PRESS RELEASE

06/05/08

The costs of organic production

Organic farmers in Wales are achieving similar returns for their milk, lamb and beef despite lower yields than conventional farmers, according to the latest Farm Business Survey benchmark data, which shows production costs and margins per kg meat or per litre milk produced. However, like conventional farmers, organic beef and lamb producers are unable to cover their production costs through sales alone.

"The overall situation for lamb and beef enterprises shows some improvement compared with previous years, but the data still show how reliant farms are on support payments to cover the farm family’s own inputs to the business," said Dr Nic Lampkin, Director of Organic Centre Wales.

Output figures are typically higher for organic, reflecting the premium price achieved, while variable costs are similar, resulting in higher gross margins for organic. However overhead costs are typically higher for organic production, mainly because costs are spread over lower total yields, resulting in a similar net margin. The exception is the breeding beef enterprise, where no significant organic premium price is usually available, so that similar outputs and variable costs combined with higher overheads result in a substantially lower net margin.

The net margins shown do not include the value of the unpaid input of the farm family’s own labour, land and capital. If these are taken into account, margins for all lamb and beef enterprises, whether organic or conventional, are negative by a significant amount, more so in the case of organic because similar total costs are spread over lower total yields. However, income from agri-environment and single farm payment support is sufficient to offset this, and these receipts are higher in the organic case in part because of greater participation in agri-environment schemes, but also because the income is spread over lower total yields.

Output, costs of production and margins in pence per litre or kg liveweight, 2006/7

Source: Farm Business Survey, Aberystwyth University.

Further information:

Further information

Dr Nic Lampkin, Organic Centre Wales, Aberystwyth University, Tel. 01970 622248, e-mail nhl@aber.ac.uk.

Notes for the editor

1. A summary of the results can be downloaded from www.organic.aber.ac.uk/library/factsheets/23bencheng.pdf.

2. The Welsh Farm Business Survey (http://www.irs.aber.ac.uk/fbs/) is part of the Institute of Biological, Environmental and Rural Sciences, Aberystwyth University. The survey, financed by the Welsh Assembly Government, covers over 550 farms in Wales, 40 of which are organic. Financial and physical data and results are published by the Institute annually. The survey provides regional, national and EC policy-makers with information on economic conditions of different types and sizes of farms in Wales. Secondly, they provide farmers, farm advisors and others with comparative information essential for assessing the performance of individual farms.

3. The Institute of Biological, Environmental and Rural Sciences also reports to Defra on the overall financial performance of organic farms in England and Wales. The latest report for 2005/6 can be downloaded at: http://statistics.defra.gov.uk/esg/index/list.asp?i_id=130. The 2006/7 report is expected to be available by the end of May.

4. Organic Centre Wales is funded by the Welsh Assembly Government to provide information on organic food and farming to producers, food businesses, consumers and others. It is based at Aberystwyth University and run by a partnership consisting of the ADAS, the Organic Research Centre Elm Farm, and the Institute of Biological, Environmental and Rural Sciences at Aberystwyth University.

5. The Organic Conversion Information Service (01970 622100) is funded by WAG to provide information to producers considering conversion – an information pack and up to two free on-farm visits are available.

6. The Organic Farming Scheme is open for applications – further information can be obtained from WAG Divisional Offices and OCW. To qualify, farms need to be certified as organic by a recognised body.

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