WHITE PAPER - Pro-Cert...

ORGANIC OR CONVENTIONAL? YOU DECIDE.The Economic Advantages of Entering the Organic Grain Market

by Wallace Hamm, M.Sc., P.Ag Hugh Martin, M.Sc., CAA-ON WHITE PAPER

www.pro-cert.org

Revised January 2015

2 ORGANIC OR CONVENTIONAL? YOU DECIDE | The Economic Advantages of Entering the Organic Grain Market

1.0 Introduction

Senior Canadian agrologists working with experienced organic and conventional grain producers and traders and with agricultural economists compared organic and conventional grain farming systems using grain process and production costs which were considered relevant for 2015 and beyond. In assessing the relative merits of organic and conventional farming systems, the defining economic factors are relative:

• Grain prices• Grain yields• Production costs• Net returns• Capital needs and• Risks

In addition, there is a need to assess relative grain:• Market prospects• Market fundamentals• Market access• Transportation ease

Finally, there are the issues of organic:• Conversion and costs• Certification and costs• Paper work and costs• Knowledge

ORGANIC OR CONVENTIONAL?YOU DECIDEThe Economic Advantages of Entering the Organic Grain Market

by Wallace Hamm, M.Sc., P.Ag Hugh Martin, M.Sc., CAA-ON

3ORGANIC OR CONVENTIONAL? YOU DECIDE | The Economic Advantages of Entering the Organic Grain Market

2.0 Relative Grain Prices

2.1 2015 Relative Prices

The estimates for relative 2015 conventional and organic grain prices and the associated organic price advantage for Western and Eastern Canada are given in Tables 2.1 and 2.2 respectively. They are based on early 2015 interactions with Canadian grain traders and in published expert opinion. Prices are estimated for Fall 2015 harvest.

The 2015 Organic Price Advantage or grains is similar to that in 2014 and slightly higher for many crops e.g. HR Spring Wheat.

Organic prices generally are 1.5 to 3.0 times higher than those for comparable conventional prices.

Table 2.1 - 2015 Western Canadian Grain Price Estimates (Cdn $/bu)Crop Conventional Organic Organic

Advantage

Hr Spring Wheat 5.65 22.00 389%

Feed Wheat 4.50 13.00 289%

Durham 8.75 26.00 297%

Feed Barley 3.50 8.00 229%

Malt Barley 3.50 10.00 286%

Milling Oats 2.90 6.00 207%

Feed Oats 2.00 4.00 200%

Brown Flax 13.00 30.00 230%

Golden Flax 13.75 38.00 276%

Food Soybean 9.00 28.00 311%

Green Peas 8.50 15.00 176%

Feed Peas 4.40 12.00 273%

Feed Corn 4.00 11.00 275%

Hemp .075/lb 1.50/lb 200%

Lentils 13.20 34.00 258%

Rye 6.00 10.00 167%

Yellow Mustard 14.10 35.00 248%

Table 2.2 - 2015 Eastern Canadian Grain Price Estimates (Cdn $/bu)Crop Conventional Organic Organic

Advantage

Food Soybean 13.25 30.00 226%

Feed Soybean 10.75 24.00 223%

Feed Corn 4.30 12.30 286%

SR Winter Wheat 6.25 15.00 240%

Spelt -- 11.50 --

Oats 3.85 6.40 166%

Barley 3.25 9.70 298%

Prices are estimated for Fall 2015 harvest. Note: Organic grain screenings now have value!


2.2 Historic Relative Prices

Organic grain prices have always been higher than conventional prices. In the early years, (1980’s -1990’s), the organic price advantages were marginal. For example, organic HR Spring Wheat prices were $1.00 - $2.00 per bushel higher than the Canadian Wheat Board (CWB) prices. Also, organic prices for most grains were closely tied to and fluctuated with conventional prices. In the 1990 to 2000 period, the organic price advantage increased and the relationship between organic and conventional prices weakened, especially for special crops such as flax.

Relative actual grain price trends for the period 2003 to 2013 and estimates for 2014 and 2015 are given for several major crops and discussed below. In general, the organic price advantage in this thirteen year period continued to increase and the relationship between organic and conventional prices continued to weaken. In essence, organic grain price discovery became a function of organic grain supply and demand rather than a shadow of conventional price discovery trends.

The 2014 and 2015 actual and estimated organic grain prices trend substantially higher than conventional for most crops and range from 150 to 325% of conventional prices.

For the purposes of this document, three market periods are defined:1. Pre-recession – before 2008,2. Recession – 2008-2012,3. Post recession – 2013 and beyond.

2.2.1 Historic HR Spring Wheat Prices (Fig 2.2.1)

Organic Hard Red (HR) Spring Wheat prices in the early organic days (pre 2000) were marginally higher ($1 to $2/bu) than conventional Canadian Wheat Board (CWB) final prices. This margin increased after 2000, however organic wheat prices remained tied to conventional until 2008. The North American recession drastically reduced the organic advantage.

In the post-recession period to the present, organic HR Spring Wheat prices have gained full independence of conventional prices and seem to be heading for a $20 to $25/bu (400 to 500%) price advantage over conventional.

On the other hand, conventional prices during the 2003 to 2015 period have remained relatively flat with some short lived spikes, and in 2015 are at or near the cost of production.


Figure 2.2.1 – HR Spring Wheat

2.2.2 Historic Barley Prices (Fig 2.2.2)

The historic organic/conventional barley price advantage was greater than that for spring wheat and followed the same pre-recession, recession and post-recession trend. The post recession price advantage is trending to the 200 to 300% range.

Conventional prices in the 2003 to 2015 period have trended upward but in 2015 are only marginally higher than they were in 2003, are also at or near the cost of production.

Figure 2.2.2 - Barley Prices

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Conv BarleyOrganic Barley

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2.2.3 Historic Oat Prices (Fig 2.2.3)

Organic Food and Feed Oats (Figure 2.2.3) prices have trended with but were substantially higher than conventional prices prior to, during, and after the recession. Food grade oats have had slightly higher prices for both conventional and organic markets. The demand for organic food (and feed) oats since the recession has been very strong with a base price of $6/bu and spikes to $8/bu. The 200% price advantage over conventional is expected to increase with the response to the growing demand for gluten free organic oats.

Conventional prices have been and are expected to remain relatively flat, and at or near the cost of production.

Figure 2.2.3 - Oat Prices

2.2.4 Historic Flax Prices (Fig 2.2.4)

Organic brown food grade flax prices have fluctuated but have behaved independently of conventional flax prices during the 2003 to 2015 period. As a result, the organic price advantage has also fluctuated. The post-recession advantage of +/- 300% is expected to continue as the global demand for organic flax consistently exceeds supply. Organic golden flax prices are often $10-15 per bushel higher than brown flax prices. However, golden flax demand is subject to a very narrow market.

