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Abstract. Prior research has shown that an established organic farm can be as profitable as a conventional farm under certain circumstances However, organic farming systems often require a transition period before they are fully established after a changeover from conventional farming Yields may decrease and recover only slowly during this transition period and less profitable crop rotations may be required to establish an organic system. Previous studies have ignored the income trend during the transition phase, and comparisons of organic and conventional farms have been faulted for lack of similarity in management and other resources. The study reported here used a multiyear simulation model to investigate the trend in income of a 117-hectare crop-livestock farm in Pennsylvania (called the Kutztown farm) during this transition process. A baseline model of the Kutztown farm under conventional management (CONB) was found to earn an income (returns over cash operating cost) of $61, 900. The transitional models developed were an upper-yield case assuming no yield decline during the transition (TRANS) and a lower-yield case assuming severe yield decline in the first year after the change-over from conventional management and a subsequent linear recovery of yields over a three-year period (TRANS-L). Income was found to be severely depressed by a yield decline during the transitional phase. The first year of TRANS-L resulted in a 43% reduction in income. The scenario without a yield decline (TRANS) resulted in a 13% lower income compared to the baseline (CONB) model. Both transitional models led to an established organic situation with stable organic yields and an income of $57,400 or 7% less than under conventional management. It was found to be more profitable to sell the crops and purchase manure than to feed the crops to beef in a fattening enterprise. At small herd sizes (100 head) the reduction in income caused by the feeding operation was moderate ($1,300), but with a larger operation (213 head) the income sacrifice increased tenfold.
Several studies (summarized by Hodges, 1978; Vogtmann, 1984) indicate that farms using alternative technologies, such as those called organic, regenerative, or sustainable, can be as profitable as conventional farms under certain circumstances. However, very few U.S. farms use methods that would be characterized as "organic" according to a widely used definition (USDA, 1980: 9). One reason more farmers have not adopted organic methods is their expectation that yields and profits would be substantially reduced, at least during the transition phase, and perhaps permanently . In practice some organic farmers have found that their yields have declined, but their costs have also decreased, leaving profits unchanged or sometimes increased. In other circumstances, reduced yield leads to an even greater proportional drop in income.
Nevertheless, anecdotal "success stories" do not constitute a solid base on which farmers could plan the future of their operations. Studies comparing actual operating organic farms with conventional farms have been criticized as lacking adequate statistical controls so that differences could not be attributed solely to organic farming methods. There is very little carefully measured data on the costs, yields, and overall performance of organic farms. The present study uses an unusually complete body of data collected by the Rodale Research Center near Kutztown, Penn., on an adjacent farm that has been operated for several years with methods that are generally considered "organic. " It illustrates how such data may be analyzed by use of a multi-year simulation model to estimate the trend in income as a farm enters a transition from chemical-intensive to organic methods.
A farm's profits during the transition from chemical-intensive to organic farming methods are determined by a combination of five kinds of effects: rotation adjustment, biological transition, price, learning, and a perennial effect.
The rotation adjustment effect is the reduction in income caused by selection of crops necessary to establish an organic farm plan. Crop rotations are essential to organic farming. The reproduction cycles of various insects, disease organisms, weeds, and other pests are interrupted when different crops are grown in a particular sequence. In instances where the conventional crop mix was rather intensive and the transition involves introduction of less profitable crops such as a sod crop or small grain in place of continuous corn, for example, the financial losses in the early years of the transition can be severe. In other situations, such as starting from a conventional farming scenario featuring a diverse rotation including legumes, the rotation adjustment effect on profits may be minimal or non-existent.
The biological transition effect refers to naturel processes that tend to reduce profits by reducing yields or increasing costs as a result of shifting from dependence on chemicals to organic methods. For instance, the USDA report (1980: 16) notes:
"Farmers who had previously farmed conventionally reported that crop yields were often markedly reduced during the first several years following the shift from chemical to organic farming. During this transition, severe weed infestations often occurred and crops were sometimes difficult to establish. Occasionally the crops showed symptoms of nutrient deficiency. Farmers said that after the third or fourth year, as the crop rotations became established, yields began to increase and eventually equalled the yields they had obtained chemically."
