Investment Advantages Of Organic AgricultureDocument Transcript
RESILIENCE, SUSTAINABILITY AND
THE INVESTMENT ADVANTAGES OF ORGANIC AGRICULTURE
TABLE OF CONTENTS
EXECUTIVE SUMMARY 2
Top-down vs. bottom-up? 5
Holistic vs. reductionist farming. 6
External inputs 7
The soil 9
Ecosystem services 12
Barriers to entry - the organic investment advantage 16
Bottom-up summary 17
The global farm and food picture 18
Ecological / organic agriculture 19
Organic agriculture - the global success story 20
Top-down summary 25
There is growing interest in agriculture and farmland as an asset class.
This report analyses, from an investment perspective, the features of ecological /organic agriculture
that make it an attractive option for those considering investment in agriculture/farmland and
particularly for those investors with an SRI/ESG understanding.
Organic agriculture uses a whole system approach which creates a system that is environmentally
sustainable, low cost and has low exposure to rising costs, with potential for superior productive
The organic/ecological approach minimises the use of external inputs such as fertilisers, fossil fuels
and biocides which reduces the exposure to the increasing insecurity of these inputs arising from
regulation, market demands and their increasing scarcity/cost as supplies pass their peaks and
Organic/ecological agriculture maximises soil health, particularly organic matter levels. This creates
multiple benefits including carbon sequestration, decreased nutrient loss, biodiversity, better water
holding capacity and drainage and healthier crops and livestock. These strengths translate into a
more stable and resilient production system, significantly positive implications for enhanced income
generation(long term) and outperformance in capital appreciation.
Ecological agriculture uses and generates positive ecosystem service outcomes, which creates a more
robust self supporting farming system, decreased farm production costs (and exposure to rising
costs) and potential income from ecosystem service markets, e.g. carbon and biodiversity.
Barriers to Entry
Organic agriculture has multiple entry barriers, including technical knowledge and expertise as well
as social and regulatory hurdles such as detailed auditing and multi-year conversion periods.
Global farm and food picture
The world’s population continues to not only expand and demand more food, but also better
The land base to meet this demand is increasingly limited by the poor quality of prospective
new farmland, the need for such land to provide vital ecosystem services, and the loss of
existing farmland to urban growth and land degradation.
Future of investment is in agriculture
The appeal of agriculture and farmland investment is due to the straightforward analysis that
food will be in increasing demand from a larger and more affluent world population yet with
increasingly limited availability. This creates a demand and supply imbalance in favour of those
producing food and investing in farming.
Future of agriculture is ecological
The existing industrial agricultural model is coming under a multitude of increasing pressures,
including growing input costs with reduced availability, diminishing performance, the threat and
reality of climate change and increasing legal restrictions and market demands.
It is in this environment that ecological agriculture is so advantaged.
Ecological agriculture addresses these issues without the problems associated with industrial
Organic agriculture has the attributes to turn its ecological advantages into investment advantages
and thereby investment outperformance. These attributes include:
internationally agreed principles and rules with thorough third party auditing, meaning that
it has a high level of integrity, trust and globally accepted standards which facilitate trade;
globally recognised agricultural system, including among sovereign governments and
intergovernmental organisations such as the FAO, with corresponding strength in terms of
credibility and legal status; and
a clearly defined, high-value, market differentiation, which translates into growing market
size and better returns.
Organic Agriculture - the global success story
Exceeding market expectations
Organic agriculture fulfils or exceeds consumer expectations. Its authenticity, robust standards
and environmental rigour make it a clear leader in terms of market alignment.
Booming organic marketplace
The market demand results generated by organic agriculture over the last three decades speak
for themselves, with consistently strong growth in global markets.
Non event of global financial crisis
The global financial crisis only slightly decreased the expansion of organic demand, rather than
reversing it, with some organic food sectors, e.g., wholefoods, growing at a faster rate than pre-
crisis and some consumer sectors, e.g., high net worth families purchasing more organic food
not less due to ethical concerns.
Premium market prices
Even with the continued strong growth of organic agriculture over recent decades, premium
prices have been maintained, indicating the stable, robust and long term nature of the organic
This dual-perspective analysis demonstrates the need to understand agriculture from both the
bottom-up and top-down. Without such a holistic approach it is impossible to make truly informed
decisions about investment in agriculture.
Farmland investment has to be long term due to the character of the enterprise. Even in the short
term, the unsustainability of industrial agriculture is now apparent and it faces increasing
restrictions, both natural and political/regulatory on its future growth/expansion.
From an investment perspective organic agriculture has the attributes of a definably unique, secure
and attractive investment proposition. It is firmly established, tested over many decades and globally
recognised at the government and intergovernmental level. As a business sector it has demonstrated
clear and ongoing success on the ground (farm level), a track record of exceptional market demand
growth and is based upon the robust, scientific and genuinely sustainable management of that most
secure and tangible of assets - land.
This depth of understanding in the agricultural thematic environment reveals organic agriculture as a
definably sustainable, resilient, and profitable sector.
In fact from an investment perspective organic agriculture is overwhelmingly advantaged.
There is growing interest in agriculture and judgements about the merits of different
farmland as an asset class. agriculture/farmland investment options,
especially over the longer term.
This report analyses, from an investment
perspective, the features of ecological/organic
agriculture that make it an attractive option
for those considering investment in This report first investigates ecological
agriculture/farmland and particularly for those agriculture from a bottom-up standpoint,
investors with an SRI/ESG understanding. highlighting some of its key advantages. It then
takes a top-down view before pulling these
Top-down vs. bottom-up? perspectives together to demonstrate the
overwhelming investment case for ecological
Within ecology, trophic webs, commonly
called food webs/chains, are analysed both
from ‘bottom-up’ and ‘top-down’ perspectives Within this document we will refer to two
to gain a better understanding of how they contrasting forms of agriculture,
function. For example, the bottom of ecological/organic agriculture and industrial
practically all trophic webs on earth are plants, agriculture. Ecological/organic agriculture
as only they can turn sunlight into food via views agriculture to be part of ecology and
photosynthesis. At the top of trophic webs are therefore to function correctly agriculture
apex predators, such as lions which are needs to work with, not against, ecology.
indirect consumers of the food made by
Industrial agriculture is the technical name for
plants. Looking at trophic webs from both
the current mainstream form of agriculture
perspectives gives a much more complete
practiced in the developed world. It is called
view of their processes, limits and interactions
industrial agriculture as it has been modelled
than just one or other viewpoint.
on the assembly line manufacturing systems of
The same is equally true for investing in the industrial revolution. In contrast to
farming/agriculture. Just taking a top-down ecological agriculture, industrial agriculture
perspective, e.g. how well a product is selling believes it is to a large extent separate from
in the marketplace, does not give the full nature and characteristically seeks to
picture. Without understanding the bottom- dominate ecology.
