Thats a tough question Dr., perhaps we can think about the environmental cost of the current agriculture, the cost of sintetizing mineral fertilizers ( tons of fossil fuels). I think we must , in the short time, develop a planification to change that  in 20 or 30 years.

Dear Subhash Chand,

Of course there are some debatable issue related with the organic farming however in practice organic farming is more sustainable practice in the food production.rather than the production we can enhances the soil fertility reducing the GHGS emission from soil , warming climate ill effect on the soil system.

So we shouldn't ignore the additional benefit of the organic farming along with the food production..

Can some one suggest  me literature on methodological issues related economics of organic farming. 

Dear Subhash Chand,

I think that to some extent it is preferable to use a cost-efficiency approach more than a cost-benefit one. The reason is that benefits of organic agriculture (and of any environmentally friendly practice) can be measured for example on health indicators and do not always need a monetary evaluation, usually subject to discussion. But your question is extremely general, I don't think it is realistic to provide a complete answer.

Dear All,

Professor Pimentel has written many excellent papers on ecosystem services considering even their benefits expressed in USD. Some of them:

Most of Pimentel’s articles can be found at internet.

David Pimentel, Paul Hepperly, James Hanson, Rita Seidel and David Douds (2005):

Organic and Conventional Farming Systems: Environmental and Economic Issues. A report, pp. 53.

Pimentel, D., Wilson, Ch., McCallum, Ch., Huang, R., Dwen, P., Flack, J., Tran, Q., Saltman, T. and Cliff, B. (1997): Economic and environmental benefits of biodiversity. Bioscience, 47 (11): 747-757. http://udel.edu/~gshriver/pdf/Pimenteletal1997.pdf

Pimentel, D. Harvey, C., Resosudarmo, P., Sinclair, K., Kurz, D., McNair, M., Crist, S., Shpritz, L., Fitton, L., Safflouri, R., Blair, R. (1995): Environmental and economic costs of soil erosion and conservation benefits. Science, New Series, 267 (5201): 1117-1123

Pimentel, D., Lach, L., Zuniga, R. and Morrison, D. (2000): Environmental and economic costs of nonindigeneus species in the United States. Bioscience, 50 (1): 50-65.

The main aim of organic agriculture is the maintenance of ecosystem services. The more agriculture becomes organic the more can be sustained ecosystem services. Considering the possibility of irreversibility of some man made deteriorating side-effects, organic production is an option for the future.

Another major advantage is the very low or zero level of pesticide residues. In order to calculate the costs of organic agriculture a detailed economic evaluation is needed which is available. One needs about half an hour to find them at internet (Pimentel et al., 2005).

Regarding the assessed value of ecosystem services of Gea (Earth), it is 2928 billion USD (Pimentel et al., 1997). The rate of ecosystem services relating to agricultural production may be 1156 billion USD…

Now, it is your task to start your imagination!

Subhash, 

There are many journal articles out there on organic farming.  Try google.  You are nearly 40 years behind the times regarding organic crop production and processing requirements.  Since you ask about the impact on the fertilizer business it is clear you are not knowledgeable about how natural fertility occurs, the impact of biomass in the fields, the role of fungi, crop rotation and soil building. You have a huge amount, nearly a lifetime, of study to perform before you can actually understand the economic foundations of the responses directed at organic crop production and processing techniques. 

Subhash, 

Since I have more than 40 years experience in this field, co-authored books, published articles, trained growers on three continents, and been a founder of many of the North American association in organic agriculture, I would start by warning you there are two types of organic farmers.  The first group I have assigned the term "organic-by-neglect".  This group has only the experience of conventional chemical agriculture and simply stop applying the chemicals in hopes they can produce crops at higher price points.  These farmers last only a few years in the industry and revert to conventional agricultural techniques.  The second group are "organic farmers" and practice excellent weed control, crop rotations, soil testing positive soil and fertility building.  It is the second group you need to learn about.  

Dear Subhash,

I agree with both Barbara and Andras.

I'll try to keep it a broad answer and not technical, because when you become too technical, you reduce the scope of it.

Basically when evaluating a project (organic farming is one) you need to assign numbers to the different activities or tasks within it. Costs are sacrifices incurred in it, and benefits are 'the value' it creates.

A financial evaluation is the typical profit estimation substracting accountable costs from total revenues. An economic evaluation includes social and environmental aspects. What an economic evaluation does is to include "the externalities" produced by the private transaction. Externalities are the impact on society that a private transaction has. Coase, North and Williamson, all Nobel prizes elaborated a very interesting conceptual framework called New Institutional Economics focusing on this.