Severity of the biological transition effect varies according to climatic and soil properties, cropping history, combinations of chemicals used, and transition strategy employed. For example, adoption of organic methods may require additional costs for practices such as cultivation to control weeds. Establishment of populations of biological pest control organisms may take several growing seasons, especially following a long history of chemical applications that has eliminated many of the naturel predators (such as specific kinds of insects, mites, nematodes, or bacteria) and other beneficial forms of life such as earthworms and birds. Positive biological impacts on profits may occur as a result of practices such as the substitution of leguminous nitrogen for purchased fertilizers and reliance on biological controls in place of chemical pesticides. These positive biological effects usually do not occur until after a transition period. The length of the biological transition phase varies depending on field conditions, often ranging from three to six years (Koepf et al., 1976; USDA, 1980). Negative biological effects on profits can be minimized through a gradual transition featuring phased reductions in chemical use combined with introduction of beneficial predators and removal of conditions and substances harmful to these organisms. Many authors (Madden, 1984; Oelhaf, 1978; Thimm, 1984; Zerger, 1984) advocate a gradual change-over from chemical-intensive to organic methods. Preuschen (1985) proposes that one-third of the farm be changed over at one time. Some farmers experience no adverse biological effects during the transition; yields may remain high (and in rare instances actually increase) and costs may not increase (in some instances actually decrease) with the adoption of organic methods.
During the transition, the farm's profits may be affected by changes in the prices of its commodities. The price effect may be positive, as in situations where "organic" produce commands a premium price. Or the effect may be negative as in situations where insect damage reduces the grade of fresh fruits or vegetables. In other instances, the price effect may be nonexistent--when commodities are sold in conventional markets at regular prices.
The learning effect is the reduction in income related to the farmer's lack of experience or information regarding organic methods. Where the organic technology is complex and risky and the farmer is inexperienced, the learning impact on profits can be formidable. But where the organic technology is relatively easy to adopt, the learning effect may be small or negligible.
Several European authors have addressed the question of how to plan a transition (Aubert, 1981; Grosch, 1985; Koepf et al., 1976; Preuschen, 1985). They all stress the importance of improving the condition of the soil, with crop rotation and manure treatment seen as keys to achieving that goal.
Koepf et al. (1976; 195) suggest that the planning process for a transition should begin with a thorough inventory of "everything on the farm including all the given conditions for production," namely:
1. the given naturel conditions
2. the interest and particular skills of the farmer
3. marketing facilities
4. economic aims, i.e., the necessary net income and also the improvement of the farm and its lasting productivity.
Several theses from Gesamthochschule Kassel, Federal Republic of Germany, have developed plans for a transition on specific existing German farms (Grimm, 1984; Kulow, 1984; Scharf, 1981/1982; Zerger, 1984). Clearly the process of planning a transition is extremely complex, involving a learning process for the farmer who often has to deal with unfamiliar production techniques and to adapt them to his or her specific circumstances. Advice of experts can be invaluable during the transition. Aubert (1981), Grosch (1985), and Preuschen (1985) agree that the help of other organic farmers and an informed extension service (where available) can be very valuable. Lack of technical information and advice regarding organic methods can be a major barrier to adoption of organic systems by significantly increasing the farmer's apprehension and uncertainty regarding the financial outcome of the transition.
Transcending the effects of rotation adjustment, biological transition, price, and learning is a long-term or perennial effect. That is, after the biological and managerial difficulties are overcome and the rotation is established, and apart from the effects of differential prices for organic commodities, there may be a long term effect on the profit of the farm. An important element of the perennial effect is the change in profits caused by changing the mix of crops grown and livestock enterprises produced on an established organic farm as compared with conventional farm management. This perennial effect may be either positive or negative, depending on whether organic farming is inherently advantageous or not from the standpoint of year-to-year profitability of the farm.
The present study emphasizes the rotational effect of the transition. The biological effect is treated by formulating two alternative scenarios regarding yield changes during the transition; input costs during the transition are assumed to be the same as in established organic farming, and conventional market prices for farm commodities are used in computing net returns. Differences in the management lever are eliminated by using production data intended to reflect equally competent and knowledgeable management in both the organic and conventional options. The perennial effect is illustrated.
