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ECONOMIC ANALYSIS

Organic and Conventional Production Systems in the Wisconsin Integrated Cropping Systems Trial: II. Economic and Risk Analysis 1993–2006

^a Agriculture & Applied Economics Dep
^b Agronomy Dep., University of Wisconsin, Madison

^* Corresponding author (jlposner{at}wisc.edu).

This article, the second in a series looking at the Wisconsin Integrated Cropping Systems Trial (WICST), reports on the profitability of six conventional and organic systems, with a focus on net returns and associated risk exposure. Several pricing scenarios were compared to evaluate the impact of government programs and organic price premiums. When net return estimates are made using only neighboring elevator prices (no government programs or organic price premiums), we found that the no-till corn-soybean system [Zea mays L. and Glycine max (L.) Merr.] was the most profitable grain system, and management intensive rotational grazing (MIRG) the most profitable forage system. When government programs and organic price premiums are included, returns increased by 85 to 110% for the organic grain system (corn-soybean-wheat + red clover (Triticum aestivum L. + Trifolium pratense L.) and 35 to 40% for the organic forage system [companion seeded alfalfa with oat + field pea (Medicago sativa L., Avena sativa L., and Pisum sativum L.), hay, and then corn]. This places both organic systems with higher returns than any of the Midwestern standards of no-till corn-soybean, continuous corn, or intensive alfalfa production. Also, the results indicate how risk exposure varied across systems. Interestingly, taking risk into consideration did not drastically affect the ranking among those systems. Our analysis shows that, under the market scenarios that prevailed between 1993 and 2006, intensive rotational grazing and organic grain and forage systems were the most profitable systems on highly productive land in southern Wisconsin.

Abbreviations: CC, counter cyclical (payment) • CE, certainty equivalent • CRRA, constant relative risk aversion • DP, direct payment • LDP, loan deficiency payment • MIRG, management intensive rotational grazing • WICST, Wisconsin Integrated Cropping Systems Trial

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Received for publication August 15, 2008.