfa and clover. These crops command high prices and their combination mitigates weed and pest damage, as well as improving nutrient management and water retention.

As well as making a bigger profit on crops, the value of our farmland has gone up, and even outperformed the Dow Jones Industrial Average (DJIA).

From 1994 to 2014 the DJIA grew 464 percent from 3,834 to 17,823. Iowa farmland value grew 586 percent from an average $1,356 per acre to $7,943 per acre before it was even certified organic. In my experience, organic farmland commands an additional $1,000 per acre on the market.

In terms of risk, those in organic farming are similar to those faced by conventional farmers. Market demand and weather are the primary challenges, but we mitigate them in different ways.

We are able to insure against crop loss on an organic contract price of $12 a bushel rather than $3.50 per bushel. Our hay crop rotation limits water loss and soil erosion because of its density, compared with the exposed soil found between rows on a conventional GM corn and soybean rotation.

We have also found it best to focus on farmland with high quality soil where there is adequate precipitation for farming (28 to 32 inches per year) without depending on irrigation because it is generally not a sustainable water source.

The history of GM crops

The need to feed millions of soldiers during the Second World War pushed packaged food production into high gear, and when the war end, the ammonium nitrate that had been used for bombs was redirected into making fertilizer. In the 1970s, President Richard Nixon encouraged farmers to industrialize to lower the price of food and use of chemical inputs soared. In the 1990s, plant resistance to these inputs and increased food demand meant a new solution was called for.

GM corn was introduced in 1995, when the soil-living bacterium, Bacillus thuringiensis, was inserted into every GM corn plant cell, enabling it to kill pest insects. Further GM traits made corn resistant to the herbicide glyphosate, the world’s main weed-killer.

Today there are four major crop categories that are genetically modified to resist glyphosate: corn, soybeans, canola and cotton. Glyphosate is also used by many wheat farmers to kill their wheat crop early before harvest. Planting GM crops and heavy use of glyphosate certainly made farming easier, and for a while solved the weed problem

But after 20 years, new research has challenged the health and safety assumptions of GM farming. Super-weeds adapted to survive glyphosate are infesting fields. The industry’s solution is to apply more toxic herbicides.

As consumer concerns increase, organic products are now eating into non-organic food manufacturers’ profits. General Mills saw net profits plunge by 24 percent in the first quarter of 2015, in part due to competition from organic brands, and the food giant is doubling its organic purchases this year. After so many years, organic farming doesn’t have the space to grow produce that the market now demands. With key demographics like millennials, that demand is here to stay, making for a clear investment opportunity.

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