The farm modeled in this study is a mixed crop and livestock farm located near Kutztown in Berks County, Penn. The 117-hectare farm mainly produces feed for a beef finishing operation. The beef feeder stock are purchased and the finish ed. cattle are sold in conventional markets. The farmer uses crop production methods compatible with the USDA definition of organic farming (USDA, 1980: 9), but the beef feeding operation is managed more conventionally. This study deals only with the crop enterprises. The Rodale Research Center's study of this farm from 1978-1982 (Culik et al., 1983) provided most of our data.
Most of the farm's land (88 out of 117 hectares) is rented from the Rodale Research Center. By rental agreement the farmer is not allowed to use chemical pesticides or herbicides on this part of the land. Except for a small amount of starter fertilizer on corn, all the nutrients are supplied by manure application and a rotation that includes legumes. Weeds on the Rodale land are controlled by means of mechanical cultivation and rotation. On the farmer's other 29 hectares of land, reduced rates of herbicides are used for weed control in corn and soybeans. Strip-cropping is used for erosion control. Tillage is with moldboard plow.
Crop rotation is the major way of maintaining productivity; the crop mix consists of about one-third row crops (corn or soybeans), one-third small grains (wheat, barley, oats and rye), and one-third hay (alfalfa or timothy/red clover). The yields of most crops are somewhat higher than state and county averages (Culik et al., 1983: 36-41).
Livestock on the farm are primarily beef that are purchased at approximately 300 kilograms and fed for 200 to 240 days. The average herd size between 1978 and 1982 was 213 head. A few chickens and hogs are also produced on the farm, in part for home consumption.
To represent variations in land productivity found on the farm, the land was divided into three categories: Land-I (35 hectares), Land-2 (29 hectares), and Land-3 (53 hectares). Land-1 is the most productive land, Land-3 has the steepest slope and is the least productive. Different yield coefficients were assigned to different land classes, based on crop history and yield data collected by the Rodale Research Center.
Two assumptions were made in this study regarding the biological transition effect. One was no reduction in yield and the other was a 30% reduction in the first year of transition followed by a linear recovery trajectory in three years. It might be argued that if the farm is operated by a very skillful manager, the yields under conventional management would be higher than the organic yields. The fact that the Kutztown farm's yields exceed county and state averages suggest that the converse argument could also be made. However, since there is no objective way to compare the farm's soil productivity with that of the county average or to select comparable yields for the different management systems on this farm, the present study initially assumed equal yields, except for hay crops. Organic alfalfa is assumed to be established with a nurse crop (a small grain), with no hay cut in the established year. After the establishment year, organic alfalfa is assumed to yield 7.5 metric tons of hay per hectare for three years of full stand. Conventional alfalfa is assumed to be established without a nurse crop, yielding 3.75 metric tons of hay per hectare in the establishment year. It is then assumed to stand for two years, yielding 7.5 metric tons per hectare per year. A similar reasoning applies for timothy/ clover .
Because the goal in this study was to maximize the farm's income during the transition, the financial impact of keeping different herd sizes (including no beef at all) was investigated. It was decided that the size of the beef fattening enterprise in the transition models would be set at the most profitable level, even if that meant eliminating beef entirely. To some observers, elimination of the beef enterprise from the farm plan may seem antithetical to the concept of organic farming. However, the purpose of this study was to determine the most profitable way this specific farm could be organized during a transition from conventional to organic methods. Many organic farms have no livestock, relying totally on legumes and purchased manure as their sources of nitrogen. Clearly this procedure is not incompatible with the USDA definition of organic farming. It would be unrealistic, therefore, to require the farm plan to include a beef enterprise as a source of manure at the expense of a large reduction in profit as compared with a farm plan in which the manure is purchased and the crops are sold rather than fed to an on-farm beef enterprise.
It was assumed that all crops and beef were sold into conventional markets and that chicken manure could be purchased to provide nutrients in the organic options if necessary. The enterprise budgets used in this study are based on Culik et al. (1983): 70 ff.) and on Domanico (1985).