Externalities can be positive and negative. In the case of organic farming, a positive externality is the avoidance of most synthetic agrochemicals, which have an environmental impact because of residues, leaking, health issues etc. A negative externality is the decrease in productivity and hence smaller food quantities available for the population, being this a social impact.

As Barbara says, in high income countries, people are willing to buy organic and natural foods, and have the ability to pay for them. They value the avoidance of the use of agrochemicals, of transgenic seeds and accept the deterioration of the quality of products due to insects or other biological agents. In these cases, organic farming is a good business, mainly because people value organic food and can afford to pay for it.

When it comes to medium or low income countries people may be willing to consume organic foods, but don't have the ability to pay for it. In these cases organic farming will not be profitable and hence not sustainable in financial terms.

Organic and natural farming are defined by specific production protocols a farmer has to follow in order to be certified. These are credence goods, so the certification from a neutral and independent agency is a key factor to guarantee "what it promises to deliver".

Going back to the last part of your answer, I don't think we could feed a growing population with organic or natural farming. Technology (knowledge) allowed that a growing portion of world population have access to food. This is a productivity issue deeply rooted by the production function.

If we go back to organic and natural farming, productivity will decrease, food prices will increase and less people will be able to have access to food. This does not imply that there aren't any profitable "niches" for organic and natural farming. In fact organic and natural BEEF in USA have been profitable activities for the last 20 years. The same with some organic vegetables and fruits.

Food security is a global challenge and must be addressed with all known tools to achieve it.

I really hope this helps.

Rgds.,

I don't know if this helps specifically, but in general I would say that it's more about an economic comparison (comparative advantage, marginal gains and maximization (the best cost/benefit ratio of all options, rather than specifically concerning about the cost/benefit of a particular strategy).

I think it is silly to think that organic output could be bad for the economy in and of itself (all else equal). If people are willing to pay a premium for it, even better.

One unfortunate thing is that it is very difficult for a farm to internalize the wider benefits, such as by having less toxins in the surrounding environment or people's diets, whereas they face all of the direct costs, of having to weed more by hand, pick and sort produce more carefully, and generally be more attentive to the crop.

I think cost of labour and cost of fertilizers and pesticides will usually be the main variables in cost/benefit, while the presence of a local or export market for organic output will be particularly important for the benefit side (and could depend on certification schemes). In the absence of a premium for organic produce on the market, the farmer faces most or all of the costs relative to non-organic without internalizing the benefits.

More often than not, the fact of organic production in the developing world is a sign of market failure because most farmers would do much better to use some positive (and probably larger) amount of fertilizer and/or pesticide/herbicides/fungicides, although I would sure hope that folks are more sensible than the Chinese in the extent to which they allow their environment to be toxified in the name of maximum immediate economic expansion (however, it is worth noting that the rural surplus was long expected to provide for urban capital accumulation, to fuel a growth that would later repay the countryside in the form of industrial equipment and methods, and also jobs in cities).

In many cases, intercropping provides a sound alternative to monocrop with non-organic inputs, and it notable for not facing price shock risks in terms of various inorganic inputs.

Probably on very small plots, management costs to determine all the right treatment will be relatively high per ha. Economies of scale linked to these management costs are an additional reason that organic output can face a relative cost disadvantage compared to an alternating treatment alternating monocrop.

Hi Subhas Ji; Following links could be useful to you dear.

http://orgprints.org/8473/

http://www.sciencedirect.com/science/article/pii/S0006320704003246

http://www.sciencedirect.com/science/article/pii/S1096750801000404

Goodluck

Two things to remember.

Firstly that the main reason why fertilizers are used is to increase production. That is what they do. Soils which have limitations on production can have increased production by the use of fertilizer. Taking away the fertilizer will reduce yields. It is not that hard to work out.

Secondly, where produce is used away from the area in which it is produced there will be a transport of nutrient such as P with the produce. This will reduce the capacity of that soil to supply that nutrient to subsequent crops unless a replacement with artificial fertilizer is made. While ever our major consumption is in cities nutrient export makes organic inherently unsustainable. Not that fertilizers have a never ending supply, they just mean it will all go bad more slowly than if they were not used. That organic should and can be used in many circumstances is clear, but it is modern agriculture which feeds and will continue to feed the world.