Conventional brown flax prices have trended upward since 2003 but are not significantly higher given 12 years of inflation and increased production costs.

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Conv OatsOrganic Oats

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Organic and Conventional Oats Prices

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Figure 2.2.4 – Flax Prices

2.2.5 Historic Soybean Prices (Fig 2.2.5)

Pre-recession organic feed soybean prices averaged 209% of conventional prices while organic food grade averaged 245% of conventional soybean prices. During the recession period, prices were closer but organic maintained a strong price advantage (178% for feed, and 204% for food grade organic.) Post-recession organic price trends are at or above pre-recession price advantages over conventional soybeans. Over the past ten years the premium for conventional IP food grade soybeans over conventional feed/crush soybeans has ranged from $1.50 to $3.50 per bushel (about 15 to 25%) depending on year and variety. As of January 2015, estimates for the 2015 crop are that organic feed soybean prices will be 223% of conventional feed/crush soybeans and organic food soybeans will be 226% of conventional food grade IP soybeans (including premium for IP).

Figure 2.2.5 – Soybean Prices

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Organic and Conventional Flaxseed Prices

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Conventional Soybeans (Feed/Crush)Organic Soybeans FeedOrganic Soybeans Food

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Organic and Conventional Soybean Prices

($/b

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2.2.6 Historic Corn Prices (Fig 2.2.6)

Organic grain corn prices have averaged 226% of conventional grain corn prices over the study period. During the pre-recession period, the organic price advantage was 242% over conventional. During the recession (2008 to 2012), the advantage declined to 212%; and post-recession, the advantage has increased back to 2015 estimated organic advantage of 228%. Most organic grain corn is sold as organic feed, but there may also be some additional price advantages when organic food markets are identified for high quality product.

Figure 2.2.6 – Corn Prices ($/bu)

2.2.7 Grain Screenings

Historically both organic and conventional grain screenings (dockage) were a gift to the grain trading and processing industry. This has changed in the organic sector as traders now pay for weed seeds and cracked or inferior organic grain.

The recent rapid growth in demand for and supply of organic livestock products including but not limited to organic milk, eggs and meat has created a strong organic grain screenings market. For example organic flax screenings were traded for $400/tonne in the winter of 2014/2015. Cereal grain screenings were trading at $250/tonne.

Given that weed seed production and collection is an organic artifact, the sale of weed seeds at or above the price of conventional grain is a welcome new advantage to organic agriculture.

To the best of our knowledge, conventional grain buyers are not paying for conventional grain screenings.

2.2.8 Future Relative Prices

The future relationship between organics and conventional grain prices will be determined by the future performance of the distinctly separate grain markets. The discussion of relative future organic and conventional grain markets and fundamentals and hence of relative price prospects in Sections 6.0 to 7.0 of this White Paper, strongly suggests that the organic grain price advantage firstly, will continue, secondly will continue to increase and thirdly will be less dependant on conventional grain price trends in the future.

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2.2.9 Price Discovery

Organic grain price discovery in the 2015 to 2020 period likely will be dominated by annual growth in demand greater than 10% and annual growth of supply of less than 10% as depicted below.

The plus 10% demand growth prediction is based on simple extrapolation of long term US sales data (Figure 6.1). The less than 10% growth in supply opinion is based on several facts:

1. the 36 month transition period for land going into organic dictates that substantial increases in North American grain supply due to new producer entrants cannot occur before 2017 and 2018.

2. the rate of new organic producers and new organic production acre increases in recent years has not been substantial despite the well publicized organic price and income advantages.

3.0 Relative Grain Yields

The current (2015) relative conventional and organic grain yields estimates for crops included in this study are given in Table 3.1. These estimates indicate that organic grain crop yields for all regions at this time are significantly lower than conventional equivalents. This reality is related to the fact that:

1. Organic grain crop production practices are still far from optimum while,

2. Conventional grain crop production practices at this time are above optimum and aiming for maximum levels.

The organic/conventional yield disparity is expected to narrow over time. Organic crop yields will increase as better production practices, particularly the optimum use of legume green manure crops, are more fully adopted. Conventional crop yields inevitably will decline as economics, weed, disease and insect realities force the return to optimum rather than maximum crop production practices.

Supply

Price

Demand

Fulcrum

LowerPrices

Higher Prices

< 10% Annual Growth +/- 10% Annual Growth


Organic/Conventional crop yield parity is not a necessity nor is it a goal. True sustainability of food crop production without the need for or dependence on synthetic crop production inputs – fertilizers and pesticides – is the organic farmer’s goal.

There are several “organic advantages” associated with the lower organic crop yields:1. Less grain handling and storage costs;2. Less susceptibility to disease and insect infestation;3. True sustainability.

On the issue of sustainability, it is important to note that organic yields, primarily because they depend on traditional production techniques, have fed the human race for some 14,000 years and hence have demonstrated sustainability. Current conventional crop yields on the other hand, depend on the unnatural production system of monoculture coupled with large annual synthetic fertilizer and pesticide dosages. The sustainability of this 70 year old crop production experiment/system is at best uncertain and at worst impossible.

In the final analysis, as indicated in Section 5.0 of this document, the conventional grain yield advantage is more than offset by organic price and variable cost advantages.

Table 3.1 – Current (2015) Relative Conventional and Organic Grain Yields (Bus/ac)Crop Western Canadian Soils Eastern Canada

Brown Dark Brown Thin Black

C O C O C O C O

HR Spring Wheat 30 25 40 27 50 30 -- --

SR Winter Wheat -- -- -- -- -- -- 78 44

Barley -- -- -- -- -- -- 64 51

Oats -- 50 90 55 110 65 71 57

Flax -- -- 18 15 25 18 -- --

Soybeans -- -- -- -- 35 21 47 31

Green Peas -- -- -- -- 40 25 -- --

Lentils -- 800 -- -- -- --

Corn -- -- -- -- -- -- 158 98

Canola 25 -- 33 -- 38 -- --

Estimates are for only crops used in this exercise

4.0 Relative Production Costs

The estimated relative conventional and organic grain production costs for the crop rotations in this document are given for Western and Eastern Canada in Tables 4.1 and 4.2 respectively. These are variable costs and are somewhat more conservative for both systems than generally published by government agencies. The raw data for these tables are given in Appendices A and B hereto.

As a general “Rule of Thumb”, organic variable production costs in Western Canada are one-half (50%) of conventional costs. In Eastern Canada where land costs are higher and agriculture is more intensive, organic and conventional product in costs are about the same.


