The profitability of organic production has increased in recent years past that of conventional agricultural production. For example, in organic milk production, the compensation for the farmers’ labour and equity can be triple that of conventional milk production. The better profitability of organic farms is based on the higher prices of products, the subsidies paid for organic production, the larger sizes of farms and the lower production costs, which compensate for the lower crop yields.
In 2015, the entrepreneurial income of farms engaged in conventional production was EUR 13,700 a year, while the average annual entrepreneurial income of farms engaged in organic production was nearly EUR 28,000. In organic farms, the farming family was compensated EUR 10 per hour for labour and received three per cent interest for equity invested in production activities. Farms engaged in conventional production only received half of these amounts.
Production costs are lower in organic production
The sum of the sales profits and subsidies of organic and conventional farms, i.e. their total revenue, was almost equal in size, approximately EUR 140,000. Of this sum, subsidies amounted to 50 per cent on average in organic farms, while the corresponding number for conventional farms was 31 per cent. The subsidies of organic farms included in the group ‘other crop farms’ was approximately 75 per cent, compared to 50 per cent in conventional crop farms. In dairy farms, the share of subsidies was the same in all groups, approximately 30 per cent.
In 2015, the production costs, which also include the costs arising from the farmers’ labour and equity, of organic farms amounted to approximately EUR 163,000, which was EUR 26,000 less than the production costs of conventional farms. The difference was primarily due to the cost of supplies, and to the costs of fertilizer and energy in particular. The labour costs did not differ between organic and conventional production.
The total revenue and production costs also include the value of feed produced and used at the farms. The value of feed was slightly lower in farms engaged in conventional production than in farms that are fully engaged in organic production. The difference in the value of feed is smaller between farms that are partly engaged in organic production and farms engaged in conventional production.
In conventional production, the equity ratio, i.e. the share of equity from total assets, was 73 per cent, while the equity ratio of organic production was approximately 70 per cent. Based on the reviewed data, on average, enterprises are not in debt. Due to the slightly lower equity ratio and the greater fluctuation in results, risk exposure is slightly higher in organic production than in conventional production.
Yield levels of organic farms are half those of conventional farms
Among crop farms, the average crop yield of organic farms in 2015 was roughly half that of conventional farms. The crop rotation associated with organic farming could not be taken into account in the review. No differences in the diversity of plant production were detected between production categories.
The results of the profitability calculations for organic production were based on the data from approximately 100 organic farms included in the Natural Resources Institute Finland’s profitability bookkeeping records that comprise the data of 840 bookkeeping farms. Profitability records on organic production have been produced since the 2000 financial year.
Comparison by production category is possible via the Economydoctor portal
In 2015, the average area of bookkeeping farms engaged in conventional production was approximately 60 hectares and
the area of farms receiving subsidies for organic production was one quarter larger, at 75 hectares. As the breakdown of organic and conventional farms by production type is different, the Economydoctor portal provides an opportunity to compare groups of farms by production type. In addition, starting with the 2014 financial year, organic farms have been split into fully organic farms and farms that are only partially engaged in organic production.