The baseline condition of the farm was simulated assuming conventional farming methods, a model called CONB. This model permits, but does not require, that beef cattle be raised on the farm. Of course many conventional farmers produce legumes, raise livestock, and apply manure to their fields. For the purpose of the present study, the conventional version is not required to do so rather the most profitable enterprise combination is chosen so the results of the conventional and organic options would reflect comparable management skills and efficiency in operation. The constraints on the conventional crop rotations are minimal. Continuous corn is allowed on Land-1 and Land-2; continuous alfalfa is not permitted because in this location pest problems reduce yields after three years. Half of the more erodible Land-3 must be in an erosion-controlling hay crop. No soybeans are allowed on Land-3 because of the high erosion associated with this crop in steep fields.
The CONB model was constructed to answer two questions: (1) Would a profit-maximizing plan using conventional technology include any perennial crop stands (i.e. legumes) that would carry over into the first and second year of a transition? (2) Will there be a nitrogen carry-over from legume crops into the transitional period?
The transition models include a simplified connection between the years to represent the effects of legumes. Legumes not only contribute nitrogen; they also contribute to the positive effect by improving soil tilth, suppressing weeds, and interrupting the reproductive cycles of various pests and disease organisms (Kilkenny, 1984). The nitrogen carryover from legumes is often thought to be more important than the rotation effect. In the transition models, the nitrogen produced by legumes in one year is transferred as an input into the next year to fulfill nitrogen requirements of nonlegume crops. Both the amount of nitrogen transferred and the amount needed were based on figures in the Penn State Agronomy Guide [985-86, which is based on extensive experimental plot research in various locations around the state.
The other source of nitrogen on the farm is manure that can be bought or produced by on-farm livestock. In analyzing scenarios in which beef cattle are eliminated from the farm, the simulation model purchases manure as required for the farm. The nitrogen requirement constraints were introduced for every year and for every land class.
The transition models include similar requirements for potassium and phosphorus. The nutrient requirements differ for the different land classes according to the yield. The macro-nutrients (N. P. and K) can be obtained from four sources: (1) carry-over from legumes (N only); (2) purchased chicken manure; (3) manure from the cattle on the farm (which supplied N. P. and K in a different proportion and quantity compared to chicken manure); and (4) commercial fertilizer for P and K. Organic farmers prefer commercial forms of P and K that are not highly soluble (e.g., rock phosphates). Because of lack of data on the prices of such fertilizers, the same prices per pound of P and K as used by Domanico (1985) for commercial potassium and phosphorus fertilizers were assumed.
As a preliminary step in the analysis, an extreme approach to the transition was taken in an exploratory model (EXPL). It assumed that the changeover occurred throughout the whole farm in one year. As was pointed out in the literature review, this is not recommended. However, the results of the EXPL model magnified the problems and thus facilitated the construction of the transitional models; the results of EXPL were modified to form a more cautious (and realistic) gradual transition.
Two versions of the model were then developed: The first one (TRANS) incorporates an optimistic assumption that the crop yields during the transition are the same as in conventional and established organic farming. To account for the decreased yields reported by many farmers during the transition, a second version of the model was constructed (TRANS-L). TRANS-L differs from TRANS in several ways. The yields of all crops grown in the first three years are multiplied by yield adjustment factors. For all the other years the yields of TRANS and TRANS-L are equal.
For year one, the assumed yield adjustment factor is 0.7, for year two it is 0.8, and for year three it is 0.9. These factors are derived from Grosch's (1985) statement that in an unfortunate situation the yields during the transition could drop to 70 % of the conventional yield. The linear recovery was assumed by Oelhaf (1978).
Some evidence (including soybean yields of the Rodale Research Center Conversion Experiment [Dabbert, 1986]) suggests legume yields may not decline as much as non-legume yields. In fact, alfalfa and soybean yields may not decline at all. The authors considered using yield data from the Rodale Conversion Experiment (Culik et al., 1983) as the basis for yield reduction assumptions. This approach was not followed because of the high variability of the yields and the limitations in the experimental design (Dabbert, 1986: 1922). Rather, in the interest of providing a clear lower limit comparison, the TRANS-L simulation model assumes that these yield adjustment factors are the same for all crops, including legumes.
Since the amount of nitrogen fixation occurring in a legume crop is generally thought to be proportional to the biomass of the crop, the nitrogen furnished by a legume with decreased yield (i.e., in the first three years of TRANS-L) was also multiplied by the appropriate yield adjustment factor. The nitrogen needs of all crops were conservatively assumed to be the same for all the years in the TRANS-L and TRANS models.