Table 4.1 - Relative Production Costs - Western Canada (Cdn $ / acre)Crop Estimated Production Costs

ConventionalEstimated Production Costs

Organic

Legumes Plow-Down 60-85 60-85

HR Spring Wheat 130-150 70-90

Oats 90-120 60-78

Lentils 150-160 85-90

Green Peas 150-160 85-90

Flax -- 75-90

Canola 180-200 **

Soybeans 160 95

Table 4.2 - Relative Production Costs - Eastern Canada (Cdn $ / acre)Crop Estimated Production Costs

ConventionalEstimated Production Costs

Organic3

Winter Wheat1 300 260

Corn2 500 448

Soybeans 300 336

Notes: 1. Organic Winter Wheat is underseeded to clover 2. Organic Corn is preceded by clover plow-down 3. Work in progress

5.0 Relative Net Returns

Given the relative grain prices, yields and production costs for organic and conventional crops, relative net return estimates for grain production in Canada can be calculated. This is best done by comparing typical organic and conventional crop rotations for the same soil/climatic zone. For the purpose of this exercise, the grain production regions of Canada have been grouped into two regions:1. Western Prairie Region – Manitoba, Saskatchewan and Alberta,2. Eastern Canada – Southern Ontario,Quebec and the Maritimes.

Crop rotations for the two cropping systems are typical and basic – no frills. Net Returns = Gross Returns less Variable Operating Costs.

Note: Crop Rotation Comparison work sheets are provided in Appendix C hereto.

5.1 Western Prairie Region

In estimating the relative net returns for the Western Prairie Region of Canada, four soil/climatic zones were identified:1. Brown;2. Dark Brown;3. Thin Black, Gray Black and Gray;4. Humid Warm Thick Black (Red River Valley).


Basic and typical crop rotations were used; winter annuals and special crops such as hemp, borage, sunflowers, buckwheat, soybeans and corn, all of which would increase the organic economic advantage, were not included for Western Prairie comparisons. The value of organic grain screenings also was not included

Likewise, these comparisons do not include the impact of livestock and livestock manure which also enhances the organic advantage over conventional.

5.1.1 Brown and Dark Brown Soil Zones

Net return comparisons for continuous crop rotation on medium textured Brown and Dark Brown soil zones were made with results as recorded in Tables 5.1 to 5.4 and Figures 5A and 5B. These very realistic and typical data indicate that net return for organic grain cropping systems are more than double those for conventional systems in the semi-arid prairie region. Grain farmers in this region spend half as much and net twice as much as their conventional neighbours.

Table 5.1 – Organic Crop Yields, Costs and Returns Brown Soil Zone - 3 Year Continuous Rotation Rotation Year

Crop Yield (bus/ac)

Price ($/bus)

Variable Costs ($/ac)

Gross Returns ($/ac)

Net Returns ($/ac)

1 LegumePlow-down

--- --- 60 --- (60)

2 Spring Wheat

25 19.00 70 475 405

3 Oats 50 6.00 60 300 240

Total – 3 yrs --- 75 --- 190 775 585

Averages – 3yrs

--- 25 --- 63 258 195

Table 5.2 – Conventional Crop Yields, Costs and Returns Brown Soil Zone - 4 Year Continuous Rotation Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Canola 25 9.00 180 225 45

2 Spring Wheat

30 7.00 130 210 80

3 Lentils 1400 0.20 150 280 130

4 Spring Wheat

30 7.00 130 210 80

Total – 4 yrs --- 108 --- 590 925 335

Averages – 4 yrs

--- 27 --- 148 231 84


Figure 5A – Relative Average Return & Costs - Brown Soil Zone

Table 5.3 – Organic Crop Yields, Costs and Returns Dark Brown Soil Zone - 5 Year Continuous Rotation

Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 LegumePlow-down

--- --- 65 --- (65)

2 Flax 15 33.00 75 495 420

3 Lentils 800 0.55 85 440 355

4 Spring Wheat

27 19.00 75 513 438

5 Oats 55 6.00 65 330 265

Total – 5 yrs --- 110 --- 365 1778 1413

Averages – 5 yrs

--- 22 --- 73 356 296

Table 5.4 – Conventional Crop Yields, Costs and Returns Dark Brown Soil Zone - 6 Year Continuous Rotation Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Canola 33 9.00 190 297 107

2 Spring Wheat

40 7.00 140 280 140

3 Lentils 1500 0.20 160 300 140

4 Canola 33 9.00 190 297 107

5 Spring Wheat

40 7.00 140 280 140

6 Oats 90 3.00 120 270 150

Total – 6 yrs --- 261 --- 940 1742 784

Averages – 6yrs

--- 44 --- 157 287 131

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Gross Returns Variable Costs Net Returns

Organic Conventional

195

84

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Figure 5B - Relative Average Return & COsts - Dark Brown Soil Zone

5.1.2 Thin, Gray Black and Gray Black Soil Zones

The relative yields, prices, variable costs and net returns for organic and conventional grain cropping systems for continuous rotations on a medium textured soil in the Thin Black Soil zone are given in Tables 5.5 and 5.6 and depicted in Figure 5C.

These typical data for the more humid arable regions of Western Canada, including the Gray Black and Gray soil zones, but excluding the Red River Valley, indicate that while average annual gross returns per acre for organic systems are only slightly higher than conventional, net annual returns are more than double those of conventional cropping systems in this region.

This organic advantage primarily is related to the fact that organic prices are 2 to 3 times those of conventional, and organic variable costs are less than half of conventional variable costs.

Table 5.5 – Organic Crop Yields, Costs and Returns Thin Black, Gray Black and Gray Soil Zones - 5 Year Continuous Rotation Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Silage Pea Plow-down

--- --- 70 --- (70)

2 Flax 18 33.00 80 594 514

3 Green Peas 25 16.00 85 400 315

4 Spring Wheat

30 19.00 80 570 490

5 Oats 65 6.00 68 390 322

Total – 5 yrs.

138 --- 383 1954 1571

Averages – 5 yrs.

--- 28 --- 77 391 314

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195

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Table 5.6 – Conventional Crop Yields, Costs and Returns Thin Black, Gray Black and Gray Soil Zones - 6 Year Continuous Rotation Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Canola 38 9.00 200 342 142

2 Spring Wheat

50 6.00 150 300 150

3 Green Peas 40 9.00 160 360 200

4 Canola 38 9.00 200 342 142

5 Spring Wheat

50 6.00 150 300 150

6 Oats 110 3.00 130 330 200

Total – 6 yrs.

--- 326 --- 990 1974 984

Averages – 6 yrs.

