Ola Flaten
Research Scientist
Authors
Rasmus Bang Bjørn Gunnar Hansen Mario Guajardo Jon Kristian Sommerseth Ola Flaten Leif Jarle AsheimAbstract
CONTEXT An important question for farmers is whether to run their farm conventionally or organically. This choice can significantly affect the farm's financial performance and its impact on the environment. OBJECTIVE The primary objective of this study is to compare the profitability of conventional and organic cattle systems and investigate how it is associated with individual farm characteristics, like forage production capacity, forage quality, milk quota, animal housing capacity, and their relative presences. METHOD We employ a whole farm optimization model, customized for Norwegian cattle farming. The primary goal of this model is to maximize the gross margin by optimizing decisions related to land usage and animal inventory while adhering to a set of constraints. We systematically solve more than 200,000 model instances, with varying farm characteristics. RESULTS AND CONCLUSIONS The results can be distilled to the following key points: If forage of good quality is readily available, but the livestock operation cannot be expanded due to animal housing and milk quota restrictions, organic may outcompete conventional farming. Otherwise, gross margin is maximized with conventional farming. These findings emphasize the crucial role of forage production capacity and quality in relation to available milk quota and infrastructure when considering the transition from conventional to organic farming. Extensive sensitivity analyses affirm the robustness of these conclusions. Regional regulatory factors, such as government farm payments, also play a significant role, and influence the optimal farming approach. Additionally, we show that increases in organic price premiums can markedly impact the competitiveness of organic farming, even in a system where government payments make out a significant part of the farm revenue. SIGNIFICANCE The model can support farmers to make informed decisions about converting to organic or conventional farming. It can also be used by policymakers to determine the level of support required to make it worthwhile for different types of farms to convert. We also show that existing government payment schemes give rise to regional differences in the incentives for organic farming in Norway. To ensure equal incentives for organic farming across the country, the organic payments would have to be regionally adjusted, in line with the other already regionally dependent government payments. This insight may be of significant interest to policymakers and other stakeholders.
Authors
Mario Guajardo Rasmus Bang Leif Jarle Asheim Ola Flaten Bjørn Gunnar Hansen Jon Kristian SommersethAbstract
No abstract has been registered
Authors
Mario Guajardo Rasmus Bang Leif Jarle Asheim Ola Flaten Bjørn Gunnar Hansen Jon Kristian SommersethAbstract
Interest for organic products and concerns regarding sustainable practices raise an important question for farmers: should they run their farms conventionally or organically? We address this question by means of a mathematical programming model, which aims to optimize gross margin of cattle farms. We implement the model using data from Norway, including government support stipulations and a number of other features. A computational study allows us to assess the economic performance of organic farming compared to conventional farming systems. We derive some insights into the conditions when organic outperforms conventional systems, and vice versa. These hold significant relevance not only to farmers, but also to farm advisors and policy makers.
