“The organic systems were giving us higher net returns, and also more stable net returns, so a banker would really like that.”
– Bob Zentner
A12-year study in semi-arid central Saskatchewan, comparing conventional, reduced tillage and organic farming, found organic was the most profitable and made the most efficient use of non-renewable energy inputs.
But take away those organic premiums – which for the purpose of the study were estimated at as high as 180 per cent of conventional – and the profitability advantage disappeared. With no premiums, organic was the worst performer of all.
“At the full price premium, the organic systems do look very good,” said Bob Zentner, the lead researcher on the study conducted at Agriculture and Agri-Food Canada’s Scott research farm, about 70 km southwest of North Battleford.
“Generally, if the premium is reduced to 70 per cent of the current level, the organic profitability advantage begins to fall away.”
Under 2007 price-expense margins, all the systems were money-makers. But for many of the years leading up to the spike in commodity prices, profits from all three ranged from meagre to non-existent. Rainfall in eight of the 12 years was much below normal.
The trial, which ran between 1996 to 2007, tested three cropping strategies in the dark brown soil region of Saskatchewan:
High input (HI), which used conventional tillage and full rates of fertilizers and pesticides; reduced input (RI), a combination of conservation tillage with integrated weed and nutrient management; and a typical organic input (OI) regime – tillage, higher seeding rates, delayed seeding, and fertility inputs in the form of legume green manures and composted manure.
The three input systems were further broken down into six-year rotations of three types that included low-diversity grain-fallow, high-diversity grains, oilseeds and pulse crops, and a diversified rotation that included annual grains and perennial forages.
The small plot data was extrapolated to match a 907-hectare farm using 2007 input costs.Netreturns averaged over the
length of the study were highest for OI, at $173 per hectare, $121 for HI, and $104 for RI.
The least-profitable combination was the RI diversified annual-perennial, which averaged a net loss of $27. Overall, the diversified systems containing forages fared poorest, mainly because of low prices for hay and the effect of drought years.
Production costs for the OI system, which averaged $234 per hectare, were 17 per cent lower than for both the HI and RI systems, mainly due to the savings from not using chemical fertilizers or pesticides.
INSULATED FROM LOSSES
The costs of organic certification and inspection, costlier seed, higher seeding rates and machinery overhead were more than offset by not having to buy the chemical fertilizers and pesticides used in the other systems.
Lower input costs, especially in bad years when crops completely failed, insulated the OI system from higher potential losses, leading to less income variability. Apart from diesel prices, the organic strategy was also protected from the spike in fertilizer prices and other inputs that began to take hold in 2007.
“The organic systems were giving us higher net returns, and also more stable net returns, so a banker would really like that,” Zentner said. “It’s kind of a win-win. Normally, to get higher income, you have to accept higher variability.”
The researchers estimated it would take five to seven years to recoup the losses incurred during the three-year certification period, but afterward the OI was more profitable than the other systems.
“It’s not all rosy. It’s a big issue to move from conventional to organic agriculture because it could take you up to nine years before you’re actually financially better off,” he said.
The dependence on price premiums for organic production for profitability poses a serious question, with some economists suggesting that a large scale switch from conventional to organic by farmers could overwhelm demand and cause premiums to disappear.
“The other issue that people don’t realize is that if we all switched over to organic agriculture, the quantity of food products that we’re producing is going to be less,” he said, adding that organic yields in the study averaged 30 to 40 per cent less than conventional.
“But if there’s less food, then the price should go up.”
There was little difference in costs between the HI and RI systems, said Zentner, because the savings in fuel, labour and machinery overhead from reduced tillage were balanced out by higher fertilizer and pesticide inputs.
Fertilizer inputs for the HI strategy were based on crop averages, while RI rates were based on soil test recommendations.
“It surprised us. We ended up putting slightly more nitrogen fertilizer on the reduced systems than the HI system. We had these green manure crops on there, but the soil test doesn’t measure the amount of nitrogen that is in the legume biomass that is returned to the soil because it measures strictly soil nitrate N,” he said.
Total energy inputs for the non-organic systems averaged 3,855 megajoules per hectare, with the organic system using 51 per cent less, again mainly because it didn’t use fertilizer or pesticides. Nitrogen fertilizer accounted for up to 70 per cent of all the energy used under both non-organic systems, while pesticides were less than 10 per cent in RI.
Fuel consumption, which at 1,025 MJ/ha was roughly the same for both the organic and conventional tillage, was 82 per cent higher than with reduced tillage, which used just 595 MJ/ha.
Energy output, a measure of the energy value of all the grain and forage production in the plots, was highest for the HI input systems, at 26,543 MJ per hectare, about 4 per cent less with RI, and 37 per cent less with OI management – a reflection of the lower yields of organic cropping systems.
The report also noted that the total energy used to grow wheat tripled between 1948 and 1981 as high-input production was adopted on Prairie farms, and that figure rose a further 28 per cent from the 1980s to 1996 as ever-larger machinery was used to replace labour and raise productivity.
Zentner said said if the research farm had been able to incorporate livestock in the organic portions of the study, it might have produced improved returns due to marketing and better manure-fertility synergies.