--- 54 --- 165 329 164

Table 5C – Relative Average Returns and Costs - Thin Black, Gray Black and Gray Soil Zones

5.1.3 Humid Warm Thick Black Soil Zone (Red River Valley)

The Red River Valley, because of its unique moisture, temperature and frost free period, as well as its thick top soil layer was given special attention in this exercise. The realtive yields, prces, variable costs and net returns for medium to fine textural soils in the Red River Valley are given in Tables 5.7 and 5.8, and depicted in Figure 5D.

Soybeans replaced green peas in the comparison and both organic and conventional yields were increased over those for the drier, cooler and less fertile Thin Black soils. Variable costs for the organic cropping system were increased. Variable costs for the conventional system were left the same.

The organic advantage over conventional cropping systems for this unique region is greater than that for the drier, colder and less fertile soils of the Western Prairies. Organic farmers in the Red River Valley net twice as much per acre as their conventional neighbours and almost as much as their Eastern Canadian Organic counterparts.

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Table 5.7 – Organic Crop Yields, Costs and Returns 5 Year Continuous Rotation – Humid, Thick Black Soil Zone (Red River Valley)Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Clover Plow-down

--- --- 85 --- (85)

2 Flax 20 33.00 90 660 570

3 Soybeans 25 28.00 95 700 605

4 Spring Wheat

35 22.00 90 770 680

5 Oats/Clover 70 6.00 78 420 342

Total – 5 yrs.

150 --- 438 2550 2112

Averages – 5 yrs.

--- 30 --- 88 510 422

Table 5.8 – Conventional Crop Yields, Costs and Returns 6 Year Continuous Rotation – Humid, Thick Black Soil Zone (Red River Valley)Rotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Canola 40 9.00 200 360 160

2 Spring Wheat

55 6.00 150 330 180

3 Soybeans 40 9.00 160 360 200

4 Canola 40 9.00 200 360 160

5 Spring Wheat

55 6.00 150 330 180

6 Oats 120 3.00 130 360 230

Total – 6 yrs.

--- 350 --- 990 2100 1110

Averages – 6 yrs.

--- 58 --- 165 350 185

Figure 5D – Relative Average Return and Costs - Red River Valley

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195

84

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5.1.4 Summary - Western Prairie Region

The cost return data for organic and conventional farming systems for prairie and parkland regions of Western Canada are summarized in Table 5.9 below:

Table 5.9 Relative Costs and Returns - Organic vs. Conventional Grain Farming Systems - Western Prairie Region of Canada

Soil Zone Farming System Variable Costs($/ac)

Gross Returns($/ac)

Net Returns($/ac)

Brown Organic Conventional

63 148

258 231

195 84

Dark Brown Organic Conventional

73 157

356 287

296 131

Thin Black Organic Conventional

77165

391 329

314 164

Humid Warm Thick Black*


88 165

510 350

422 185

*Red River Valley

These numbers clearly demonstrate that the organic advantage over conventional holds true for the entire arable Western Canadian prairie and parkland region. In general, organic prairie grain farmers, regardless of their effective precipitation/soil zone, need to spend half as much per acre in order to make twice as much as their conventional neighbours.

This advantage undoubtedly is greater when exotic crops, screenings value and livestock are included in the comparison.

5.2.1 Eastern Canada

In estimating and comparing organic vs. conventional crops in the relative net returns for the Eastern Canadian grain producing areas, one soil/climatic zone was considered adequate for comparison purposes. A simple 3 year rotation – winter wheat, corn, soybeans – was considered typical for both systems. Again special crops, livestock and screenings value which would be more beneficial to the organic cropping system were not included in this exercise.

The relative yields, prices, variable costs and net return for organic and conventional grain cropping systems for continuous rotations in typical soils in Eastern Canada are given in Tables 5.10 and 5.11 and depicted in Figure 5E below.

These comparative estimates indicate that while variable costs for the two cropping systems are similar, both gross and net returns are substantially higher for organic cropping systems.

In essence, Eastern Canadian organic grain farmers need to spend about the same per acre but can make three times as much as their conventional neighbours.


Table 5.10 – Organic Crop Yields, Prices, Costs and Returns – Eastern CanadaRotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Winter Wheat1 44 15.00 401 660 259

2 Clover Plow-Down + Corn

98 12.30 574 1,205 631

3 Soybeans 31 30.00 423 930 507

Total – 3 yrs --- 173 --- 1,398 2,795 1397

Averages – 3 yrs

--- 58 --- 466 932 466

1 Underseeded to Red Clover

Table 5.11 – Conventional Crop Yields, Prices, Costs and Returns – Eastern CanadaRotation Year

Crop Yield (bus/ac)

Price ($/bus)



Net Returns ($/ac)

1 Winter Wheat1

78 6.25 353 488 165

2 Corn 158 4.30 562 679 117

3 Soybeans 47 10.75 320 505 185

Total – 3 yrs --- 283 --- 1205 1672 467

Averages – 3 yrs

--- 94 --- 402 557 155

1 Underseeded to Red Clover

Figure 5E – Relative Average Return and Costs - Red River Valley – Eastern Canada

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5.3 Canadian Relative Return Perspective

This assessment of relative net returns as summarized and depicted in Figure 5.3 clearly indicates that if you are a grain farmer located anywhere in Canada, your net return per acre in 2015 will be 2 to 3 times higher for organically grown than for conventionally grown crops. Your variable costs in Western Canada will be half those for conventionally grown crops. In Eastern Canada, your variable costs will be about the same per acre.

The East to West organic vs. conventional grain farming comparison indicates that the organic economic advantage is higher in Eastern Canada than in Western Canada. This is due to the fundamental difference in available moisture and growing season conditions which translate into higher yields and the ability to consistently grow both corn and soybeans in Eastern Canada.

When fixed costs are added into the calculation, the organic advantage is even more apparent as the fixed costs for organic farms are also substantially lower than those for conventional farms.

Figure 5.3 – Canadian Relative Net Returns and Costs – Organic vs. Convenetional Grain Production in 2015

5.4 Livestock Impact

This organic or conventional comparative economic analysis did not include the full benefits or impacts of livestock as in a mixed farming operation. Animal mnure was included as cost in the Eastern Canadian comparison but not in the Western Canadian examples. The full inclusion of livestock and animal manure benefits in this comparison undoubtedly would indicate an additional economic advantage for organic over conventional systems because:

1. Organic livestock prices consistently trend higher than conventional prices;2. The net return to manure application is substantially higher for organic cropping systems.

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BrownSoils

Thin Black,Gray Black

& Gray Soils

Humid WarmThick Black

Soils


Net

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- CD

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2015 Canadian Organic vs. Conventional - Net Returns as a Function of Soil/Climate Region

Dark BrownSoils

EasternCanada*

195

84

296

131

314

164

596

191

*works in progress


6.0 Relative Capital Needs / Costs

The land, building and equipment needs of a viable, sustainable organic farming operation are substantially less than those for a conventional farm with the same net annual returns.

