Organic more profitable at higher oil prices

The profitability of organic combinable crops relative to non-organic crops will improve as oil prices rise, according to a report published.

The study by Andersons for the Soil Association used actual farm business data to model what would happen to margins across the whole rotation if oil prices rose from $135 to $200 a barrel. It found that the use of fertility-building break crops in organic systems sheltered organic producers from the rising costs of artificial fertiliser, heavily dependent on fossil fuel for its manufacture.

oil rig

Oil prices have fallen recently, but any future increase would have less impact on organic producers, a new report suggests

With oil at $135 a barrel, net margins for non-organic combinable crop systems ranged from £397 to £449/ha, depending on rotation. Organic margins ranged from £405 to £445/ha. At $200 a barrel, non-organic margins fell to £296 to £348/ha, while organic margins also fell, but by a smaller amount, to nearer £371 to £411/ha.

For rotations that included potatoes, non-organic systems were more profitable at both oil prices. “It illustrates the fact that people growing organic potatoes for supermarkets are not being paid enough. It’s why many sell locally or through farm shops,” Peter Melchett of the Soil Association commented.

oil barrels

He said the report would generate important discussion about how food supplies could be maintained at the same time as cutting greenhouse gas emissions. “We also need to think what will happen when oil and gas prices rise and nitrogen fertiliser gets more expensive and difficult to obtain.”

* Oil prices have slipped back considerably from the $135 a barrel when the Andersons analysis was carried out. US crude reached a five-month low of $105.46 a barrel on Tuesday. The fall was largely due to fears of lower global demand and the fact that Hurricane Gustav had less impact on oil facilities than expected.

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