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Organic vs Conventional Banana production: Comparison of economic performance and carbon footprint

Lorenzo Giovanni Bellú, Economist (ESA)Louis Bockel, Economist (ESA)Uwe Grewer, International Consultant (ESA)Fabrizio Moscatelli, International Consultant (ESA)

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Key questionsKey questions

•Do certified banana have a lower carbon footprint?

•Which practices lower the carbon footprint while still performing in the market?

•Do certification and labelling allows for higher prices ?

•How to assess which type of banana is performing on the market ?

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The analysis method: FAO accounting tools VCA & EX-ACTThe analysis method: FAO accounting tools VCA & EX-ACT

::

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Presenting the case study Presenting the case study

we compare the economic performance and the carbon footprint of two different types of banana production

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Necessary data for the analysis (with VCA-Tool and EX-Act)Necessary data for the analysis (with VCA-Tool and EX-Act)

Production factors (labour, capital, land)

Yields of organic and conventional production practices

Physical quantities of inputs and outputs used along the

entire value chain (fuel, materials, etc.)

Data on benefits and costs of various chain actors

Prices of inputs, outputs and factors

Reference prices of carbon emissions/sequestrations and

health costs related to the use of pesticides (estimated)

Production factors (labour, capital, land)

Yields of organic and conventional production practices

Physical quantities of inputs and outputs used along the

entire value chain (fuel, materials, etc.)

Data on benefits and costs of various chain actors

Prices of inputs, outputs and factors

Reference prices of carbon emissions/sequestrations and

health costs related to the use of pesticides (estimated)

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The EX-ACT calculationThe EX-ACT calculation

Production dataFertilizerFuel and energy consumptionFurther resource use along the value chain

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Conventional Organic

Production 0.138 -0.043

Packaging & Post harvest

0.113 0.113

Transport 0.860 0.860

TOTAL 1.111 0.929

EX-ACT resultsEX-ACT results

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Inputs and OutputsInputs and Outputs

First step: Inserting input and output goods and their prices

You may also choose if the item you are considering is part of the value added and if it is a depreciation item

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Technologies: Inputs-Outputs/HaTechnologies: Inputs-Outputs/HaSecond step: creating the activities We are building two scenarios using

the VCA-Tool; the first one is the “Base scenario”, the conventional one; the second one is “scenario 1” that represents the organic production.

The two different productions have different yields and different technologies ( in terms of labour, use of fertilizers). Moreover, the conventional one produces carbon emission and health costs, and the organic one sequestrates carbon.

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Cost/Benefit Analysis at market and reference (social) pricesCost/Benefit Analysis at market and reference (social) prices

After creating the two scenarios is possible to compare them and determine the differences in terms of costs and benefits. In this analysis market prices related to carbon emissions and health costs are zero, in fact they are considered only as a social cost.

Analyzing at market prices the profits in the organic production (even if Labor Costs are higher) are higher due to:•higher prices of the outputs•lower, or even no, costs for chemicals and fertilizers

In the reference prices analysis profits are still higher, due to:•zero carbon emissions (even slight sequestration)•no health costs

The reference (social) price of the carbon emission (or sequestration ) is 5 $/T.

After creating the two scenarios is possible to compare them and determine the differences in terms of costs and benefits. In this analysis market prices related to carbon emissions and health costs are zero, in fact they are considered only as a social cost.

Analyzing at market prices the profits in the organic production (even if Labor Costs are higher) are higher due to:•higher prices of the outputs•lower, or even no, costs for chemicals and fertilizers

In the reference prices analysis profits are still higher, due to:•zero carbon emissions (even slight sequestration)•no health costs

The reference (social) price of the carbon emission (or sequestration ) is 5 $/T.

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AnswersAnswers

 Conventional

FarmOrganic

Farm

Difference in profits/losses (for organic

farm)

Profits/Losses at market prices

125,833 181,526 +44.3 %

Profits/Losses at reference prices

117,085 182,015 +55.5 %

Difference between market and reference prices

-8,748 489

Differences due to the costs of the emission/sequestration of carbon (for 60 ha banana farming unit) and the health costs.

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Conclusion remarksConclusion remarks

Results with limited data:•Organic production decreases the carbon footprint, though transportation stays the most central issue•Differential analysis on yield impacts of low emission practices needed•Organic production is economically more profitable from a social and private producer perspective•on the different Equity...•in any case vca and exact allow for further analysis ( in different situations)...•FAO is ready to assist .(to carry out further analysis) ..including equity concerns in value added distribution across agents and countries....

Results with limited data:•Organic production decreases the carbon footprint, though transportation stays the most central issue•Differential analysis on yield impacts of low emission practices needed•Organic production is economically more profitable from a social and private producer perspective•on the different Equity...•in any case vca and exact allow for further analysis ( in different situations)...•FAO is ready to assist .(to carry out further analysis) ..including equity concerns in value added distribution across agents and countries....

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ReferencesReferences

•P. Liu , FAO (2008), “Certification In The Value Chain For Fresh Fruits The Example Of

Banana Industry”

•Athukorala, Wasantha and others (2010), “Determinants of health costs due to farmers’

exposure to pesticides : an empirical analysis”

•C. B. Ochoa – B. R. Benavides (2001) “Conversión a banano orgánico: una alternativa

para la recuperación financiera de las bananeras”

•S.Smith, (2010), Institute of Development Studies, University of Sussex, Uk, “Fairtrade

bananas: a global assessment of impact”

•B. Luske (2010), Soil & More International, “Comprehensive Carbon Footprint Assessment

Dole Bananas “

•P. Liu , FAO (2008), “Certification In The Value Chain For Fresh Fruits The Example Of

Banana Industry”

•Athukorala, Wasantha and others (2010), “Determinants of health costs due to farmers’

exposure to pesticides : an empirical analysis”

•C. B. Ochoa – B. R. Benavides (2001) “Conversión a banano orgánico: una alternativa

para la recuperación financiera de las bananeras”

•S.Smith, (2010), Institute of Development Studies, University of Sussex, Uk, “Fairtrade

bananas: a global assessment of impact”

•B. Luske (2010), Soil & More International, “Comprehensive Carbon Footprint Assessment

Dole Bananas “

The VCA-Tool can be downloaded at:

http://www.fao.org/easypol

The Ex-Act tool can be downloaded at:

http://www.fao.org/tc/exact