To find the optimum (most profitable) crop rotations for the farm under established organic management for each land class, several preliminary versions of TRANS and TRANS-L were run without any requiring any organic crop rotations. Thus the most profitable crop on every land class was found. The shadow-prices (profit foregone) due to omitting crops from the simulation solution revealed the approximate order of profitability of these omitted crops. With this knowledge, the requirements of the organic systems were introduced. Several feasible organic crop rotations were formulated for each land class. These were then compared through the model's profit maximization process (linear programming) to determine the most profitable crop rotation consistent with the organic farming definition. These rotations were then entered into the transition models TRANS and TRANS-L starting from year four, the beginning of the established organic crop rotation in the model. The profits of the organic systems continue to be reduced in years four and five, because the nitrogen cycle using the legumes is only fully established in year six and subsequent years.
For the first three years of the model TRANS, the crop mix on the three different land classes was selected using good agronomic practices, while at the same time profit was maximized. For instance the proportion of organic corn following conventional corn was kept as low as possible to reduce pest problems.
The average cost of buying chicken manure during the study period was estimated to be $12.86 per metric ton, based on the price paid by the Kutztown farm operator, including the cost of hauling and spreading the manure. This study disregards any effects of manure other than the macro nutrients supplied, such as increase in organic master, micro-nutrients provided, improvement of soil structure, weed seeds introduced, or salinity. Also the effect of a slow decay of manure that contributes nitrogen in the second and subsequent years after the application was not taken into account. These omissions may understate the profitability of organic systems.
Eight years of the model are presented. This includes the three-year transition period, two intermediate years while the nitrogen cycle and income are stabilizing, and a three-year period of stabilized income. Subsequent years of the model would be identical to these lest three years in all respects.
The model CONB results in an income of $61,900 (Table 1), with "income" in this study representing returns over cash operating costs and not the income of the farm families. To reduce this to net farm income, the depreciation costs, net reductions in inventory, and overhead costs such as interest, taxes, insurance and rent must be subtracted. Family income includes net farm income plus off-farm income of various family members.
In the CONB model results, all of Land-1 and Land-2 is used for continuous corn, the most profitable crop in these land classes. On Land-3 corn is grown up to the upper limit (50% or 26.5 hectares); the other half is in alfalfa. A third of the total baseline alfalfa acreage (8.8 hectares) is in the first year of the stand on Land-3; another third is in the second year of the stand, and the remainder is in the third year of the full stand. These legume stands were carried into the first year of both of the transitional models. That means there was a nitrogen carry-over from the alfalfa grown in the baseline model CONB to the transition models only on Land-3, but none for Land-1 or Land-2.
In the transitional model TRANS, the most profitable organic crop rotation on Land-1 was found to be a wheat-soybeans-corn rotation (WHT-SB-C). On Land-2 and Land-3 the most profitable organic rotation was WHT- A - A -A - C-C , or wheat followed by three years of alfalfa and two years of corn. The resulting income is reported in Table 1.
On Land-1 the optimum organic rotation (WHT-SB-C) for year one of the transition continues to be the optimal solution for subsequent years. One third of the land class (7.7 hectares) is grown in each crop. Since it is more profitable to bu} nitrogen as chicken manure than to produce alfalfa on Land-1, the need for manure on Land-1 is 6.9 metric tons of chicken manure per hectare in the first year, and 5.6 metric tons per hectare in subsequent years (Table 2). On Land-2 the first six years show a general downward trend in the manure required, from 6.9 metric tons per hectare to 2.3 metric tons per hectare (Table 2). The only irregularity in this trend is year two, in which only 2.5 metric tons per hectare are bought. This is a result of the high proportion of soybeans in the first year of transition crop mix. The need for chicken manure for the whole farm drops by approximately a third from year one (531 metric tons) to the established organic situation in year six (348 metric tons). The total expenditure for nutrients drops by approximately 15% from the first year ($10,917) to the established organic expenditure ($9,309). Alfalfa has to be established in a small grain on Land-2; wheat is the most profitable small grain nurse crop. A third of the total area to be allocated to alfalfa on Land-2 is to be established in year one, another third in year two, and the remainder in year three. In the establishment year there is a wheat crop but no alfalfa harvest. By year four the total alfalfa area reaches its maximum for Land-2 of 14.5 hectares. This is 50% of Land-2, the amount of alfalfa determined in the optimum crop mix of the organic rotation (Figure 1).