Given that organic farmers can net twice as much per acre as their conventional neighbors, they need to own and rent half as much land for the same net income. Similarly, they need to own or lease half as much “steel” as their conventional counter-parts.

Then, also there is the almost complete absence of the need for fertilizer and pesticide storage, transportation and application equipment on an organic operation. This is only slightly offset by the greater need for traditional tillage equipment in organic crop production, e.g. discs for legume plow-down and light duty cultivators; rod weeders for seed-bed preparation and weed control; post emergence tine weeders and rotary hoes. Compost and manure handling systems are also needed in intensive organic crop production systems.

7.0 Relative Risk

In assessing the relative risk between organic and conventional farms, it is readily apparent that organic farmers:

1. need to spend half as much on variable costs to achieve twice the net annual returns and therefore also;

2. need to own/lease half as much land to create equivalent net incomes;

3. need to own/lease half as much infrastructure as their conventional counter-parts.

“Transitional risk” related to the 36 month transition period during which 2 crops grown organically must be sold at conventional prices (or saved for seed) and to the cost of learning how to farm organically (lehr gelt) does exist and must be considered. However, transitional costs are offset by reduced variable costs and can be minimized by gradual diversification from conventional to organic production rather than 100% “cold turkey” conversion.

8.0 Organic Conversion/Transition Considerations

There is a 36 month substance “withdrawal” or dissipation period implicit in Canadian and global organic crop production standards. (See Section 5.1.1 of CAN/CGSB-32.310-2006). Given that transitional grain yields will be lesser than conventional yields during the last two years of the transition and that conventional rather than organic prices apply during these two years, there can be a negative economic impact associated with the conversion period.

The authors of this study have not yet fully quantified this impact. Hence, the substitution of conventional prices in Tables 5.1, 5.3, 5.5, 5.7 and 5.10 of this report and the subsequent comparison of the resulting average transition year net returns with corresponding conventional data (Tables 5.2, 5.4, 5.6, 5.8 and 5.11) will provide a reasonable estimate. For example, if you eliminate the silage pea plow-down year in the organic crop rotation for Black, Gray and Gray Black (Table 5.5) and substitute conventional for organic prices, the average net return for the organic transitional year is $126/ac. The comparable average conventional net return for this soil zonal group (Table 5.6) is $164/ac. Thus, there is a two year period in which net returns are $38/ac less than conventional for this soil group.


This negative economic impact can be minimized and/or eliminated by transitional to organic strategies including but not limited to:

1. converting a portion of the cultivated land each year,2. planting alfalfa on a portion of the land as a transition crop which will boost nutrient levels and reduce

weed populations and hence increasing yields and return during the transition years3. “priming” the soil with nutrients prior to conversion (the economic benefits of this are questionable);4. saving and/or selling the transitional crop for seed.

Some preliminary estimaztes of current transportation return relative to conventional return is given in Section 8.2 and 8.3 below.

8.1 The Canadian Land Transition Rules

In Canada, transitioning from conventioanl to organic farming is subject primarily to three important rules:

1. Prohibited substances “shall not have been used for at least 36 months before the harvest of any organic crop.”

2. An assessment by a certification body must at least include one inspection of the production unit during the production in the year before field crops may be eligible for certification.

3. “In the case of an initial application for an organic certification of field crops, the application must be filed 15 months before the day in which the product is expected to be marketed.”

Rules #1 and #2 are demonstrated for four typical conversion types in Table 8.1 below. Rule #3 involves timing of the sale of the initial organic production.

Table 8.1 - The Transition Time Chart2013 2014 2015 2016 2017 2018

Eg. 1Alfalfa

Zero Substance Use > 24 months

T3 Alfalfa

Breaking & Pre-Inspection by CB

First Organic

Crop

Eg. 2Alfalfa

Zero Substance Use > 24 months

T3 Alfalfa

Breaking & Pre-Inspection by CB

First Organic

Crop

Eg. 3 T1 Canola

& Fertilizer & Pesticide (last July 15)

T2 Crop

Zero Substance Use

T3 Crop

Zero Substance Use & Pre-Inspection by CB

First Organic

Crop (Harvest after July 15)

Eg. 4 T1 Canola

& Fertilizer & Pesticide (last July 15)

T2 Crop

Zero Substance Use

T3 Crop

Zero Substance Use & Pre-Inspection by CB

First Organic

Crop (Harvest after July 15)


8.2 Transition Economics - Canadian Prairies

The historic notion that net returns during the 2nd and 3rd years (T2 & T3) of grain farm transition to organic are less than those under conventional cropping on prairie soils is subject to opinion. This notion only holds true in the worst case scenario below. Under all other scenarios, net returns during the transition periods are equal to or greater than conventional returns.

Worst Case Scenario In this scenario, T2 and T3 crops are grown organically, result in organic yields but are sold at conventional prices. The net return for organic in this scenario as determined by Hamm and Martin for the Black Soil zone of Western Canada in their White Paper (2015), is $38/ac per year less than conventional.

This scenario is somewhat unrealistic as T2 and T3 crop yields invariably are greater than long term organic rotational yields. Higher fertility and less weed competition is normal in the T2 and T3 period.

Better Case Scenario This scenario is the same as A, except that T2 and T3 yields are estimated to be 80% of conventional. The net returns for the organic transition period under Scenario B as determined by Hamm and Martin for the Thin Black Soils of Western Canada is $21/ac per year greater than conventional.

Best Case Scenario This scenario is the same as B except that T2 and T3 crops are priced 25% higher than conventional based on the assumption that a portion of T2 and T3 crops are saved for seed use in subsequent organic years. This is a sensible and common transitional scenario. The net return for the organic transition period under Scenario C for the Black prairie soils is $86/ac greater than conventional.

8.4 Transition Economics - Eastern Canada

The transition scenarios for Eastern Canadian grain farmers are different than their western counterparts.

Worst Case Scenario When cash crop rotations such as corn - soybeans – winter wheat are compared using organic yields and conventional prices, the transitional year net return is $107/ac per year less than conventional.

Better Case Scenario When lower cost crops such as oats and barley are compared using organic yields and conventional prices, the transitional net returns are $31/ac per year less than conventional.

Best Case Scenario In this scenario, some of the grain grown in the 2nd and 3rd year of transition is saved for seed use in subsequent organic years. This portion of the transitional grain is given a value closer to organic and the net returns during transition are higher than conventional.

In the alternative, alfalfa is grown to “prime” the soil for subsequent organic crops and the transitional return is the same as for conventional or better if manure is accepted as payment.


