Organic farming can be less risky than conventional farming

A recent study published in the journal Agricultural and Resource Economics Review challenges popular belief that switching to organic farming is riskier for the farmer than staying in conventional farming. The results of the study suggest that with the recent addition of Whole-Farm Revenue Protection (crop insurance), organic farms have fewer losses and can be more resilient to large losses than conventional farming. The study used financial data from grain farms in Minnesota as a measure of actual crop performance and paired that with WFRP insurance coverage to compare the riskiness of diversified farms under organic versus conventional management. Organic farms in the study were different from conventional farms in many ways, starting with the size and composition of crops in the diversified operations. Conventional farms tended to be larger than organic and comprised of more soybeans, corn and wheat, while organic farms tended to, in addition to corn and soy, include more crops like hay, sugar beets, barley, and oats. Organic farms spent less on insurance policies overall, while organic price premiums for the crops exceeded conventional. Altogether, when hypothetical insurance payouts were modeled with losses based off of actual farm performance data, organic farms had lower loss ratios than conventional farms. This suggests that organic farming is less risky, or at the very least, no more risky than conventional farming, which disputes past studies that have suggested the opposite. 


Photo Credit: Henry Be;