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Does Organic Command a Premium When the Food is Already Local?

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  • Cristina Connolly
  • H. Allen Klaiber

Abstract

The emergence of community supported agriculture (CSA) farms has been recognized as a new way for small farms to remain competitive while engaging in their local community through direct marketing. In this study, we report on first revealed preference valuation of CSA attributes using data on share prices and CSA characteristics for the summer 2012 growing season. Using data covering 453 CSA farms in Michigan, New York, Ohio, and Pennsylvania, we develop a hedonic model based on firm-level prices to reveal consumer valuations of CSA attributes, including various types of organic certification. We also test for competition in the CSA market using a model of firm entry to evaluate whether firms appear perfectly competitive, which is a requirement when using firm-level prices in our hedonic analysis. Our results reveal a price premium of approximately 7% for USDA organic certification, although this value is heterogeneous across states. We find no premium associated with competing certified naturally grown programs. Finally, we find that CSA farms exhibit little market power and appear to act competitively even with few market entrants.

Suggested Citation

  • Cristina Connolly & H. Allen Klaiber, 2014. "Does Organic Command a Premium When the Food is Already Local?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(4), pages 1102-1116.
    • Handle: RePEc:oup:ajagec:v:96:y:2014:i:4:p:1102-1116.
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    File URL: http://hdl.handle.net/10.1093/ajae/aau030
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