The Economics of Organic Grain and Soybean Production in the Midwestern United States

Organic agriculture offers expanding market opportunities for many farmers, processors, distributors, and retailers in the food system (Anton Dunn, 1997a; 1997b). The recent launch of an organic breakfast cereal line by General Mills, complete with a multi-million dollar advertizing budget, exemplifies the expansion. Filling those cereal boxes likely means more organic grain and soybeans from u.s. farmers, many of them in the Midwest. But, is organic production a profitable alternative for the region's farmers? A growing body of research sheds new light on the answer. This report synthesizes and interprets economic studies of organic grain and soybean production by midwestern universities. The central conclusion is that organic production systems are competitive with the most common conventional production systems. Indeed, if farmers obtain current market premiums for organic grains and soybeans, their organic production generally delivers higher profits than non-organic grain and soybean production. The answer for any individual farmer depends, of course, on his or her particular situation. However, the main finding passes the commonsense test. By all accounts, the acreage of organic production is increasing nationwide, as well as in the Midwest. Will the estimated higher profitability of organic grain and soybean production hold, relative to conventional production, as the industry expands? Farmers who face the decision to invest substantial amounts of time and money need sound information to make careful decisions. While no one can forecast the future of the organic grain and soybean industry with certainty, understanding the forces that drive costs and prices is a key factor for anticipating likely trends in profits.