Silver Spring, MD—What is the impact of organic certification on land value? Mercaris, along with partners including Croatan Institute, Laird Norton Company, Merge Organics, Midwestern BioAg, and People’s Company, addresses the topic in the first whitepaper in its Mercoterra project. The key finding: Certified organic cropland can command higher rents.
Data gathered from a survey of organic farmers and landowners revealed that organic land for row crops receives an average 25% rent premium over conventional cropland. Mercaris reported in a press release that respondents who rent both conventional and organic land pay a price premium of $68 per acre annually for land that is certified organic. Mercaris noted that this premium can be overlooked when considering the value of owning, managing or transitioning to organic farmland.
“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,” said Erin Leonard, manager of this initiative at Mercaris, in the release. “What we’re seeing is evidence that organic certification can go beyond income and boost the overall value of the farm operation.”
Taking a closer look, Mercaris reported:
- Price premiums were not universal. Some respondents did not receive a price premium for the organic land they own or rent; Mercaris said more research is needed to determine the true extent of premiums.
- Beyond rental values, most organic landowners believe that, thanks to the organic status, they can sell their land for a higher value then when they purchased it.
- 60% of organic owner-operators reported that the net operating income has increased since the land has been farmed organically.
- 70% of respondents converted the organic land themselves, suggesting that most organically certified land is farmed by its original operator.
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“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 in the release. “Continued growth should lead to more farmers and land owners needing to understand the correlation between production practices and land value.”
Mercaris CEO Kellee James added, “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. We hope to change that with the Mercoterra initiative.”