Effect of yield and price risk on conversion from conventional to organic farming

Szvetlana Acs, Paul Berentsen, Ruud Huirne and Marcel van Asseldonk

Australian Journal of Agricultural and Resource Economics, 2009, vol. 53, issue 3, 19

Abstract: Although the benefits of organic farming are already well known, the conversion to organic farming does not proceed as the Dutch government expected. In order to investigate the conversion decisions of Dutch arable farms, a discrete stochastic dynamic utility-efficient programming (DUEP) model is developed with special attention for yield and price risk of conventional, conversion and organic crops. The model maximizes the expected utility of the farmer depending on the farmer’s risk attitude. The DUEP model is an extension of a dynamic linear programming model that maximized the labour income of conversion from conventional to organic farming over a 10 year planning horizon. The DUEP model was used to model a typical farm for the central clay region in the Netherlands. The results show that for a risk-neutral farmer it is optimal to convert to organic farming. However, for a more risk-averse farmer it is only optimal to fully convert if policy incentives are applied such as taxes on pesticides or subsidies on conversion, or if the market for the organic products becomes more stable.

Keywords: Agribusiness; Crop Production/Industries; Farm Management (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Journal Article: Effect of yield and price risk on conversion from conventional to organic farming * (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:161974

DOI: 10.22004/ag.econ.161974

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