Aug 12, 2020

Report shows how organic certification boosts land value

Certified organic cropland can command substantially higher rents than traditional agriculture, according a recent report.

Research firm Mercaris recently issued a whitepaper in its Mercoterra project, which investigates the impact of organic certification on land value.

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, according to a news release.

“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 the initiative at Mercaris, said in the news release. “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 wasn’t felt by all respondents, with some reporting no premium for the organic land they own or rent. 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, according to the news release. Sixty percent of organic owner-operators stated that net operating income has increased since the land has been farmed organically. Also, 70% 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 in the news release. “Continued growth should lead to more farmers and land owners needing to understand the correlation between production practices and land value.”

Mercaris’ partners in the Mercoterra project effort include Croatan Institute, Laird Norton Company, Merge Organics, Midwestern BioAg and People’s Company.

“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 in the news release. “We hope to change that.”