up perspective, e.g. the physics and ecology of
The terms agriculture and farming are used
agriculture, it is impossible to make sound
This difference also illustrates a fundamental
Holistic vs. reductionist farming. problem with the reductionist approach of
Ecological agriculture is a systems based/ industrial agriculture. If the biocide works,
holistic approach to farming . The terms then that is well and good, but if it stops killing
holistic and system have become buzzwords. the pest because the pest has become
They originated however, from rigorous resistant or the biocide is withdrawn from use
academic disciplines that describe how due to evidence of harmful non-target effects,
complex structures work, e.g. general systems then there is a problem. As the previously
theory . An example is the concept of effective solution no longer works, the pest
holons created by Arthur Koestler [56, 57], has free reign. In comparison, with the holistic
which is something that is simultaneously a approach, management of the pest is not
whole and a part. This is an illuminating reliant on one or a small group of biocides, but
concept within agriculture as it neatly is part of the system as a whole with many
encompasses the concept that the many parts factors managing the pest population. If one
of a farm need to be treated both as things in or more of these fails to work, then other
their own right, e.g. a crop, yet they are also parts of the system will continue to manage
parts of the bigger farm system, e.g., part of the pest.
the soil ecosystem, but at the same time are
This whole-system approach is not just
also composed of holons themselves, e.g. the
restricted to pest management; it extends to
individual plants that make up a crop, and in
all aspects of the farm system, for example,
turn the constituent parts of the plant such as
manure. In industrial agriculture, especially in
leaves, cells, chloroplasts, all the way down to
concentrated animal feeding operations
the chemical elements which make up their
(CAFOs), manure is considered a ‘waste’
physical structure and even beyond into the
product that has to be disposed of, often at
weird world of quantum mechanics .
considerable financial expense and/or
Ecological farmers understand this complex environmental pollution. In ecological
interdependence and therefore appreciate agriculture, manure is a valuable resource; it
that trying to manage one part of the farm contains the full suite of plant nutrients
system in isolation from the other parts will (‘fertilisers’) along with a lot of carbon, a
fail. For example, pests1 are managed by a critical component of soil organic matter. It is
wide range of integrated tools such as therefore carefully collected and used to
rotations and encouraging natural enemies by fertilise the fields to improve crop
providing flowers for pollen and nectar. In performance and soil health. This recycling of
comparison industrial agriculture is nutrients is also how natural systems work,
philosophically reductionist , i.e. it views and is in direct contrast to industrial
different farm components as discrete entities. agriculture that takes a linear view, applying
Continuing the pest example, industrial brought-in fertilisers to feed the current crop
agriculture mostly uses biocides/pesticides and then exporting the resulting products off
(chemicals designed to kill living things), to kill the farm and treating by-products as waste.
pests when their populations exceed desired
So, while terms such as ‘holistic’ and ‘system’
levels. However, little thought is given as to
may be trendy, they are in fact scientifically
why the pest populations grew so large in the
rigorous and highly practical concepts which
first place and if there are ways to prevent
underpin ecological agriculture and provide it
them doing so in future rather than simply
one of its great strengths. By not relying on
continuing to spray biocides.
single points of control, such as biocides,
ecological agriculture has a greater repertoire
1 of mechanisms for managing the farm system,
Pest is used in its broad meaning and includes not
only insects but also diseases, weeds, parasites etc. thus making it more stable and secure, both in
the short and longer term. This translates into However, there are other looming issues, e.g.
greater financial return and stability in the ‘peak-phosphorus' , that are only just
short term because costly ‘wastes’ are turned leaving the scientific sphere and entering
into valuable ‘inputs’, pests have multiple public and political awareness. If an input is
control points rather than a few biocides, and finite, and its peak is in the present or not too
diversity means that where one section is distant future (a few decades) then as supplies
under-performing, e.g. due to weather, other dwindle and prices increase in response, any
parts compensate because they perform system that minimises its use of, or is not
better under such conditions. In addition a dependent upon those inputs will increasingly
systems-based approach creates an integrated find itself in a far stronger and more financially
farming system better adapted and more viable position than those that do.
resilient to climate change impacts with
Ecological agriculture aims to minimise the use
corresponding benefits for financial
of external inputs and maximise self-
sufficiency. This means that manures and crop
Farms that have well developed holistic by-products (e.g. straw) which are commonly
infrastructures, e.g. established shelter belts regarded as ‘waste’ in industrial agriculture,
and fodder trees on hot dry slopes, can are retained and reused. Manure is used to
achieve higher stocking levels (production) feed the soil and crop by-products are used as
and therefore higher returns which supports livestock feed and bedding or they may also be
higher asset values and better overall returned to the soil as fertiliser. These, and
investment returns. other internal re-use approaches, minimise
the need for external fertiliser and stock food.
Nitrogen, which is the most important plant
In minimising its reliance on external inputs nutrient/fertiliser, is an especially clear point
such as biocides and fertiliser, organic of difference between organic and industrial
agriculture creates one of its most significant agriculture. Organic farms ‘make’ their own
strengths and advantages. nitrogen fertiliser for themselves, from the
Biocides and nitrogen fertilisers are made atmosphere, using biological nitrogen fixation.
from and with fossil fuels (mostly oil and gas), Industrial farms predominantly buy in nitrogen
while other fertilisers are directly mined from in mineral forms. As nitrogen fertilisers are
the ground, i.e. they are fossil nutrients. These made from and with fossil fuels (chiefly
inputs are not however infinite in supply. The natural gas)  their price is strongly
issue of peak-oil  is now both well correlated to the price of oil. Figure 1, .
established and widely accepted [33, 102].
800 Ammonia 100
Crude oil 90
US$ / barrel
US$ / ton
Figure 1. Historical price of nitrogen fertiliser (ammonia) and crude oil [18, 48].
Ecological farmers use the whole farm system pesticides and fertilisers, it also applies to
to combat pests, eliminating the reliance on higher level inputs, e.g. stock food.
purchased biocides (as discussed above)
CAFOs are systems in which large numbers of
which, like nitrogen fertilisers, are also mostly
animals are confined and fed grain which is
made from fossil fuels. This further
purchased from grain farmers, who often farm
emphasises the advantage ecological
some considerable distance from the CAFO. In
agriculture has in terms of exposure to rising
comparison ecological farms raise their stock
fossil fuel prices.
on pasture produced on the farm, using
Direct and indirect energy use is significantly nitrogen fixing plants such as clover, which the
lower in ecological/organic agriculture than stock harvest for themselves. When grain and
industrial agriculture. No-till systems are often transport prices are low, assisted by subsidies
held up as being more energy efficient due to to grain farmers and cheap nitrogen fertiliser
their reduced reliance on tillage . and fuel, then CAFO systems are financially
However, results from a long-term field viable. However, it does not take a large
experiment in the USA, one of the strongholds increase in grain prices, e.g. due to reduced
of no-till, demonstrates that total energy use subsidies, higher nitrogen and oil prices, or
in tilled organic maize production is lower than alternative crop markets such as human food
no-till and organic no-till is lower still. or biofuel production, to make CAFOs
Figure 2, [61, 86]. uneconomic. This was clearly seen in the
fertiliser and grain price spike in 2008 when
many European CAFOs simply shut their
Pasture based organic livestock production,
Gallons of diesel/acre
which uses biologically fixed nitrogen is not at
150 risk from changes in the price of grain or
nitrogen fertiliser as the inputs it requires are
chiefly sunlight, rain and land (often land that
cannot be used for crop production due to its
slope and soil quality). Other benefits of the
232 199 122 78
50 ecological approach are that the animals’
manure is a valuable fertiliser created and
used in-situ, boosting pasture growth as
Tillage No-till Tillage No-till
opposed to a waste in the CAFO system which
costs money to dispose of.