9.0 Relative Grain Market Fundamentals

In further assessing the relative merits of organic and conventional grain farming systems, it is interesting to compare market fundamentals such as i) demand, ii) method of price discovery, iii) levels of price subsidy, iv) transportation and market access sustainability, and v) health benefits .

9.1 Organic Grain Demand

The North American organic grain market is epitomized by the USA organic food sales and growth of sales data in Table 9.1 below.

Table 9.1 – USA Organic Food Sales and Growth 1998-2014

Certified organic food demand has increased steadily since data were first collected. The rate of growth in organic food (and grain) demand has exceeded 10% except for a brief period during the global recession.

At the time of writing, North American demand for domestically grown and certified organic grain exceeds supply. This situation has persisted for several years and is expected to continue for at least five more years as discussed in Section 2.2.7 of this treatise.

In assessing these and other organic market statistics for the USA, the EU, Japan and other markets, it is important to note that these data:

1. do not include demand for uncertified organic produce sold in local markets;2. do not include the demand for the so-called “Natural” foods;3. do not reflect the demand for the “free form” foods that try to capture organic markets but are not fully

organic or certified.

0

$5

$10

$15

$20

$25

$30

$35

Org

anic

Foo

d Sa

les

($B)

USA Organic Food Sales and Growth 1998 - 2014

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Ann

ual G

row

th (%

)

5

10

15

20

25

Note: 2013 and 2014 are unofficial data-based estimates


In essence, there is a substantial “latent demand” for organic food as indicated by consumer interest in non-conventionally produced food. The “Natural” food demand in the USA currently exceeds that for organic. Given consumer education, time, and historic trends, much of this latent demand is expected to shift to certified organic food labels and brands.

9.2 Conventional Grain Demand

The global conventional food and feed market can best be characterized as flat-lined with periodic spikes in demand and prices prompted by political, military and/or weather anomalies.

In essence, conventional grain farmers have been faced with ever increasing costs, and prices which have not increased with those costs.

9.3 Price Discovery Methods

Organic grain prices are determined by simple supply and demand relationships, unfettered by government intervention and competing commodity prices and investment opportunities. This is a refreshing reality when compared to the conventional grain pricing system which has become very, very complex and is subject to a host of factors other than supply and demand. Conventional corn prices in North America, for example, are highly dependent on government intervention in the “food for fuel” concept. In the latter regard, organic grain is not used, and likely will never be used for fuel.

9.4 Transportation and Market Access Issues

Organic grain movement into the regulated global market place is facilitated by equivalency arrangements with all the major importing countries. Canada now has organic equivalency agreements with USA, European Union, Switzerland, Costa Rica and Japan which allows us access to 96% of the world market for organic produce and products. These recent agreements have greatly enhanced opportunities for export to these burgeoning markets. The USA and Canadian markets operate as one market with frequent sales going either way depending on market opportunities and considerations for the value of CAN/US currency.

Rail and other grain transportation obstacles are non-existent for organic grain except for remote areas in northern Alberta.

Grain movement and market access issues have plagued conventional grain producers for decades. This issue recently has been exacerbated by the ever increasing volumes of conventional grain produced for export and the ever increasing demand for crude oil and other commodity transportation. Conventional grain prices in Canada have suffered and likely will continue to suffer because of transportation and market problems.

9.5 Relative Sustainability

Traditional (organic) agriculture has fed the human race since plants and animals were first domesticated in the “Fertile Crescent” of the Middle East some 14,000 years ago. Traditional food production systems continue to sustain a large portion of humans around the world at the time of this writing.


It is hypothesized that given:a. the discontinuation of “food for fuel”;b. the elimination of food waste;c. the rationalization of grain quantities fed to animals;

traditional/organic agriculture could sustain human beings for at least another 14,000 years.

The conventional grain production system which now depends on synthetic fertilizer derived from finite sources and pesticide technology with transient utility is now in its 70th year of existence. The long-term sustainability of this experimental model is in serious doubt. At the time of writing, there is a ground swell of reversion to traditional methods of weed and pest control necessitated by the growing resistance of weeds and pests to synthetic pesticides. Likewise, nitrogen fixation via biological processes is displacing industrial fixation due to the ever increasing cost of the latter and to negative soil and environmental impacts.

Given the above, it is reasonable to conclude that the Oscar for Long Term Sustainability of grain and food production must be awarded to organic and traditional agriculture.

As a footnote, the certified organic grain (and food) niche market is not without threat or challenge. The most persistent threat to consumer demand is the plethora of food fads and labels which distract health minded buyers. Of these, the undefined, unverified “Natural” label remains dominant. The recent advent of “Non-GMO”, a factor implicit in the organic brand, is capturing market share which ultimately will revert to the organics industry.

As a further note, contamination of organic grain and food with GMO material and pesticides is a persistent and increasing challenge. There is today a trend toward zero tolerance of any synthetic substance which is not based in science or in the reality of outdoor crop production. It is predicted that consumer education will alleviate this threat over time.

9.6 Human Health Benefits

The organic health advantage is now firmly based in science. The following Washington State University press release dated July 11, 2014, describes the result of a bench mark study:

Major study documents benefits of organic farming

PULLMAN, Wash. – The largest study of its kind has found that organic foods and crops have a suite of advantages over their conventional counterparts, including more antioxidants and fewer, less frequent pesticide residues.

The study looked at an unprecedented 343 peer-reviewed publications comparing the nutritional quality and safety of organic and conventional plant-based foods, including fruits, vegetables and grains. The study team applied sophisticated meta-analysis techniques to quantify differences between organic and non-organic foods.

Most of the publications covered in the study looked at crops grown in the same area on similar soils. This approach reduces other possible sources of variation in nutritional and safety parameters.

The British Journal of Nutrition study was led by scientists at Newcastle University in the United Kingdom.


In general, the team found that organic crops have several nutritional benefits that stem from the way the crops are produced. A plant on a conventionally managed field will typically have access to high levels of synthetic nitrogen and will marshal the extra resources into producing sugars and starches. As a result, the harvested portion of the plant will often contain lower concentrations of other nutrients, including health-promoting antioxidants.

Without the synthetic chemical pesticides applied on conventional crops, organic plants tend to produce more phenols and polyphenols to defend against pest attacks and related injuries. In people, phenols and polyphenols can help prevent diseases triggered or promoted by oxidative damage, like coronary heart disease, stroke and certain cancers.

Overall, organic crops had 18 to 69 percent higher concentrations of antioxidant compounds. The team concludes that consumers who switch to organic fruit, vegetables and cereals would get 20 to 40 percent more antioxidants. That’s the equivalent of about two extra portions of fruit and vegetables a day, with no increase in caloric intake.