On Land-3, the most profitable rotation throughout the transition turned out to be WHT-A-A-A-C-C. The average need for chicken manure on Land3 is 1.6 metric tons per hectare in every year. In actual practice, the farmer would apply a larger amount in fewer years, preferably on the wheat and corn.
For TRANS-L (the model version with reduced yields and a linear recovery during the transition in years 1 to 3) the same crop mix was found to be the optimum as in TRANS. However, there are large income differences between the two models in the first three years (Table 1). Reduced yields cause a greater proportionate reduction in income.
TRANS-L also differs from TRANS in some of its manure needs. In TRANS L, less nitrogen was furnished by legumes because the yields of biomass are longer. However, the requirements of the other crops were conservatively assumed to be the same as in TRANS in spite of the decreased yields during the transition years. This results in a slightly higher amount of manure purchased in year two through five for TRANS-L as compared to TRANS.
As increasing herd sizes are incorporated into the TRANS model, income declines. Expanding herd size up to 100 head reduces income by only $1,300, whereas a 213 head beef enterprise reduces income by $13,100 as compared with selling all the crops and buying manure.
A yield loss of 30%, as assumed in the first year of TRANS-L, has a serious financial impact. The trend in income from TRANS-L shows how income is reduced by the combination of the rotation adjustment effect and the biological transition effect, while TRANS (assuming no yield decline) shows only the reductions from the rotation adjustment effect. Because the two models represent the same crop rotations, the biological effect (Table 2, column 5) is estimated by subtracting the income of TRANS-L from the income of TRANS in respective years. The biological transition effect declined from $19,000 in year 1 to zero in year 6. The "rotation adjustment effect" in a given year is estimated by subtracting that year's income of the TRANS model from the income of the TRANS model in year six (column 4). This effect declined from $3,400 in year 1 to zero in year 5.
The "perennial effect" is calculated as the income from one of the transitional models after the organic rotation has been established, such as in year 6, minus the income from the conventional model (Table 1, year zero). Given the assumptions and resource endowments used in this study, the perennial effect is estimated as minus $4,500, or a 7.3% reduction in income as compared with conventional operation.
We have demonstrated the use of a multi-year simulation model to predict the income effect of a transition from conventional to organic farming. This analytical method has several advantages, particularly in its capacity to eliminate the con founding effect s of differences in management ability.
The empirical findings of this study illustrate the common knowledge that a transition to organic farming can cause severe short-term financial losses for a farm, but the magnitude of these losses (as compared to established organic farming or a continued conventional operation) can vary widely under different yield reduction scenarios (Figure 2). Losses due to the rotation-adjustment effect are most severe in a phase of reorganization before the crop rotations become fully established. During a transition which involves a shift to a less profitable rotation, these losses are unavoidable. The established organic rotation is reached on all land classes in year four, but the rotational effect on income is not completely overcome until year six of the models, when the legumes begin providing their maximum contribution to the farm's nitrogen supply. In year four and year five the nitrogen supply from the legumes is not yet fully established.
Soil erosion is not limited in this study; the conventional option earns a 7.3% higher profit, while incurring nearly twice as much soil erosion as the established organic farming option. Domanico et al. (1986) have shown that if the soil erosion on this farm was limited to an average of 5 tons per acre or less, organic farming methods would produce a higher income than conventional farming. For example, when soil erosion is limited to 3 tons per acre, the organic option earns 11% higher income than conventional. An even greater income differential occurs when overseeding of legumes into corn is included as a management strategy.
The price effect and learning effect are not applicable in this study, because it was assumed that all products were sold into conventional markets with no price differential for organic production, and that the farmer was fully capable of implementing organic methods.
