Economic performance of organic dairy farms during and after conversion

Abstract

Empirical research on the economic performance of organic farming yields conflicting results. The findings vary by region, agricultural sector, economic performance indicators, and methodologies used. This study compares the economic and financial performance of conventional and organic dairy farms by specifically examining the performance trends during the period when conventional farms got converted into organic farms. Using a difference-in-differences estimator within a panel regression model, we analysed the microdata of 1,016 farms in Ille-et-Vilaine (Brittany, France) between 2007 and 2018, including 62 farms that had converted from conventional farming to organic farming during this period. Our results show that, contrary to expectations, the financial performance of the farms did not reduce significantly during the conversion. However, after the two-year conversion period, the profitability and return on assets of organic farms exceeded those of conventional farms. Considering the limited sample size of organic farms analysed in this study, these findings require further validation.