Non-organic treaments Organic treaments
Figure 2. Energy used in different maize (corn) The examples above illustrate that ecological
production systems [61, 86]. agriculture is far less dependent on external
inputs due to its maximisation of recycling of
There is now a considerable, and growing, farm by-products and managing the farm
body of scientific evidence showing that system as a whole. This makes ecological
ecological/organic agriculture has superior agriculture much less exposed to external
direct and especially indirect energy use, input costs and availability . As most of
particularly from non-renewable energy industrial agriculture’s inputs are made with or
sources than industrial agriculture. These from fossil fuels, they are heavily exposed to
come from comparisons of individual farms up the risk of increasing fossil fuel prices.
to whole-country level, from real-world data, Therefore ecological agriculture will gain an
long-term trials and models e.g. [3, 20, 25, 30, increasing competitive advantage as input
31, 55, 68, 88, 100]. costs go up and availability goes down. This
Problems with input dependence are not just suggests there will be a step change in
limited to ‘lower level’ inputs such as energy, demand for product from ecological/organic
agricultural systems, as prices become
increasingly competitive. These factors, is needed to do this without degrading
combined with the entry barriers to organic the environment, endangering human
farming (see ‘Barriers to entry - the organic and animal health, or decreasing
investment advantage’ page 16) means that biological diversity. This paradigm
established organic farms will be more envisages an ecosystem approach for
attractive to purchasers for their stability, farming - an approach that emphasizes
sustainability and superior profitability which the interaction of plant productivity
will generate a price premium for organically with the productivity and well-being of
managed assets. all living organisms and with the quality
of the environment. Organic farming
The soil will have a role to play in the new era of
Unfortunately, soil to most people is just dirt soil quality management”  page
and something of a turn-off, as Professor 913.
David Montgomery found out when he had to Let us consider a few aspects of ecological and
change the title of his recent book ‘’Dirt: The organic farming that will play a role in this
erosion of civilizations” to exclude the ‘soil’ “new era of soil quality management”.
word . However, Prof. Montgomery is only
one in a very long line of scientists and Nitrogen
philosophers, all the way back to Plato, who The issue of the plant nutrient/fertiliser
have pointed out that soil is the foundation of nitrogen has already been discussed in the
civilisation. Like the abused terms ‘holistic’ section ‘External inputs’, in terms of it being an
and ‘whole-system’, the concept that our external input facing increasing prices and
civilisation is based on the soil has become decreasing supply. The nitrogen problem is,
clichéd in some circles. Unfortunately the however, much larger than just supply
reality is that it is no cliché, and despite the concerns, it is the major sleeper-issue of
huge advances wrought by science and industrial agriculture [39, 105, 106, 110].
technology over the last two and a half
centuries, humanity today is more, not less, Organic agriculture completely eschews
dependent than any previous civilisation on synthetic nitrogen fertilisers. Instead it uses
good soil management as most of us no longer biological nitrogen fixation, mostly produced
have the option of hunting or gathering for by growing crops such as legumes Plate 1, that
our food: agriculture is our only option [66, host microbes that fix atmospheric nitrogen
87]. into plant available forms. Synthetic nitrogen,
in comparison, is increasingly proving to be
For organic agriculture managing the soil, i.e. something of an ‘own goal’.
soil husbandry is of prime importance. Indeed,
the care, protection and good husbandry of
soil, particularly ensuring the soil is high in
organic matter, is the core issue upon which
the organic movement was founded .
Science is now unambiguously clear that the
approach of industrial agriculture towards the
soil has to stop and that organic agriculture is
part of the solution. To quote the final
conclusions of the 14th edition of the treatise
‘The nature and properties of soils’…
“A major challenge facing humankind is
the production of more food and fibre Plate 1. White Clover - a legume.
in the next 40 to 50 years than has been
produced since the dawn of agriculture
some 10,000 years ago. A new paradigm
It was a widely promulgated idea during the The financial implications for this are quite
introduction of synthetic nitrogen fertilisers clear: biologically fixed nitrogen has a zero
that they would lead to an increase in soil purchase price and its production enhances
organic matter, due to the increased crop soil organic matter which improves soil
growth and thus return more crop residues to productivity, which improves the stability and
the soil. However, if this were true, it would be yield of crops, which means increased and
expected that after more than half a century more stable crop gross margins (income).
of widespread, and often intense, use of
Soil organic matter is not something you can
synthetic nitrogen fertilisers that cropping
increase over-night, it takes years to build up
soils would be brimming with organic matter.
good levels. As the comprehension among the
The plain fact is that they are not, indeed
farming community of the importance of good
conversely, cropping soils globally show a
soil organic matter levels continues to
consistent decrease in organic matter with
increase, farms with well managed soils and
increased nitrogen fertilisation. It is now
high organic matter will increasingly command
understood that nitrogen fertilisers do not just
increase plant growth, they also increase the
growth of soil microbes. These then eat Soil organic matter, the great leveller
through soil organic matter faster than it is
Organic matter is what makes a soil a soil,
replaced by the extra crop growth [53, 78].
without it, it is just rock dust. It is also one of
The reasons this situation is an ‘own goal’ is those rare things where the maxim ‘too much
because only a small proportion of fertiliser is of a good thing’ barely applies. The more
directly taken up by crops, instead the organic matter a soil has, generally the better
majority of the nitrogen passes through soil it performs. In comparison too much synthetic
microbes before being served up to the plants fertiliser will kill both soil and plant alike. Soil
[53, 78]. Soil microbes need soil organic organic matter also has some seemingly
matter to do this as they can’t live on nitrogen paradoxical properties where it can negate
fertiliser alone. This means that as soil organic both extremes of a particular condition, e.g.
matter decreases due to the use of nitrogen water-logging and drought. It is also chiefly
fertilisers, the efficacy with which the organic matter that makes a soil a quality soil:
microbes can serve-up the nitrogen to the without sufficient levels of organic matter a
plants also decreases, i.e. as soil organic soil will cease to function and be increasingly
matter diminishes less of the applied fertiliser lost to erosion [27, 76].
gets taken up by plants. This is what has been
Unarguably, good husbandry of soil, and
found over the past 40 years in real world
particularly organic matter, is critical for
farming; the efficiency of nitrogen fertilizer
successful farming. As noted above the
has decreased by 66% globally [92, 108].
maintenance of good soil organic matter is the
Synthetic nitrogen fertilisers are therefore self-
foundation of organic agriculture and a key
defeating, the more you use, the more you
component of all truly sustainable agriculture
have to use to get the same result until the
[4, 47]. Not only is it a key aim, it is also
soil system collapses.
unambiguous that organic farming achieves
The biological fixation of nitrogen used by higher levels of organic matter, with many
ecological agriculture does not suffer from this examples, particularly those from long term
problem because as soon as the nitrogen is trials being unequivocal [38, 60, 69, 70, 86].
fixed inside the plants it is combined with The practical agricultural, and therefore,
carbon and other nutrients to build the plants’ investment benefits that good soil husbandry
tissues. Only when the plant dies, do the soil brings are many and substantial; for example
microbes get to feed on the nitrogen and in coping with and responding to climate
because it is packaged up with other nutrients change.
there is no additional organic matter loss.