It is clear that yield loss is a major factor that influences the financial viability of a farm during the transition. Unfortunately there are no clear-cut rules for maintaining a profitable yield lever. Certainly, nutrient supply is a factor; for that reason the models required an adequate supply of nitrogen, phosphorus, and potassium. Organic farmers cope with severe weed problems by additional mechanical cultivations and a diverse crop rotation. The crop rotation is also the key to avoiding pest and disease problems. If major pest or disease problems did occur during the transition phase, a practical organic farmer would probably use some chemicals--preferably the minimum effective dose of the least harmful pesticide. This emergency measure is compatible with the USDA definition of organic farming. There is some evidence (Dabbert, 1986; Grosch, 1985) that the yield reduction factors are different for different crops. Since no exact data exist for Pennsylvania, a conservative approach was taken: equal yield reduction factors for all crops have been assumed. If yields for legumes did not decline as much as those for other crops, legumes would become relatively more profitable, and would therefore tend to take the place of non-legumes in the rotations. Manure purchases would be reduced and incomes would increase as compared with those reported from TRANS-L.
CONB represents an extreme approach to conventional farming. This approach results in continuous corn on two land classes and is associated with high erosion (compare Domanico, 1985). However, it illustrates a radical change in the crop mix during the transition. This extreme approach is in large part responsible for the sharp decline in income during the transition. On Land-2 the proportion of land allocated to corn was limited so as to minimize the amount of organic corn following conventional corn in the first year of the transition models. Having organic corn following conventional corn could lead to severe yield losses resulting from pest infestations, since pesticides are not used in the organic corn (except in emergencies) and the natural predators and rotational effects would not reach their full potential until after more years of organic farming.
On Land-2 and Land-3 alfalfa cannot be established during the baseline year because of lack of a nurse crop. This delays the first harvest of a profitable alfalfa hay crop by a year. These findings illustrate Grosch's (1985) point that a transition becomes more difficult the more chemically intensive the conventional operation is. Grosch referred primarily to the biological transition effect, but his statement is also true for the rotation adjustment effect of the transition. This means it might be a successful strategy to gain a gradual transition by reducing the intensity of the conventional crop rotation before adopting the full transitional rotation. This would reduce the financial losses during the transition, but it might also longer the profit during the end of the conventional management state.
The different amounts of manure needed on the different land classes in the established organic situation (see Table 2) reflect the different proportion of legumes (especially alfalfa) in the crop mix. The absence of alfalfa in the profit maximizing rotation on Land-1 means that on good quality land, under the assumed prices and yields, it is more profitable to have a crop rotation that relies entirely on soybeans and the import of manure for nitrogen rather than to commit the land to three years of alfalfa.
Three conclusions emerge from the findings: (1) Even if there is a high proportion of alfalfa in the crop rotation, manure is still needed during the transition period to bridge the gap until the alfalfa is fully established. (2) If a crop rotation does not include a perennial legume, the need for imported nitrogen remains basically constant over the years, and (3) It is necessary to spend more on nutrients during the transition period than in the established organic farming situation.
The results of TRANS when beef is introduced into the programming model indicate that the beef feeding enterprise was not the most profitable use of resources under the circumstances of the Kutztown farm. For small sizes of beef herd, the decrease in income is moderate. If the farmer fattens 100 head of beef, the income in the established organic situation is only $1,300 longer than without beef (Table 3), whereas with 213 head, the sacrifice in income is ten times greater. Sensitivity analysis showed that the beef enterprise remains unprofitable even with substantially higher beef prices. The manure produced by the cattle as an input to the organic system is included as a positive contribution in this calculation. As with the crop enterprises, income from the beef feeding operation is calculated as the net return over cash operating cost.
As a hypothetical case study based on an actual Pennsylvania farm, this study illustrates by mathematical programming simulation how a transition from chemical-intensive to organic farming could have occurred. The hypothetical character of the study implies both strengths and weaknesses. The models are based largely but not entirely on empirical data. In the construction of the transitional models, the possibility of a decline in yields was taken into account. Both a positive and a negative borderline case were modelled. An actual transition would probably be somewhere between those extremes. Also, it is possible, though not very likely in most crops and locations, that yields might increase during and after the transition, as compared with conventional farming. If so, the income comparisons would be different, depending on variations in production costs and returns.
