This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.
Sabine Johnson says:Why is organic produce more expensive than regular (i.e. non-organic) produce? For example, at Safeway a pound of regular Fiji Apples costs $1.99, while a pound of organic Fiji Apples costs $2.39, a pound of regular Bananas costs $0.48, compared to a pound of organic Bananas for $0.99 per pound. The price difference at other supermarkets, such as Whole Foods, tends to be even bigger.
But shouldn’t the price difference be the other way around? In order to grow regular produce, farmers use lots of expensive chemical fertilizers, pesticides and herbicides. Furthermore, in many cases they buy expensive genetically modified seeds (e.g. Monsanto’s Roundup Ready Corn). On the other hand, organic produce is supposedly grown without chemical fertilizers and pesticides, and many organic farmers say they cultivate their own seeds. Therefore the production cost of regular farmers should be higher than the production cost of organic farmers, and organic produce consequently be cheaper. Why is this not the case?
I think there are two reasons for the price difference. First, regular farmers (due to the use of fertilizers, etc.) have higher yields per acre, which translates into a lower average fixed cost, and more than makes up for the cost of fertilizers and pesticides.
Second, non-organic farming methods create a lot of externalities, for which the farmer does not have to pay. These externalities range from environmental damage such as water pollution, topsoil erosion, poisoning of insects and insect eating animals to the health risks for the consumer.
Non-organic produce is cheap due to the lack of full cost pricing: the price of regular produce does not reflect the entire cost of production as externalities are not taken into account. In contrast, the organic produce farmer does not use chemicals, therefore creates no (or few) externalities, but has lower yields per acre. Therefore the real question we should ask is: why is regular produce so cheap?
Bottom line: Lower average fixed cost combined with the lack of full cost pricing allows farmers of regular produce to sell their products for less than organic farmers.
8 comments:
You say that fertilizer leads to lower yields but you don't back up this statement (which your whole argument is based on.) In fact there has been research done to suggest that organic farming actually produces equal, and in some cases, HIGHER yields of produce.
Actually, I am saying that fertilizers DO lead to higher yields, which more than makes up for the cost of fertilizers. This is, I believe, one reason why non-organic is cheaper. The second point (which is actually my main argument) is that non-organic farmers do not pay for externalities (fertilizer run-off, poisened insects from pesticides, etc). If these costs were included in their production, their produce would probably be more expensive than organic, who cause less environmental damage.
Obviously, the organic producers are greedy jerks who should be taxed more heavily until they lower their prices.
Actually, the price of produce is set by our old friends, supply and demand. Consumers value organic products more than conventionally farmed ones. Whether this is rational is beside the point.
It is more expensive to farm organically, and yields are lower. If that were not true, why would farmers pay for expensive chemicals and seeds to produce a product that sells for less? The price of insecticides and herbicides already reflect the recovery of substantial (and appropriate) regulatory costs: safety testing, permitting, container disposal, etc.
There are very substantial negative externalities of going to a 100% organic system for a world of more than 6 billion humans. Take a look back at the 20,000 years or so of famine, disease, and attendant war that organic farming produced.
I want to add my two cents in otherwise right observation. I think in US the "natural" living or "organic" brand had been turned into a "cool" factor and you pay more for coolness. And yes of course, growing something naturally is harder, espec. when u compete with chemically designed fertil. seeds and so on.
It's not just about yields; organic farming can, and often does, yield more per acre than "conventional" chemically-assisted agriculture. The single biggest difference is labor. Organic farming is just plain harder work! It takes more people, and more education, to succeed at organic farming.
It usually isn't soil fertility but pest management that causes reduced yields in organic production. A lot of edible produce is not marketable because customers have come to expect perfect-looking produce; cosmetic damage from insects or diseases renders produce unsalable or fit only for processing. Insect pest control requires long-term management of the farm (and surroundings) as an ecosystem, and it also requires accepting some level of damage. The "conventional" farmer doesn't have to do any of that - just spray, baby, and let somebody else worry about the consequences.
I'm a small producer, selling at a local Farmer's Market; none of this is theoretical!
Thanks to everyone for the great comments!
@Mister Kurtz
"Obviously, the organic producers are greedy jerks who should be taxed more heavily until they lower their prices." I don't quite understand how taxing organic producers, (which will increase their production cost), will make "the greedy jerks" lower their prices. As far as I know, taxes lead to higher and not lower prices for the consumer.
Your point about supply and demand is well taken, and I agree that high demand for organic produce may drive up the price (and may even lower prices for non-organic prices, as demand shifts from non-organic to organic produce).
However, my main point, which I should have made clearer, is that I believe that non-organic produce is too cheap, as the price does not reflect the cost of non-organic farming to society. Farmers, using pesticides, herbicides and fertilizers do not have to pay for poisened wildlife, (see for example http://www.stanford.edu/group/stanfordbirds/text/essays/DDT_and_Birds.html), water contamination, and potential health problems for consumers, to name just a few examples. If these costs were reflected in the price of non-organic produce, it would certainly be much higher. (Not to mention agricultural subsidies, another cost to society, as we taxpayers are paying for them. But that's another blog post in itself).
I also believe that a delay in the "billing date" is one of the major reasons why we are not aware of the cost of these externalities. If non-organic farmers excessively use fertilizers, pesticides, etc. today, the consequences may not be felt immediately. That doesn't mean that the cost of destroying our ecosystem isn't real, and someone (my generation or my children!?) will have to pay the bill.
@DS
I agree that the organic label, just like the green label has been much abused, and that some products certainly don't keep their organic promises. But I am talking about (maybe idealized) truly organic farming, which I do believe is practiced by some farmers.
@albionwood
Thank you for telling me about the labor cost, I was not aware of the need for more labor in organic farming and would like to find out more about it.
As for the higher yields. I am not a farmer, and only know what I read. You are certainly way ahead of me in practical experience, and I trust what you're saying about potentially higher yields of organic farming. Maybe the difference stems from looking at yields in the short run (1 harvest) versus the long run. As organic farming methods are better for the overall ecosystem, they ensure yields for generations, whereas other methods may yield very high yields for a few years, until the ecosystem collapses, and the farmer has to look for new land elsewhere? Would you agree with that?
I also agree that we're all pretty brainwashed and drilled to believe that we can only eat spotless apples, etc. Then again, people can re-learn and may be eventually willing to eat a less pretty-looking apple that actually tastes like an apple!
Another thing not mentioned that adds to costs of organic production is the immense amount of paperwork associated with it.
I joke with my organic inspector that CCOF really stands for California Compulsive-Obsessive Farmers...... as we have to track every single input & output, record any time a field crew or tractor goes through the field, all production records, seed labels, invoices, etc... all that takes time, and time is money in the real world.
Sorry, Sabine, I did not notice you had responded to my posts. First, I was being sarcastic about taxing organic producers. The concept, however, is no more illogical than the calls for "windfall profits" taxes on oil companies a couple of years ago. Second, do not confuse "organic" with "sustainable". Both conventional and organic systems can be practiced responsibly or irresponsibly, just as one can be a healthy or unhealthy vegetarian. Like many people, I am extremely skeptical that we can feed the world without synthetic forms of nitrogen and crop chemicals/GMOs to protect our crops. There is too much hard evidence to the contrary, and too much mushy hogwash wishing otherwise. Users of chemicals *do* pay for the negative externalities (in California, anyway) of these tools in higher regulatory costs, container disposal fees, required licensing and training of workers, etc. Sadly, many other places are not as responsible, which is one reason why I caution those who would shoo lots of agriculture out of our state, to consider who should grow their food, and how.
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