Climate change Climate change legislation is increasingly likely
Climate change is the most significant problem to financially and otherwise penalise
facing humanity [8, 29, 107] and agriculture businesses that have negative climate impacts
has a critical role to play in its mitigation as it and financially reward those that have positive
is directly and indirectly responsible for a effects. Ecological agriculture with its reduced
significant proportion of global warming. At negative effects and increased positive effects
the same time it also needs to adapt to a is set to have a growing financial advantage
changing climate as it will have to acclimatise under such conditions.
to new weather patterns . Agro-Ecological Investment Management has
Organic agriculture is recognised as having a produced a paper on climate change and
key role in both mitigating and adapting to agriculture: ‘Climate Change and Investment in
climate change [45, 52, 68, 77, 79]. One Ecological Agriculture: Outperformance and
practical example of how this can be achieved Opportunity’ available from the Agro-
comes from the Rodale Institute in the USA, Ecological website.
where a comparison of organic and www.agro-ecological.com/investment-research/
conventional cropping systems in a long term
Water: droughts to deluges
experiment, found that organic farming
increased soil carbon (soil organic matter) by The paradoxical effect of increased soil organic
15 to 28% for legume and manure systems matter improving both water retention and
compared with industrial methods. In another drainage is not only scientifically fascinating,
compost comparison experiment, organic but it also has productivity benefits which lead
techniques increased soil carbon by to increased farm profitability. Higher soil
3,456 kg/ha/yr compared with a 230 kg loss organic matter levels reduces soil compaction
for the industrial system Figure 3, . Based and density and improves structure which in
on this result, if the 65 million hectares of corn turn means they drain more effectively .
and soybean grown in the United States were This means they are less likely to become
switched to organic farming, a quarter of a anaerobic, a condition which has multiple
billion tons of carbon dioxide could be negative effects not only on the soil itself, but
sequestered . This result was also achieved also on crop growth, nutrient loss and climate
with lower energy costs in the organic system change. For example, when soils are anaerobic
as shown in Figure 2. they produce methane and nitrous oxide,
which are powerful greenhouse gases, and
nitrates which leach from soil. Nitrous oxide
3,500 and nitrates also represent a potentially
3,456 significant loss of soil nitrogen  with both
Kilograms soil carbon / ha / year
environmental and direct financial downsides
2,500 in reduced crop yields.
2,000 Higher organic matter soils also hold more
water as well as draining excess water more
effectively, so they need less irrigation and are
1,000 less prone to erosion [23, 27, 29]. A clear
500 example of both the water holding and
drainage effects of organic management and
-230 increased organic matter is demonstrated by
-500 the results of a trial where in drought years
maize/corn yields under organic management
were significantly higher than the industrial
Figure 3. Average, annual, soil carbon change (conventional) agricultural system based on
(addition or loss) of an organic/compost vs. mineral mineral fertilisers (Figure 4) and yielded the
fertiliser experiment over ten years . same in non-drought years .
In 1999 the drought was broken by hurricane than industrial agricultural soils under all
derived torrential rain. The organic soils water situations, both rain-fed and irrigated.
captured twice the amount of water than the Better soil performance, translates into better
conventional treatment which lost the crop and livestock performance which means
difference in surface run-off with resultant soil higher on farm returns.
The soil: conclusions
These few examples, give a flavour for how
140% critically important good soil husbandry is for
farm sustainability, productivity and hence
120% 128% profitability, both in the short and long term.
Productive and profitable farms translate into
100% top farmland values at sale thus maximising
return on investment. So, although, on first
consideration, the soil may not seem to have
60% anything to do with successful investment,
there is a clear and unbroken chain starting in
40% the soil that continues through farm
management all the way to successful
20% agricultural investment.
Manure Legume Mineral
Organic treaments fertiliser
Figure 4. Relative maize yields in three cropping
systems, (two organic, one industrial), in five years
of water deficit between 1988-1998 .
So, whether the weather brings droughts or
deluges; or both; or the status quo,
ecologically managed soils will perform better
Ecosystem services are the benefits people dependent on ecosystem services. The 2005
obtain from ecosystems and include ‘Millennium Ecosystem Assessment’ 
provisioning services such as food, water, marked a turning point in humanity’s
timber, and fibre; regulating services that collective understanding of its total
affect climate, floods, disease, wastes, and dependence on the services provided by the
water quality; cultural services that provide natural world. It also clearly showed
recreational, aesthetic, and spiritual benefits; agriculture to be one of the primary direct
and supporting services such as soil formation, causes of ecosystem loss yet at the same time
photosynthesis, and nutrient cycling . being totally dependent on them.
Humanity, both poor and wealthy, while Agriculture is both a consumer and a producer
buffered against environmental changes by of ecosystem services Diagram 1,.
culture and technology, is fundamentally
Diagram 1. Linkages between ecosystem services and agriculture (adapted from ).
What does this mean for agricultural services, farming is more profitable in both the
production and investment? If an agricultural short and long-term.
system does not actively protect ecosystem
Even though organic agriculture predates the
services then its future is unsustainable
emergence of ecosystem service science and
because they provide irreplaceable functions
philosophy (e.g. [63, 82, 111]) by several
without which farming and wider society
decades, it is founded on the same
cannot prosper. The practical ramifications of
fundamental concepts, i.e. working with, not
this are both top-down and bottom-up. Top-
against, ecosystems. The very name ‘ecological
down in that legislation and markets are
agriculture’ clearly pins its colours to the mast
increasingly requiring agriculture to reduce its
of ecosystem services. In comparison
negative impacts on ecosystem services ;
industrial agriculture is a significant cause of
bottom-up in that by enhancing ecosystem
ecosystem service decline .
to the viticulturalist for hundreds of dollars. In
Direct benefits of ecosystem services to farms comparison, managing leafrollers with
A principle tool by which ecological agriculture buckwheat is not a proprietary product, i.e. it
enhances and benefits from ecosystem is a freely available idea.
services is to promote biodiversity, both of the
farmed species, i.e. crops and livestock, non- 0.50
farmed species and areas such as hedges. The 0.45
value of the ecosystem services this creates is 0.40
Proportion of leafroller larvae
often considerable. In one experiment, the
parasitised by D. tasmanica
economic value of ecosystem services on real-
world organic farms was shown to be 56%
higher compared with non-organic farms 0.25
Figure 5, . 0.20
Figure 6. The proportion of leafroller larvae
parasitised by D. tasmanica in areas of vineyard
$600 $670 planted with and without buckwheat .
$400 Once a viticulturalist understands the concept
they can use it indefinitely for the price of a
$200 few kilos of buckwheat seed worth a few tens
of dollars. Thus the grower saves money
Organic Non-organic thereby increasing their profits plus they have
more control over their production system due
Figure 5. The economic value (US$) of ecosystem to deeper knowledge of the pest and its
services on organic and non-organic farms . natural enemies.
