Going green: Is organic farming profitable?

Organic farming is more a revival than an innovative new movement, as farming before WW2 was generally organic. Today, this growing trend is big business. LEAP digs up the dirt on organic farming in South Africa and around the world.

Wine, beer, milk, eggs, cotton, meat – whatever product you’re looking for, you can be certain that you’ll be able to find an organic version somewhere. This shift in farming practises has grown, as more people are becoming concerned about environment damage, and food and health safety. This is making eco-friendly farming systems more mainstream, and organic produce more accessible.

The objective of organic farming is to work with, rather than against, nature. Amongst other things, organic farming doesn’t rely on pesticides, fertilisers, genetically modified organisms, antibiotics and growth hormones. Water resources are carefully used, natural pesticides control pests, diseases and weeds, and crop techniques like crop rotation and soil cultivation are used.

The long-term benefits for people and the environment are significant, including: pests and diseases are controlled without harming the environment, water stays clean and safe, healthy soil is maintained and pollution is limited. Farmers also learn to grow the crops and varietals that are suited to the local conditions and climate, creating a balance between nature and farming. Additionally, a 2015 report published by two researchers at Washington State University, states that organic is more profitable than conventional farming.

Sustainable farming generally produces lower yields than commercial farming. It’s also more labour intensive and costs are higher for certification, but farmers save on chemical costs. The key factor is that customers pay a premium for organic food, which is seen as a prestige product. According to the study, this makes organic agriculture 22%-35% more profitable than commercial agriculture.

So, if this is the case, why aren’t more farmers moving to organic? One of the biggest stumbling blocks is that land needs to be managed using organic practices for 3 years before products can be certified and sold as “organic”. This transitional period is long and financially risky – potentially causing cash flow problems. It may even take 5-10 years to become completely organic, and this long-term plan requires that farmers radically alter their farming style.
Organic food production is gaining global support as consumer demands change, and this provides South African entrepreneurs in the food production and processing industries with significant opportunities for production and export. In 1999, global sales of organic products were $15.2 billion, this increased to $72 billion in 2013, and the projection is that sales will reach $211.44 billion by 2020.

In South Africa, only 0.04% of agricultural land is certified organic, leaving plenty of opportunities for entrepreneurs who are willing and able to capitalise on the market benefits of organic farming, where demand outstrips supply, and the global market looks healthy.

LEAP provides valuable business support services that connect entrepreneurs to a network of experts across a broad range of disciplines, from technology to business management. For more information and to see how we can help you, call LEAP today on 011 449 7974 or visit www.leapco.co.za.
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