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Transitioning to Organic Crop Production: A Dynamic Programming Approach

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  • Delbridge, Timothy A.
  • King, Robert P.

Abstract

Despite evidence that organic cropping systems in the Midwest can be more profitable than conventional systems, only a small percentage of cropland has been certified as organic. This paper models the decision to transition to organic crop production as a dynamic programming problem in which investment is reversible but includes sunk costs. Results indicate that the risk and unrecoverable costs associated with organic transition lead to a significant option value, and this provides a partial explanation for low transition rates in the baseline scenario. Sensitivity to expected organic yield and price levels is explored, as are the costliness of reverse transition and the short-term effect of high conventional return levels.

Suggested Citation

  • Delbridge, Timothy A. & King, Robert P., 2016. "Transitioning to Organic Crop Production: A Dynamic Programming Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), pages 1-18, September.
    • Handle: RePEc:ags:jlaare:246250
    DOI: 10.22004/ag.econ.246250
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    References listed on IDEAS

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    Cited by:

    1. Hadachek, Jeffrey & Saitone, Tina L. & Sexton, Richard J. & Raszap Skorbiansky, Sharon & Thornsbury, Suzanne & Effland, Anne, 2022. "Organic Feed Grains and Livestock: Factors That Influence Outcomes in Thinly Traded Markets," USDA Miscellaneous 319355, United States Department of Agriculture.
    2. Erik Nelson & John Fitzgerald & Nathan Tefft, 2019. "The distributional impact of a green payment policy for organic fruit," PLOS ONE, Public Library of Science, vol. 14(2), pages 1-25, February.
    3. Komarek, Adam M. & De Pinto, Alessandro & Smith, Vincent H., 2020. "A review of types of risks in agriculture: What we know and what we need to know," Agricultural Systems, Elsevier, vol. 178(C).
    4. Wieme, Rachel A. & Carpenter-Boggs, Lynne A. & Crowder, David W. & Murphy, Kevin M. & Reganold, John P., 2020. "Agronomic and economic performance of organic forage, quinoa, and grain crop rotations in the Palouse region of the Pacific Northwest, USA," Agricultural Systems, Elsevier, vol. 177(C).
    5. Hadachek, Jeffrey & Saitone, Tina L & Sexton, Richard J & Skorbiansky, Sharon Raszap & Thornsbury, Suzanne & Effland, Anne, 2022. "Organic Feed Grains and Livestock: Factors That Influence Outcomes in Thinly Traded Markets," Economic Research Report 327179, United States Department of Agriculture, Economic Research Service.
    6. De Lapparent, Alice & Sabatier, Rodolphe & Paut, Raphaël & Martin, Sophie, 2023. "Perennial transitions from market gardening towards mixed fruit tree - vegetable systems," Agricultural Systems, Elsevier, vol. 207(C).

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