This benefit was achieved ‘just’ from the
overall management of organic farms. At the
other end of the spectrum are highly
interventionist techniques. One example of
this is the use of the beneficial plant
buckwheat Plate 2, to reduce the leafroller
pest in vineyards by up to 29% with the result
that leafroller populations were below
economic treatment thresholds Figure 6, .
This represents a considerable direct financial
saving to the grower. It is also a good example
of the transferring of agricultural expertise
away from input suppliers to farmers. Without
the buckwheat the viticulturalist would have
had to spray with a biocide to control the
leafroller. The technical expertise in this Plate 2. Buckwheat flower.
system resides chiefly with the chemical The benefits of the buckwheat system do not
company that created the biocide. The stop there. The leafroller biocide is at constant
company recoups their investment though risk of failure due to evolved resistance 
patents and selling the product year-on-year and/or withdrawal of the biocide due to more
stringent legislative safety requirements, e.g. only at lower risk from legislative changes but
the European Union’s REACH program . that it will increasingly benefit from them.
Neither of these apply to the use of
For example, in the EU the Nitrates Directive
buckwheat as the leafrollers parasitoids
aims to protect water quality across Europe by
(‘predators’) are in evolutionary competition
preventing nitrogen from agricultural sources
with the pest so it is highly unlikely it will
polluting ground and surface waters by
develop resistance, and there are no harmful
limiting the nitrogen applied to farmland .
effects from growing buckwheat so legal
However, the use of nitrogen fixing crops and
prohibition is highly improbable. The
pasture species are not restricted by the EU
ecological buckwheat system is therefore far
Nitrates Directive, so while there are limits on
more sustainable than the chemical biocide
the amount of synthetic nitrogen that can be
applied, there is none on biologically fixed
The above two examples are just the tip of the nitrogen, giving ecological agriculture the
iceberg in terms of the value of ecosystem advantage.
services to farming. There is now considerable
Another example is the synthetic biocides
and continually increasing, scientific evidence
used by industrial agriculture, which when
of the substantial value of ecosystem services
they persist and escape into the wider
to agriculture and that organic/ecological
environment can cause a wide range of
agriculture is the clear leader in boosting such
unwanted effects . One example of the
political response to this is the EU wide review
The above examples demonstrate the financial of all synthetic chemicals  with the result
benefits of using ecosystem services instead of that many are being banned, withdrawn by
purchased inputs, e.g. several hundred dollars the manufacturer, or their conditions of use
per hectare per year. At the same time the effectively prevents them being used, e.g. the
ecosystem approach is measurably period of time between application and when
sustainable, while the industrial biocide the crop can be sold (the ‘harvest interval’) is
approach is unsustainable. longer than the time the crop takes to grow
. Organic agriculture eschews the use of
Ecological agriculture’s lower ecosystem synthetic biocides so their loss is of no
impacts consequence, while their prohibition is
Not only does ecological agriculture financially proving to be a serious headache for industrial
benefit from the ecosystem services it agriculture .
enhances, it also performs better on the flip In the United States the President’s Cancer
side of having less impacts on the ecosystem Panel has recently called for systematic and
services that wider society relies on, such as wide ranging reduction of agrichemicals
clean water and air and global temperature putting further pressure on the use of such
regulation . inputs .
Governments are increasingly legislating Organic/ecological agriculture builds soil
against agricultural activities that reduce organic matter, which is the method by which
ecosystem services [35, 74, 93]. Such carbon is stored in soil. This in turn is a critical
legislative curbs on the negative effects of mechanism to mitigate climate change (as
agriculture on ecosystem services are discussed above). Soil carbon sequestration is
therefore a significant risk for industrial one example of potential ecosystem markets.
agriculture as it is industrial farming Other future ecosystem markets include water
techniques that are in a large part responsible quality and biodiversity. Carbon trading
for the problems in the first place. In markets are already in existence, and interest
comparison, ecological agriculture has lower in other ecosystem markets is growing rapidly
negative impacts and more positive benefits e.g. see www.ecosystemmarketplace.com
for ecosystem services meaning that it is not .
Ecological farmers are favourably poised to This is even more so the case with organic
benefit as both wider society and individual agriculture. The reductionist approach of
businesses start to pay ecologically sound industrial agriculture with its increased
farmers for the ecosystem services that they reliance on outside expertise makes it simpler
have hitherto provided at no cost . to farm. The holistic approach of organic
management demands greater skills and
From an investment perspective focusing on
knowledge. This represents a barrier to entry,
farming systems with positive ecosystem
as obtaining this additional knowledge and
service outcomes and avoiding those that fail
skill is not achieved easily. There is also a social
to take advantage of ecosystem services,
barrier for many existing farmers to covert to
and/or harm ecosystem services essential for
organic agriculture, plus the detailed auditing
wider society will be vital to maximise both
requirements and the two to three year
income and asset values. Ecological agriculture
conversion period create further impediments
is measurably superior in this respect.
to entry. If the knowledge and expertise are
available, then these barriers enhance
Barriers to entry - the organic investment
investment potential as it is more difficult for
others to enter, thereby dramatically reducing
Agriculture is utterly unlike any other business. the bandwagon effect where new entrants
Farming is a technical enterprise, more flood the market, or worse less scrupulous
complex than any production line. It spans a people try to enter. This moderating effect
wide range of scientific disciplines such as soil shows itself in the continued outstripping of
science, plant and animal biology and ecology, supply by demand and persistent price
engineering, marketing, and even premiums, despite organic agriculture
meteorology. Managing farms and agricultural expanding dramatically for over three
investments requires both extensive decades. These conditions are text-book
knowledge and experience, neither of which examples of a highly profitable and stable
can be gained by reading a few books or even business sector that is ideal for generating
taking a degree. It is a profession, requiring superior returns on investment.
both formal qualifications and extensive real-
Ecological agriculture generates a stable,
future adapted and profitable investment
Uses a whole system approach. Minimises the use of external inputs
such as fertilisers, fossil fuels and
This creates a system that is environmentally
sustainable, low cost and has low exposure
to rising costs with potential for superior By minimising the use of such inputs
productive performance (income) organic agriculture reduces its
supporting higher asset values. exposure to evolved resistance in
the case of pesticides and to the
Uses biologically fixed nitrogen.
increasing insecurity of these inputs
This avoids the multiple ills of synthetic arising from regulatory and market
nitrogen such as: demands.
1. high energy use; In addition organic agriculture, by
2. destruction of soil organic matter; minimising the use of these inputs,
3. environmental pollution; reduces its exposure to cost
4. escalating climate change; and increases and their negative impact
5. lower quality crops and livestock. on farm profitability.
Avoiding the above ills in turn avoids their
Uses and generates positive ecosystem
1. exposure to increasing cost;
2. reduced yield, negative impacts on This creates a double-dividend of
asset value, and increased exposure to decreased farm production costs
extreme climate impacts such as (and exposure to rising costs) and
drought and flood etc; potential payments from ecosystem
3. damage to the asset and its productive service markets.
capacity, reputational risk and cost;
Has multiple entry barriers.