While crops harvested from organically managed fields sometimes contain pesticide residues, the levels are usually 10-fold to 100-fold lower in organic food, compared to the corresponding, conventionally grown food.

“This study is telling a powerful story of how organic plant-based foods are nutritionally superior and deliver bona fide health benefits,” said Charles Benbrook, a Washington State University researcher and the lone American co-author of the paper.

In a surprising finding, the team concluded that conventional crops had roughly twice as much cadmium, a toxic heavy metal contaminant, as organic crops. The leading explanation is that certain fertilizers approved for use only on conventional farms somehow make cadmium more available to plant roots. A doubling of cadmium from food could push some individuals over safe daily intake levels.

10.0 Organic Certification and Record Keeping Considerations

10.1 Organic Certification and Cost

Neither the process nor the cost of organic certification can be considered a barrier to entering the organic niche market. Certification involves submitting an annual crop production plan to an accredited certifier and an annual inspection to verify compliance with applicable organic standards and regulations.

The cost of certification relative to the economic benefit is nominal. The cost of certifying a 1000 acre grain farm in 2015 (based on the Pro-Cert Fee Schedule) is $1.34/ac. The cost for 3000, 5000 and 10,000 acre farms is $0.96/ac, $0.88/ac and $0.83/ac respectively.

The certification costs for smaller farms are higher due to the fixed “base cost” (eg $450 for Pro-Cert clients) implicit in the annual inspection requirement in the Canadian regulation.


10.2 Record Keeping Requirements

A review of the crop production records required for compliance with Canadian and equivalent organic regulation indicates that record keeping in a 21st Century organic farm is not an onorous task. The critical components are:

1. individual field (paddock) management data – crops grown, yields, inputs and storage date;2. crop handling audit trail and chain of custody to a certified buyer – lot #’s indicating bin #’s and fields of

origin and movement to buyer or internal usage;3. farm and field maps;4. seed source, and5. input usage records.

The formats for organic farm record keeping as well as the guides to standards and regulations are provided by the certifier.

These same records are also essential for the imminent Food Bio-Security Regulations and are part and parcel of any “Sustainable”, “Verified” or Identity Preserved (IP)” system.

Record keeping is not a barrier to organic grain production in an increasingly complex regulatory environment.

11.0 Organic Production and Marketing Knowledge

The organic industry has now reached the state of maturity at which unsophisticated internet searches can access current (and historic) applied research data and crop production guidelines which are adequate and reliable for start-up as well as sustained organic crop production systems.

Likewise, there are numerous organic grain processors, handlers and trader directories readily available to assist in marketing decisions. For example, see Pro-Cert’s Brokers and Buyers Profile (available on Pro-Cert’s website www.pro-cert.org).

Also, many of the established grain buyers in Canada now have “organic agrologists” on staff to assist their suppliers with production advice and information.

Implicit in the learning (or re-learning) of traditional organic agriculture is the need for peer mentoring and networking. All the Canadian provinces/regions have organic organizations and hold annual/biannual conferences and trade shows.

The Canadian Organic Trade Association’s (COTA) mission statement in part is to provide organic stakeholders with up to date statistics in consumer demand and market access developments.

It is reasonable to conclude that production and marketing knowledge is no longer a barrier to new entrants.


Hugh Martin, M.S.c., CAA-ON

Hugh was Ontario’s organic specialist at OMAFRA for some 25 years. His many responsibilities included updates to the annual organic and conventional system budgets for the province.

He is the chair of the committee in Organic Agriculture of the Canadian General Standards Board, the agency responsible for the Canadian Organic Standard. He also inspects organic farms for Pro-Cert in his spare time.

Phone: 519-829-2141Email: [email protected]

J. Wallace Hamm, M.S.c., PAg

Wallace wears two hats; he and his son own and operate a 2000 acre grain farm in Saskatchewan which has been organic for the last 20 years.

They also own and operate Pro-Cert Organic Systems (Pro-Cert), a well recognized North American organic certification body.

He directed the Saskatchewan Soil Testing Laboratory at the University of Saskatchewan in the 1970-1982 period.

Phone: 306-382-1299Fax: 306-382-0683

Email: [email protected]

About the Authors


Appendix A Variable Crop Production Costs

Western Canadian Prairie

A1. Organic Production Costs A1.1 Brown and Dark Brown Soil Zone

1. Legume Plow-Down ($/ac) Brown Dark Brown Pre-seeding, tillage 8 8 Seed 20 22 Seeding 6 6 Plow-Down (disc) 8 8 Cultivation (x2) 13 15 Rod-weeding (x2) 5 6

Totals $55/ac $60/ac

2. Flax Production ($/ac) Brown Dark Brown Pre-Seeding, tillage 8 8 Seed (1b/ac @ $35/b) 25 30 Seeding 6 6 Pre/Post-emergence 3 3 Tine-weeding (x1) Swathing 8 8 Harvest & Trading 20 20


3. Lentil Production ($/ac) Brown Dark Brown Pre-seeding, tillage 8 8 Seed 25 30 Seeding 6 6 Tine-weeding/Rotary Hoe 5 5 Swathing 8 8 Harvest & Trading 22 22


4. Spring Wheat Production ($/ac) Brown Dark Brown Pre-Seeding, tillage 8 8 Seed (2b/ac @ $15/b) 20 25 Seeding 6 6 Tine-weeding/Rotary Hoe 8 8 Swathing 8 8 Harvest & Trading 20 20


5. Oat Production ($/ac) Brown Dark Brown Pre-Seeding, tillage 8 8 Seed 12 15 Seeding 8 8 Tine-weeding/Rotary Hoe 8 8 Swathing 8 8 Harvest & Trading 16 18


Appendix AVariable Crop Production Costs

Western Canadian Prairie


A1.2 Black Soil Zone

1. Silage Pea Plow-Down ($/ac) Thin Black Humid Warm Thin Black Pre-seeding, tillage 8 Seed (3b/ac @$8/b) 24 Seeding 6 Plow-down (disc) 10 Cultivation (x2) 16 Rod-weeding (x2) 6

Totals $70/ac $xx/ac

2. Flax Production ($/ac) Thin Black Humid Warm Thin Black Pre-Seeding, tillage 8 Seed (1b/ac @ $35/b) 35 Seeding 6 Pre/Post-emergence 3 Tine-weeding (x1) Swathing 8 Harvest & Trading 20


3. Green Pea Production ($/ac) Thin Black Humid Warm Thin Black Pre-seeding, tillage 8 Seed 30 Seeding 6 Tine-weeding/Rotary Hoe 5 Swathing 8 Harvest & Trading 22


4. Spring Wheat Production ($/ac) Thin Black Humid Warm Thin Black Pre-Seeding, tillage 8 Seed (2b/ac @ $15/b) 30 Seeding 6 Tine-weeding/Rotary Hoe 8 Swathing 8 Harvest & Trading 20


5. Oat Production ($/ac) Thin Black Humid Warm Thin Black Pre-Seeding, tillage 8 Seed 18 Seeding 8 Tine-weeding/Rotary Hoe 8 Swathing 8 Harvest & Trading 18


A2 Conventional Variable Production Costs

The Conventional Variable costs for the Western Prairie region used in this exercise were estimated by integrating data from several sources including Manitoba, Saskatchewan and Alberta provincial agricultural department publications. The variable costs for canola and spring wheat used in this document were significantly less than those stated in provincial documents.


