The view of many farmers is that organic farming is more fun and more challenging but most importantly more profitable; with the additional risk of more variable yields and an immature market providing better rewards. However does this remain so when conventional cereal prices have strengthened so strongly and seem likely to remain strong for next harvest too?
Can the organic market provide sufficient premium over the conventional market when the economy is struggling and consumers are facing inflation and tax rises? But perhaps the premium does not need to be as great as it has been historically as it is margin and profitability which is important not simply the level of the premium over the conventional price. Whilst conventional farmers are seeing higher percentage increases in prices they are also facing increases in the costs of their major inputs.
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| Ammonium Nitrate prices. Source: www.dairyco.org.uk The graph above shows how fertiliser prices have risen significantly since the higher prices grain has been available rising 10% between October 2010 and November 2010 and about £100 between November 2009 and November 2010. When such increases occurred in 2008 the cost of oil was also rising significantly (see graph below) which gave a reason for the high fertiliser prices. This year the fertiliser price seemingly has been driven higher by the strength of the grain market.  Higher grain prices have pushed input costs higher which impacts negatively upon farm profitability and more worryingly as a conventional farmer these input prices are beyond your control and so a weakness within your business model. In volatile times perhaps better to be in control of your cost structure than to see your input costs rising and being unable to do anything about it. |
