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Profitability of organic and conventional soybean production under ‘green payments’ in carbon offset programs

Published online by Cambridge University Press:  07 November 2011

Ariel Singerman ,
Kathleen Delate ,
Craig Chase ,
Catherine Greene ,
Michael Livingston ,
Sergio Lence  and
Chad Hart
Ariel Singerman
Affiliation:
Department of Economics, Iowa State University, Ames, IA, USA
Kathleen Delate*
Affiliation:
Departments of Agronomy and Horticulture, Iowa State University, Ames, IA, USA
Craig Chase
Affiliation:
Leopold Center for Sustainable Agriculture, Iowa State University, Ames, IA, USA
Catherine Greene
Affiliation:
USDA-ERS, Washington, DC, USA
Michael Livingston
Affiliation:
USDA-ERS, Washington, DC, USA
Sergio Lence
Affiliation:
Department of Economics, Iowa State University, Ames, IA, USA
Chad Hart
Affiliation:
Department of Economics, Iowa State University, Ames, IA, USA
*
*Corresponding author: kdelate@iastate.edu
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Abstract

Emphasis on reducing emissions from the greenhouse gases (GHG), carbon dioxide (CO2), nitrous oxide (N2O) and methane (CH4) has increased in recent years in the USA, primarily for industry, transportation, energy and agricultural sectors. In this study, we utilized on-farm data collected by the USDA-National Agricultural Statistics Service (NASS) Agricultural Resource Management Survey (ARMS), secured under an agreement with the USDA-Economic Research Service (ERS) to analyze the profitability of organic and conventional soybean production, based on changes that ‘green payments’ in a cap-and-trade system would introduce in agricultural markets in the USA. In particular, the analysis focused on establishing whether organic producers would be better positioned to sequester carbon (C) and reap the benefits of the C-offset scheme compared to conventional producers, given the differences in costs, management practices and environmental benefits between organic and conventional production methods. We estimated several changes in profitability of soybean producers according to management practices, incentives for the generation of offset credits, and increase in energy input prices that a potential cap-and-trade system may introduce in future agricultural markets in the USA. Survey data suggested that even with lower yields, conventional producers could profit from converting to organic agriculture, given organic price premiums. In addition, taking into consideration both direct and indirect costs, average cost for conventional-till (CT) organic soybean production was approximately 9% lower than no-till (NT) conventional production. With a C market and payments for soil C sequestration through potential Clean Energy legislation, additional profit could be accrued by organic producers, because organic production would have 28% greater ton CO2 eq. acre−1 yr−1 sequestration than conventional NT. Thus, the environmental benefits from GHG reduction could incentivize increased conversion from conventional to organic production across the USA.

Keywords

organiccarbon sequestrationsurveycost of production
Type
Research Papers
Information
Renewable Agriculture and Food Systems , Volume 27 , Issue 4 , December 2012 , pp. 266 - 277
Copyright
Copyright © Cambridge University Press 2011

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