Appendix BVariable Crop Production Costs

Eastern Canada

The following crop budgets for Eastern Canada are adapted from the 2014 Field Crop Budgets OMAFRA Publication 60 and using the 2012 Farm Custom rates for Ontario (Area 3).

Note: Typical farm custom machinery rates have been used for field activities and typical rates for other inputs such as seed, fertilizers, pesticides, drying and storage have been used. A cover crop cost has been included for each of the organic crops to pay for seed, planting and extra tillage or mowing costs. For high nitrogen requiring crops such as organic corn, wheat and spelt a cost for manure/compost (or for other soil amendments) has also been included.

Farmers should always calculate their own costs of production based on the needs of their farm and crop requirements. See also Appendix C for cropping system comparison work sheets.

B1 - Organic Soybean Crop Budgey January 2015Expenses Conventional

SoybeansSample cost/ac

Organic Soybeans

Sample cost/ac

Your Farm Budget

Seed - 200,000 seeds/ac $56.50 $64.00

Fertilizer & application $34.05

Manure, compost

Soil Maintenance (cover crop, fallow, etc) $50.00

Pesticides & application $46.90

Tillage - plowing $25.00 $25.00

Tillage - field cultivating + pack (2-3x) $40.00 $60.00

Planting $23.00 $21.00

Weed Control - harrow or rotary hoe (3x) $24.00

Weed Control - row cultivation (2x) $22.00

Weed Control - hand labour $60.00

Combining + grain buggy $41.00 $41.00

Crop Insurance $12.60 $22.70

Certification Fees $3.00

Drying $13.65 $9.57

Storage $10.07 $7.06

Trucking $9.78 $6.86

Marketing Fees $1.33 $0.93

Other

General Variable Costs

Land Rent

Interest on Operating Capital $4.60 $6.00

Total Variable Costs $314.48 $423.12 $


B2 - Organic Corn Crop Budget January 2015Expenses Conventional

CornSample cost/ac

Organic Corn

Sample cost/ac

Your Farm Budget

Seed - 32,000 Kernels $122.05 $73.05


Manure, compost $100.00

Soil Maintenance (cover crop, fallow, etc) $50.00


Tillage - plowing $25.00 $25.00

Tillage - field cultivating + pack (2-3x) $40.00 $60.00

Planting $22.00 $22.00

Weed Control - harrow or rotary hoe (2x) $16.00

Weed Control - row cultivation (2x) $22.00

Weed Control - hand labour $40.00

Combining + grain buggy $41.00 $41.00

Crop Insurance $18.90 $22.30

Certification Fees $3.00

Drying 8 points $79.48 $48.90

Storage $33.16 $20.42

Trucking $32.39 $19.95

Marketing Fees $1.61 $0.99

Other


Land Rent

Interest on Operating Capital $9.30 $9.20

Total Variable Costs $562.39 $573.82 $


B3 - Organic Spelt and Winter Wheat Crop Budget January 2015Expenses Conventional

Soft Winter Wheat

Sample cost/ac

Organic Soft Winter

WheatSample cost/ac

Organic Spelt

Sample cost/ac

Your Farm Wheat

Your Farm Spelt

Seed - Wheat 110lbs/acre | Spelt 180lbs/acre $53.00 $78.00 $90.00


Fertilizer #2

Manure, compost $100.00 $100.00

Soil Maintenance (cover crop, fallow, etc) $50.00 $50.00


Tillage - field cultivating + pack (2x) $40.00 $40.00 $40.00

Planting $23.00 $17.00 $17.00

Labour - hand weed $30.00 $30.00

Combining + grain buggy $40.00 $40.00 $40.00

Crop Insurance $11.00 $19.00 $12.00

Certification Fees $3.00 $3.00

Drying

Storage

Trucking $17.00 $10.00 $10.00

Marketing Fees ($2.00 tonne) $4.00 $2.00

Other


Land Rent

Interest on Operating Capital $9.00 $11.00 $11.00

Total Variable Costs $323.00 $401.00 $403.00 $ $


Appendix COrganic vs Conventional

Crop Rotation ComparisonWork Sheets

Use the blank tables below to compare organic and conventional grain farming costs and returns using data for your own farm.

Table 1: Organic Crop Yields, Costs and Returns 8 Year Continuous Rotation – Your FarmRotation Year Crop Yield

(bus/ac)Price

($/bus)Variable Costs

($/ac)Gross Returns

($/ac)Net Returns

($/ac)

1

2

3

4

5

6

7

8

Total – ___ yrs --- ---

Averages – ___ yrs --- ---

Table 2: Conventional Crop Yields, Costs and Returns 8 Year Continuous Rotation – Your FarmRotation Year Crop Yield

(bus/ac)Price

($/bus)Variable Costs

($/ac)Gross Returns

($/ac)Net Returns

($/ac)

1

2

3

4

5

6

7

8

Total – ___ yrs --- ---

Averages – ___ yrs --- ---


Notes:

About Pro-Cert

Pro-Cert Organic Systems Ltd. (Pro-Cert) is one of North America’s foremost certifier’s of organic products. With a client base including producers, processors and traders from across Canada and the United States of America, Pro-Cert is fast becoming one of the most prominent players in the certification field. Pro-Cert’s certification program is recognized globally providing international access to the products and brands branded “Pro-Cert Organic”.

Why Choose Pro-Cert?

Our system provides a customer friendly approach to operating within a regulated system, ensuring the integrity of your organic product and brand.

Our knowledgeable staff includes professional Food Scientists, Agrologists, Biologists and Animal Scientists, which makes our Inspection and Evaluation team unmatched in the industry.

www.pro-cert.org

Western North America Head Office:Saskatoon, Saskatchewan

Ph: 306-382-1299 email: [email protected]

Eastern North America Branch Office:Cambray, OntarioPh: 705-374-5602

email: [email protected]

Pro-Cert’s Fee Structures are all-inclusive. When you receive a quotation from Pro-Cert there are no additional inspection, membership or transaction fees. Pro-rated inspector’s travel costs are the only exception to this rule.

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