4. reduced yield, higher costs, damage to
the asset and its productive capacity; Including technical knowledge and
and expertise as well as social and
5. reduced income. regulatory hurdles such as detailed
auditing and multi-year conversion
Maximises soil health, particularly organic
This minimises the ‘bandwagon’
This creates multiple benefits including
affect, the easy entry of
carbon sequestration, decreased nutrient
uncommitted and unethical
loss, biodiversity, better water holding
businesses into the sector and the
capacity and drainage and healthier crops
development of un-balanced
Making a long-term investment into a farming The strengths of ecological/organic
system with higher costs and an uncertain management outlined above translate into a
future could not be described as prudent. The more stable and resilient production system
organic option avoids such limitations. with significantly positive implications for long
term income generation and capital
A top-down analysis of agriculture needs to be uninhabited areas to expand into, urban areas
holistic, i.e. looking at the whole picture, just (cities) are mostly expanding onto adjacent
as ecological agriculture is itself a holistic land. Unfortunately, many urban areas are
agricultural system. A lot of business analysis located on the most productive farmland as it
starts with market demand, and economic was this attribute that initially attracted large
commentators often talk about ‘what the numbers of people to the location in the first
market is doing’ or ‘where the market is place, therefore it is mostly the best farmland
going’. However, markets are not the origin of that is being lost. However, those areas which
demand, nor are they entities with minds of farming could potentially expand onto are
their own; rather they are mechanisms for often poor quality, e.g. too steep, rocky, poor
more fundamental components to interact. soil, too little/much rain etc., and they are
Understanding these components and the often areas of natural vegetation, which even
factors influencing them, particularly over the if they are not very appealing from a human
longer term, is critical to successful perspective, e.g. ‘scrub’, they are often utterly
investment. critical ecosystem service providers such as
greenhouse gas sinks, so converting them to
The global farm and food picture farmland is exceptionally hazardous in the
For the first time in the earth’s history, one long term.
species - humans have populated the entire At the same time there are some original
planet. Prior to the industrial revolution, when agricultural products that are making a return,
people exceeded the locally available land, a key one being (bio)fuel crops, many of which
they simply moved to new areas. This is no are also food crops, e.g. maize and oil seed
longer an option as humanity has now rape, and/or they need to be grown on good,
explored the earth’s entire surface and set up rather than marginal land, to be viable, e.g.
home everywhere that is habitable. miscanthus. Biofuels are therefore putting
even more pressure on food production
A growing global population meaning that food prices are likely to climb
The global population now stands just under higher still.
seven billion with nine billion forecast by 2040
. Agriculture is now the dominant means The future of investment is in agriculture
of feeding people (as opposed to wild harvest) The growing world population therefore needs
. In rapidly developing and industrialising more, and increasingly can pay, for higher
areas such China and India, incomes are quality food, just as the availability of
increasing which is resulting in increased farmland to meet this demand is being
demand for food and more expensive forms of increasingly squeezed .
food, e.g. a shift from rice to milk and meat
. The appeal of agriculture and farmland
investment is due to the straightforward
Increasingly constrained farmland analysis that food will be in increasing demand
from a larger and more affluent world
However, agricultural land is in increasingly
population yet with increasingly limited
short supply. The global land area that is
availability. This creates a demand and supply
suitable for agriculture is 31.8 million km2 .
imbalance in favour of those producing food
However, some 21% of this land has been so
and investing in farming.
severely degraded as to destroy its productive
ability . The increasing world population
also requires space to live and with few
The result being that the agriculture sector is Technology for Development put it “Business
set to be a leading industry of focus and as usual is no longer an option” .
opportunity for investors as suggested by two
The unsustainability of mainstream/industrial
of the world’s leading investors, Jim Rogers
agriculture is the half of the picture that is
and George Soros:
missing from most agricultural investment
“Agriculture is going to be one of the decisions.
greatest industries in the next 20 years,
Failing to understand the bottom-up limits of
30 years”, and “I’m convinced that
agriculture means that it is impossible to make
farmland is going to be one of the best
informed decisions about top-down farming
investments of our time”.
strategy. Knowledge is power .
The future of agriculture is ecological It is in this environment that ecological
It is the considered opinion of Agro-Ecological agriculture, as outlined in the first part of this
however that most farmland investment report, is so overwhelmingly advantaged.
decisions are made on half, not the full picture
of agriculture. Ecological/Organic agriculture
Organic agriculture has the attributes to turn
In the past the answer to the above issues has
its ecological advantages into investment
been to increase the amount of food produced
advantages and thereby investment
per area of land, mostly by applying industrial
outperformance. These attributes include:
agricultural techniques. However, as outlined
in the first part of this report, farming is not a a strong historical legacy over nearly a
factory, its output cannot be increased century;
indefinitely. There are limits, from physical to a single transparent and democratic
ecological, as to how much food and other international peak body in the form of The
agricultural products can be produced from International Federation of Organic
the land, particularly without damaging its Agricultural Movements (IFOAM) so it
capital resources, such as soil, and support speaks with a single clear voice;
systems, such as ecosystem services, that are internationally agreed principles and rules
essential for agriculture to function. with thorough third party auditing,
The current dominant agricultural system meaning that it has a high level of
(industrial agriculture) has exceeded the integrity, trust and globally accepted
ability of these natural resources and systems standards which facilitate trade;
to be sustained, which means it simply cannot a globally recognised agricultural system,
continue its past trajectory and will have to including among sovereign governments
reverse in many areas instead of intensifying and intergovernmental organisations such
further as many suggest . as the FAO, so there are no issues about its
legal or other credibility;
The existing industrial agricultural model is a focus on the effects of its produce on the
coming under a multitude of increasing final consumer, which gives organic
pressures, including growing input costs with products the highest possible level of
reduced availability, diminishing performance, marketplace integrity and credibility; and
the threat and reality of climate change and clearly defined, high-value, market
increasing legal restrictions and market differentiation, which translates into
demands. growing market size and better returns.
This is the third pressure point on agriculture Organic agriculture is also an entirely
after a growing (and wealthier) population and appropriate option for ethical/SRI/ESG
constrained farmland. As the International investors seeking to participate in agriculture.
Assessment of Agricultural Science and
Consumers in the developed world such as
Organic agriculture - the global success North America, Europe and Japan and
story increasingly in developing countries such as
The size of organic agriculture is now China and India are asking more and more
substantial: globally there was 35 million questions about their food and other farm
hectares of organic farmland managed by 1.4 products, for example:
million producers (farmers and growers) in Where was it grown, i.e. what is its
2008. The majority of the land is in Oceania provenance?
(12.1 m ha), Europe (8.2 m ha) and Latin
Were any biocides (pesticides) used in its
America (8.1 m ha), with the highest number
production, i.e., is it safe to eat?
of producers in India (340,000), Uganda
Has it undergone harmful processing, i.e.
