Does Organic Conversion Pay? Evidence from German Farms Using a Difference-in-Differences Approach

Climate change and evolving regulations in the European Union (EU) place increasing pressure on agriculture to reduce its carbon footprint while remaining economically viable. The Farm-to-Fork strategy positions organic farming as a cornerstone of sustainable food systems, aiming for 25% of EU agricultural land to be organic by 2030. Yet, the economic feasibility of making this transition remains contested. This study provides a robust assessment on changes in farm profitability of transitioning from conventional to organic farming in Germany. Using a uniquely comprehensive large dataset of 1,048,139 farm-year observations from 54,817 farms (between 1995 and 2018), we identify all converting farms and match them to structurally similar nonconverting “twin” farms. A difference-in-Differences framework adapted for staggered adoption and fixed effects estimates the impact of conversion on operating profit. Preliminary results indicate an average post-conversion increase of €11,580 per year. Effects vary by region and farm type, underscoring heterogeneity in economic outcomes. These findings highlight the complexity of aligning environmental goals with farm-level incentives and demonstrate the value of long-run panel data for evidence-based policy. Further research will refine identification and explore distributional impacts to inform strategies under the EU Green Deal.