The study incorporates only a limited part of organic methods. It was based on data collected on a single farm. Other farms might use different enterprises successfully or might use a different production technology for similar enterprises, thus obtaining different costs, yields, and incomes.
If many farms were to attempt the transition from chemical-intensive to organic methods of production, the prices of farm commodities such as beef, corn, and wheat, as well as the cost of inputs such as manure, would be likely to change. For example, shortages of manure could drive up its price; reductions in crop yields could cause commodity prices to rise; the most profitable rotations would change as prices of commodities and inputs changes; regional and international patterns of production could be altered; the profitability of organic and conventional farming could be modified, and the pattern of farm size could be affected. All these possibilities lie beyond the scope of this study.
Ordinarily, multi-year economic models include a procedure for computing the discounted present value of several years of income, using an assumed discount rate. Because the procedure used in this study gives high priority to attainment of a meaningful and stable organic rotation, introduction of a discount rate would not change the optimal solution. It would just discount the incomes, without having any influence on any of the cropping activities. For purposes of the present study, undiscounted income is maximized. Therefore the income stream over the transitional period is not adjusted for loss of value due to inflation or for possible interest earnings on income. That is, income earned during early years of the transition is not valued higher than income in subsequent years.
This study was not designed to decide whether organic or conventional technology is more profitable. The following limitations are relevant to such a comparison:
(1) Comparisons of conventional management, the transition phase and established organic management are meaningful only if the management levels are comparable. For this reason this study used linear programming to find the most profitable combination of crops for each scenario being modeled. This approach involves approximation and judgment. For instance, yields and resource requirements for organic crop rotations during a transition phase can only be estimated because experience is limited.
(2) The assumption about equal yields in a conventional and the established organic system (in TRANS) can be criticized. As a whole the literature reports slightly longer yields on organic farms than on conventional farms (Diercks, 1983; Grosch, 1985; Vogtmann, 1984). However, in the case of corn, which plays a major role in the crop rotations on this farm, Lazarus et al. (1980) report significantly higher yields for rotational corn than for continuous corn. This is true regardless of the type of rotation and can be considered a positive rotation effect. In this study, the conventional corn is continuous and the organic corn is in a rotation. This would tend to favor the organic yields. It is possible, of course, for conventional farms to grow corn in a rotation and thereby capture the rotation benefit (in higher yields) while still using chemicals and other conventional technology. As a whole it can be said that the assumption of equal yields is a defensible one, but by no means the only one possible.
(3) On the cost side, the amounts of potassium and phosphorus assumed to be required in the transition models are the same standard replacement requirements as applied in the conventional system. These rates are higher than the literature on organic agriculture would suggest. This imposes an artificial disadvantage on the organic system, because higher amounts than usually recommended for this system are required in the present study for the sake of reaching conservative estimates for income and long-term sustainable yields. Organic farmers usually operate on the longer range of nutrient requirements and do not routinely add every year what has been taken away from the soil in crops, erosion, and leaching. In an effort to avoid adding commercial fertilizer, organic farmers try to recycle nutrients as much as possible on the farm (USDA, 1980).
(4) The optimum farm plans developed in this study break the nutrient cycle on the farm because the beef feeding enterprise is not profitable under the prices assumed in this study.
(5) While resource requirements and costs in the transition budgets are assumed to be the same as those in the established organic budgets, yields vary. However, there is a real possibility that a farmer during the transition would incur higher cost because of the need to apply pesticides in an emergency case or to do additional cultivations to fight severe weed pressure. This would further decrease profits during the transition.
(6) The output prices are assumed to be the same in conventional and organic in this study. For certain commodities, a premium price is received if they are marketed as "organically produced." This premium depends on the commodity, location, access to organic markets, and marketing skills of the farmer. If premium prices could be attained, the relative profitability of organic farming would be higher than indicated in this study.
Acknowledgements. Review comments by William Lockeretz and Neill Schaller are gratefully acknowledged. This article is Pennsylvania Agricultural Experiment Station Journal Series Number 7704.
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Citation : Dabbert Stephan, Madden Patrick, 1986, " The transition to organic agriculture : a multi-year simulation model of a Pennsylvania farm". Vol. 1, No. 3, pp. 99-107
Copyright © 1986 Reprinted with permission.
Reprinted with permission.
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