(180,000) and Mexico (130,000) with more
is this real food or is it some kind of ‘food
than a third of producers in Africa . This
clearly demonstrates the truly international
Is it free of transgenic material, i.e.
stature of organic agriculture, i.e. it is not just
genetically engineered / modified
restricted to affluent countries. At the same
time, 35 million hectares is just 0.81% of
global agricultural land  which represents What is its nutritional value, i.e. will it help
a huge growth opportunity. Organic farming keep me healthy and fit?
has not been sluggish in its growth What are the environmental effects of the
performance, with organic farmland tripling farming, production and distribution
since 1999 Figure 7, . systems, i.e. is it causing ecological
The organic market has been performing Does it treat livestock humanely?
extraordinarily well and remains strong, Is it ethical? [9, 28, 42, 99, 118]
expanding (rapidly) and undersupplied in a
number of key enterprises/products. Organic agriculture clearly answers these kinds
of questions in the affirmative because they
Exceeding market expectations are the same issues that are built into the core
Organic agriculture can be described as surfing of organic farming .
the marketing zeitgeist of the 21st century.
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Agricultural land Aquaculture, forest, wild collection & bee keeping
Figure 7. Increase in organic agricultural land area and further certified land .
Provenance is a key issue in organic Put simply, organic agriculture fulfils or
agriculture. Every individual certified organic exceeds consumer expectations. Its
product can be traced back to the farmer(s) authenticity, robust standards and
that produced it. Organic farming is the origin environmental rigour make it a clear leader in
of direct food distribution systems such as ‘box terms of market alignment. The results in
schemes’ and CSA (community supported terms of demand growth and price premiums
agriculture) and it is a natural fit for ongoing speak for themselves.
approaches to link farmers and consumers
such as farmers markets. The booming organic marketplace
Organic agriculture has banned all synthetic Global sales of organic food and drink were
biocides, which coupled with rigorous auditing US$ 50.9 billion in 2008 an amount that has
systems mean that organic food has the lowest doubled in just five years (US$ 25 billion in
risk of containing biocides/pesticides . 2003) Figure 8, .
The effect of processing on food quality is a 60
foundation concern of organic agriculture [58,
72], and organic standards and principles are 50
clear that the minimal amount of processing
and only natural ingredients should be used in 40
organic food. Organic agriculture has clear and US$ (billions)
strong links with the ‘Slow Food’ movement
on this and related issues .
Organic agriculture has completely banned the
use of transgenic organisms and their
The maxim of organic farming is ‘healthy soil,
healthy food, healthy people’. It
unambiguously illustrates that the primary
1999 2002 2005 2008
concern of organic agriculture is the impact of
how food is produced and processed on the Figure 8. The global market for organic food and
health of those eating it. The scientific drink 1999 to 2008 .
evidence of the improved health benefits of The sales of fruit and vegetables account for
organic food are now well established [24, 40, 36% of the global organic food market,
44]. followed by prepared food and others 19.90%,
Care for the environment is a fundamental with the fast growing dairy category in third
issue for organic agriculture and its place with 16.80% Figure 9.
environmental benefits now have a
considerable body of supporting scientific
evidence, from local to global effects [6, 37, % Share by Value
69, 98, 101]. 10%
The humane treatment of livestock is a key 36% Fruit & Vegetables
principle of organic agriculture, enforced by 11% Prepared Food and Others
standards and auditing . Dairy
Organic agriculture is the only agricultural Bread and Grains
17% Meat, Fish and Poultry
system that has explicitly and democratically
determined its ethical principles. These are the
principles of Health Ecology Fairness and Care Figure 9. Global Organic Food Market
. Segmentation I: % Share, by Value, 2008 .
The highest market growth is occurring in market opportunities. At the same time
North America. The USA has seen organic consumers have been rocked by the high
foods jump from 0.8% to 3.5% of total market incidence of recent health scares, such as
share from 1997 to 2008 with sales growing melamine in milk in China, cola drinks in India
from US$ 3.5 to US$ 22.9 billion in the same and tofu in Indonesia . This makes the
period Figure 10, [43, 94] . affluent Asian consumers wary of products
from other countries in the region which is
increasing demand for products from
countries viewed as safe producers such as
20,000 New Zealand .
Australia and New Zealand continue to be
15,000 organic export powerhouses due to their small
domestic markets compared with the large
10,000 size of their agricultural land base Figure 11,
Million New Zealand dollars
Figure 10. USA organic food sales from 1998 to
2008 . 80
Even though organic farming is the fastest 60
growing segment of U.S. agriculture for over a
decade, production is still lagging behind 40
demand which is being met by imports from a
range of countries . In Canada, sales data 20
has not been collected for as long or as
systematically as the USA but recent surveys 0
put the value of the market between Canadian 1997 2002 2007
$2 to 3 billion, and the market shows Figure 11. New Zealand organic export market
considerable growth potential [46, 67]. from 1997 to 2007 .
Europe has the largest organic food industry in Having said this, the domestic markets in both
the world (US$ 26 billion) and the organic Australia and New Zealand also continue to
market remains the fastest growing food grow strongly for the same consumer driven
sector within Europe with considerable reasons they are elsewhere [42, 119].
potential to widen still further . The fastest
expansion of organic demand and production New Zealand export markets/sectors are
is now moving eastwards to Central and dominated by fresh fruit and vegetables which
Eastern Europe . In many areas, are in turn dominated by apples and kiwifruit.
particularly in the north, demand still outstrips However, dairy in particular has shown very
supply for products including vegetables, fruit, strong growth in the last few years increasing
salads and dairy, so imports are required to fill from 6% to 16% of exports and $6,986,126 to
the gaps . $27,845,204 in value from 2007 to 2009 which
is almost a 400% increase [G. Middleton,
In Asia the largest markets for organic foods OANZ, pers. comm. 2010]. This is mostly due
are in Japan, South Korea, Taiwan, Singapore to the entry of Fonterra, the 13,000 member
and Hong Kong, which are the more affluent dairy farmer co-operative which is New
countries in the region . However, these Zealand’s largest multinational company, with
countries have very low domestic organic revenue exceeding NZ$16 billion and that is
production so they represent significant
responsible for approximately 40% of the because of its intrinsic properties such as
world's dairy exports. Fonterra have a very healthier, safer and better for the
significant and ongoing organic supply environment. Therefore even at the height of
shortfall. Currently there are approximately the financial downturn, people continued to
100 organic dairy farms (including in- purchase organic food, even if they traded
conversion) but Fonterra require three times down, e.g. from ready meals to fresh
that number to meet existing demand, while ingredients to cook at home.
that demand is growing at 17% per year
There is also the axiomatic precept that food is
[R. Managh, Fonterra, pers. comm. 2010].
a non-discretionary purchase, i.e. after air and
water humans have to eat to live. This can
The ‘non-event’ of the global financial crisis
appear to be forgotten on occasions by some
The global financial crisis of 2008, has proved financial analysts and politicians2. While air to
to be a minor blip for organic agriculture breathe is free, there is only a limited amount
rather than any kind of failure [54, 65, 75, 94]. by which people can reduce the quantity of
The picture is complicated, as would be food they purchase (without radical self-
expected, because the financial crisis had sufficiency lifestyle changes few can achieve).
