Profitability of Farms Converting to Organic Farming in Germany

The Institute of Farm Economics of the FAL monitors 107 farms which have started conversion to organic farming in the crop year 1990/91. The objective is to identify the economic impacts of conversion to organic farming on different farm types. After three years of organic farming, a wide variety of changes in the farms can be observed. Because organic farming prohibits the use of chemical inputs, crop rotation and the cropping of legumes gain more importance. Furthermore, the land use system depends strongly on the marketing possibilities of organically grown products. Livestock numbers show a declining trend. On the other hand, labor requirements are increasing. In crop production, the yields decrease strongly. At this point in time, higher prices can only be realized for plant products. Overheads increased only slightly during the study period. The conversion to organic farming has led to positive income effects for the majority of farms. However, the profitability of organic farming depends largely on the extensification premium and the marketing possibilities for organic products.