August 12, 2020 (SILVER SPRING, MD) – Certified organic cropland can command higher rents, a phenomenon that can be overlooked when considering the value of owning, managing or transitioning to organic farmland, according to research by Mercaris and several partners.
Today, Mercaris issued the first whitepaper in its Mercoterra project, which investigates the impact of organic certification on land value. Partners in this effort include Croatan Institute, Laird Norton Company, Merge Organics, Midwestern BioAg, and People’s Company.
According to the data gathered from a survey of organic farmers and landowners, organic land for row crops on average receives a 25% rent premium over conventional cropland. Among respondents who rent both conventional and organic land, Mercaris found that they pay a price premium of $68 per acre annually for certified organic land.
“We’ve known for a long time that there is a substantial premium for organic crops, but these results indicate that the financial impact to organic farmers is broader,” Erin Leonard, manager of this initiative at Mercaris, said. “What we’re seeing is evidence that organic certification can go beyond income and boost the overall value of the farm operation.”
The boost in value was not universal, however. Some reported no premium for the organic land they own or rent, and more research needs to be done to determine the true extent of these premiums. Beyond rental values, Mercaris found that most organic landowners believe they can sell their land for a higher value then when they bought the land due to its organic status. Sixty-percent of organic owner-operators stated that net operating income has increased since the land has been farmed organically. Lastly, 70 percent of the Mercaris survey respondents overall converted the organic land themselves, implying that most organically certified land is farmed by its original operator.
“Organic commodity farming has grown steadily over the last decade, about 8% per year, and U.S. demand is still higher than domestic supply,” Leonard said. “Continued growth should lead to more farmers and landowners needing to understand the correlation between production practices and land value.”
“One of the barriers to organic certification for many farmers is that they lack a full picture of the impact it has on the whole operation,” Kellee James, Mercaris CEO, said. “We hope to change that with the Mercoterra initiative.