widely varying impacts on different regions So unlike practically any other business,
and countries. In addition there are agriculture has as guaranteed a market as it is
considerable variations in food and organic possible to have. The results of organic food
markets among regions/countries. The overall sales through the financial crisis strongly show
trend however was not a decrease in organic that while people had the option of changing
food sales but a minor reduction in the rate of from organic to cheaper industrial food, most
increase, e.g. double digit growth dropped to continued to buy organic, and some even
high single digit growth. At the same time the increased their organic purchases. Actions
tail-off in organic foods was less than non- speak louder than words.
organic foods. It is clear therefore, that
consumers were not abandoning organic for Premium market prices.
non-organic food . This outcome was not
Even though organic agriculture has seen
consistent among the different food sectors.
dramatic increases in market size this has not
For example, high priced convenience items,
been at the expense of price premiums. For
such as ready meals, saw a larger reduction,
example, recent surveys of Australian
while staples such as fresh fruit and vegetables
consumers found a willingness to pay an
and key niches such as baby food even saw
organic price premium of 17%  while in
sales increase faster [43, 115]. A similar
California consumers said they would pay up
picture emerged in retailing with the highest
to 39% for organic produce . In a parallel
end retailers with a larger proportion of luxury
with the increased consumption of organic
goods noticing a fall-off in growth rates, while
products by higher income earners during the
others at the ‘value’ end of the spectrum, such
financial crisis, those with higher educations
as farm shops and box schemes saw an
are also willing to pay more for organic food.
increase in the rate of growth. At the same
For example, in a 2007 survey those with
time higher income earners purchased more
secondary education would pay 13% more
organic produce in the crisis, even if their
while those with a tertiary education would
incomes decreased, as this market sector
pay 19% more .
became increasingly sensitive to ethical issues
. In the USA a decade’s worth of data for a
broad basket of products shows organic price
These patterns indicate that while organic
premiums have been approximately 50% to
food is seen as a quality product it is not
300% Figure 12.
viewed as a luxury by most organic consumers,
i.e. consumers understand that organic food 2
may cost more, not because it is trendy or that For example the late New Zealand Prime Minister,
it is a means to display their affluence, but David Lange, who in 1988 infamously described
farming as a “sunset industry”.
Organic price premium
Figure 12. USA organic price premiums (maximum, mean, minimum) over the same non-organic product
between 1999-2008 (not all products recorded in all years, data compiled from ).
In New Zealand organic producers are is itself up on the season’s opening forecast of
achieving premiums of 39% for apples, 35% for $4.10 [R. Managh, Fonterra, pers. comm.
kiwifruit with similar production costs to non- 2010]. In addition Fonterra are guaranteeing
organic [H. Atkinson, OANZ, pers. comm. the premium for organic milk for three years
2010]. Fonterra offer suppliers a in-conversion and then another three years
NZ$1.05 / kg milk solids (kgms) premium over once fully certified organic, i.e. a six year
the non-organic price for fully certified organic contract. This is a remarkably clear cut
and NZ$0.45/kgms for in-conversion milk. The endorsement of the organic market, especially
current conventional milk price forecast is coming from a company that represents 40%
NZ$6.10/kgms for the 2009/10 season, which of the world's total dairy exports.
As with the microscopic world of the soil, the
long term, global scale, ‘top-down’ picture for
organic agriculture is one of clear and
The world’s population continues not only with thorough third party auditing,
to expand and demand more food, but meaning that it has a high level of
also better quality food. integrity, trust and globally accepted
standards which facilitate trade.
The land base to meet this demand is
increasingly limited by the poor quality of Organic products offer clearly defined,
prospective new farmland, the need for high-value, market differentiation, which
such land to provide vital ecosystem translates into growing market size and
services, and the loss of existing farmland better returns.
to urban growth and land degradation.
Organic agriculture fulfils or exceeds
The appeal of agriculture and farmland consumer expectations. Its authenticity,
investment is due to the straightforward robust standards and environmental
analysis that food will be in increasing rigour make it a clear leader in terms of
demand from a larger and more affluent market alignment.
world population yet with increasingly
The market demand results generated by
limited availability. This creates a demand
organic agriculture over the last three
and supply imbalance in favour of those
decades speak for themselves, with
producing food and investing in farming.
consistently strong growth in global
The current dominant agricultural system markets, (often in double digits).
(industrial agriculture) has exceeded the
The global financial crisis only slightly
ability of natural resources and systems to
decreased the expansion of organic
be sustained, which means it simply
demand, rather than reversing it, with
cannot continue its past trajectory and will
some organic food sectors, e.g.
have to reverse in many areas instead of
wholefoods, growing at a faster rate than
intensifying further as many suggest .
pre-crisis and some consumer sectors, e.g.
This produces a nexus of increasing high net worth families purchasing more
demand with a narrowing supply base and organic food not less due to ethical
curtailment of existing technological concerns.
approaches creating long term price
Even with the continued strong growth of
increases for agricultural products.
organic agriculture over recent decades,
Ecological agriculture addresses these premium prices have been maintained,
issues without the problems associated indicating the stable, robust and long term
with industrial agriculture. nature of the organic agricultural
Organic agriculture operates according to
Internationally agreed principles and rules
This dual-perspective analysis demonstrates ecosystem service markets, e.g. carbon
the need to understand agriculture from both trading.
the bottom-up and top-down. Without such a
The world is moving into uncharted territory,
holistic approach it is impossible to make truly
or rather lack of territory, as every last
informed decisions about investment in
habitable area of the planet is lived on.
Despite the lack of new land, the global
Despite over a century of attempts, farming is population is set to increase 50% by 2040 as
not a factory and it cannot be treated as such well as increasing in affluence, which means
because doing so damages the natural that demand for food will both increase in
systems/ecosystem services (e.g. biodiversity) quantity and quality. A growing population is
that are essential for productive agriculture also leading to a decrease in farmland
and the wider prosperity of human civilisation. availability, the opposite of what is required.
Farmland investment has to be long term due From an investment perspective organic
to the character of the enterprise. Even in the agriculture has the attributes of a definably
short term, the unsustainability of industrial unique, secure and attractive investment
agriculture is now apparent and it faces proposition. It is firmly established, tested
increasing restrictions, both natural and over many decades and globally recognised at
political/regulatory on its future the government and intergovernmental level.
growth/expansion. Ecological agriculture As a business sector it has demonstrated clear
however is increasingly advantaged by the and ongoing success on the ground (farm
prevailing and developing environment. level), a track record of exceptional market
demand growth and is based upon the robust,
Ecological/organic agriculture works with
scientific and genuinely sustainable
natural systems such as the soil and
management of that most secure and tangible
biogeochemical cycles rather than against
of assets - land.
them, whilst being as efficient and self-
contained as possible. By working with This depth of understanding in the agricultural
nature’s systems it is adapted to be more thematic environment reveals organic
resilient, secure and well performed in the agriculture as a definably sustainable, resilient,
face of issues such as climate change, and profitable (lower cost, higher income)
increasing environmental legislation and sector.
growing consumer ethical awareness. It is also
In fact from an investment perspective organic
well positioned to be able to take advantage of
agriculture is overwhelmingly advantaged.
new potential income streams generated by
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