An empirical analysis of risk in conventional and organic arable farming in The Netherlands

P.B.M. Berentsen, M.A.P.M. van Asseldonk

Business Economics Group, Wageningen University, Hollandseweg 1, 6706 KN, Wageningen, The Netherlands.

Abstract

This paper assesses and compares risk in conventional and organic arable farming in The Netherlands with respect to family farm income and underlying price and production variables. To investigate the risk factors the farm accountancy data network was used containing unbalanced panel data from 196 conventional and 29 organic representative Dutch arable farms (for the period 2002 up to and including 2011). Variables with regard to price and production risk were identified using a family farm income analysis scheme. Price risk variables are input and output prices, while yield volatility of different crops is the main production risk variable. To assess risk, an error components implicit detrending method was applied and the resulting detrended standard deviations were compared between conventional and organic farms. Results indicate that the risk at the level of family farm income is higher in organic farming. The underlying variables show higher risk for organic farms in crop yields, crop prices and variable input costs per crop.

Keywords: Arable farming; Organic farming; Risk assessment; Error component implicit detrending method.