Activities for Module V - A Growing Market: Organic Agriculture

Section D: The Economics of Organic Agriculture

Activity 1: Costs and Returns
Activity 2: Wanted: Organic Consumer
Activity 3: Decision Time -- Is Organic Worth the Money?

Activity 1: Costs and Returns

Purpose: Students will learn about the differences in costs of production and returns between organic and conventional production by looking at figures from grain and forage production on Iowa farms.

Advance preparation: Print out and copy page 1 of the Costs and Returns worksheet, the "Adapting Crop Share" publication, and information on typical yields and current prices. If students have good web access, they can look up price information themselves at New Farm or USDA ERS.

Estimated time: Worksheet - 20 minutes; discussion - 15 to 20 minutes.

1. Review the role of costs of production, yield, and price in determining profitability.

2. Distribute the worksheet and supporting information to the students. Students can work alone or in small groups

3. Once the class has finished the worksheet, discuss the findings.

How would net incomes change with different input costs, prices, or yield assumptions?
For example, what happens if the historically typical prices of around
- $2.20/bu conventional corn and $5.00/bu conventional soybeans and
- $5.50/bu organic corn and $11.00/bu organic soybeans
are used?

Given the higher net incomes for organic grain farming that this exercise shows, why don’t all grain farmers convert to organic agriculture?

• Many farmers don’t know this financial information
• The organic costs and yields in this exercise are drawn from established, experienced organic farms. During organic transition, costs (especially labor) are likely to be higher, yields will probably be lower, and the farmer will not be able to get organic price premiums. Three or more years of higher risk, more labor, and reduced yields (and therefore reduced income) are a significant deterrent to most farmers.
• Farmers are concerned about the time and effort needed to master a different farming system
• A dislike of having a certifier (or the government) “look over their shoulder” and tell them how to run their farm
• Concern about what neighbors and family will say or think; a sense that organic agriculture is for hippies
• A lack of infrastructure supporting organic agriculture in many places. Organic premiums may be great, but if there is no organic buyer or processing plant in the area, the premiums may be swallowed up in transportation costs or the farmer may have to sell on the conventional market.
• Also, it can be difficult to get organic inputs and technical advice.

4. Extended activity (optional): Have one or more students develop and demonstrate a spreadsheet that will compute average per acre returns for organic and conventional agriculture with different input costs and prices and rotations.

Activity 2: Wanted: Organic Consumer

Purpose: Students will learn about the nature of the organic market.

Advance preparation: Print out the organic market information and make copies for the students. Market survey, consumer profiles from Organic Trade Association, Organic Processors, Whole Foods, Michigan State U or Organic Consumers. If your class did the “Survey the Market” activity in Section A, get the survey forms or the compiled answer to Question 9.

Estimated time: 15 to 40 minutes

Organic foods are more expensive than conventional foods in general. Nevertheless, an increasing number of consumers are buying organic foods. What kinds of people are buying organic products? How does economic theory explain consumers’ decisions to buy organic?

1. If your class did the Survey the Market activity in Section A, begin by reviewing the class answers to Question 9, “How often do you consume organic food?” If you did not do the survey activity, have the students in your class answer that question now.

2. Using the experience of the students and their best guesses about the market, have the class predict the answers to the market profile questions. If you wish to turn this activity into a game, you can give each student a copy of the market profile questions and have them vote for the answers they think are most likely. Then have each student pass his or her worksheet to another student.

3. Give the students the Market Survey and Consumer Profile articles and ask them to find the answers to the Market Profile Questions presented in those articles. Discuss how the information in the articles compares to their predicted answers. Is the market information surprising? If so, how and why? Also, in a few cases, the information in the different articles is slightly different. Ask students why they think the information is different.

4. If you are doing this activity as a game, have the students tally up the correct answers on the worksheets. The student with the most correct answers wins the title of Organic Market Seer.

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Activity 3: Decision Time -- Is Organic Worth the Money?

Purpose: Students will learn about the reasons why people buy organic food as well as some of the criticisms of organic agriculture and will begin to analyze how those reasons relate to economics.

Advance preparation: If students have good web access, they can do their own web searches for information, starting with the Background Information in Section D. If they do not have good web access, you will have to print out and copy the Background Information and articles from key links (see below).

Estimated time: One classroom hour.

What factors lead consumers to buy organic? How much more expensive is organic food? What arguments are people using for and against buying organic foods?

This is a role-playing exercise that requires students to find some of the answers to the above questions. Here is the scenario:
A group of parents in a day care center has requested that the center switch to serving organic food to the children. The day care director calls a meeting with a variety of stakeholders to find out the arguments for and against switching to organic food.

Assign each student a role to play from the following list. You can assign several students to some of the roles, and you can add other roles if you wish.

Day Care Director (the teacher can take this role, or it can be assigned to a student with good facilitation skills)

Parents who want to switch to organic food (different students may want to specialize in different arguments – for example one person talks about pesticide concerns, another about the environment, another about food safety concerns from hormones to GMOs, another about other reasons) These students will research arguments for buying organic food. References include the background discussion, the Ecology of Pizza. the Benefits of Organic , and the “Dirty Dozen”.

Parents who think switching to organic food is a bad idea These students will research arguments against buying organic food from the viewpoint of a consumer. (Again, different students may want to specialize in different arguments – for example one person talks about cost, another about food safety concerns, another about other reasons). Starting reference: the background discussion. The most quoted critics of organic food are Dennis and Alex Avery of the Hudson Institute . Please be aware that some of their claims are untrue.

Conventional farmer(s) and/or retailer These students will research arguments against buying organic food and emphasize the good practices of conventional farmers and the safety of conventional food. References include the background discussion andUrban Myths of Organic Farming

Organic farmer(s) and/or organic retailer These students will also research arguments for buying organic food, but in addition to arguments about the value for the children, they will talk about benefits for farmers and the community. References include the background discussions in Section C and Section D and Ten Good Reasons to Go Organic.

Bookkeeper (optional) This student will try to figure out the actual increased cost for switching to certain organic products. If possible, provide the student with local price information. If not, use the retail price comparison table in the curriculum.

Problem solvers (optional) – These students will weigh the arguments they hear and try to propose a reasonable plan of action for the day care center. Most organic consumers do not buy all organic food but pursue a strategy of selecting some key foods that they prefer to have as organic. The students might also think about how the day care center would fund a switch to organic food. These students should prepare themselves by reading through the background discussion.

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