EFFICIENCY ANALYSIS OF ORGANIC FARMING SYSTEMS AN OVERVIEW ON JOINT TOPICS, RESULTS AND CONCLUSIONS Presentation at the Vadym Hetman Kyiv National economic University Sebastian Lakner & Stephan von Cramon-Taubadel November 11, 2011

Outline 1.Introduction: Organic Farming in Germany 2.Methods 3.Overview on empirical results 3.1Studies focussing on organic farming 3.2Comparative studies 3.3Joint topics and results, shortcomings 4.Summary and Conclusions November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 2

1. Introduction: Organic Associations and the state November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 3 Farmers Associations for organic farming Government-Signs for organic farming GermanyEuropean Union

1. Introduction: Wheat prices November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 4 Figure 2: Producer Prices of Conv. and Organic Soft Wheat Sources: ZMP [a]; ZMP [b]; ZMP [c]; AMI (2010a, 2010b, 2011a, 2011b).

1. Introduction: Grain Yields (dt/ha) November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 5 Figure 5: Wheat-Yields in Organic and Conv. Farms in Germany Source: own calculation, data from the Federal Ministry of Food, Agriculture and Consumer Protection

B technology 2. Methods: Data Envelopement Analysis November 11, 2011Efficiency of organic farms - Lakner & von Cramon-Taubadel Figure 7: Production function and production frontier Source: Cantner et al. 2007: p.5 C Output Input Output- oriented Input- oriented Slide No.: 6

2. Methods: Stochastic Frontier Analysis November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 7 Stochastic Production Frontier y = f (x; beta) * exp{v-u} Stochastic-term: exp {v} maximal feasible output Inefficiency-term: exp{- u} Input Observed farm n Output Figure 8: The Stochastic and inefficiency term in the model Source: Own elaboration according to COELLI et al. 2005: p. 244

3.1 Studies focussing on organic farming Labour’s impact on organic farms Arable farms > mixed farms > grassland farms The scale level is not always optimal Optimal specialization Regional distribution Efficiency during the period of conversion The organic subsidy has a negative impact on efficiency November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 8

Figure 9: Technical efficiency in 15 regional cluster of organic farming Source: own calculations November 11, 2011Slide No.: 9

3.2 Comparative studies Organic farming is less productive, Mixed evidence with efficiency Often separate estimation in DEA The choice of farm-system? November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 10

3.3 Joint topics and results, shortcomings Environmental objectives of organic farming Farm-structure of organic vs. conventional  Sample-selection techniques (the Heckman model)  Matching techniques Balance of observation in the data-set Optimal level of specialization Methodological issues November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 11

Environmental objectives of organic farming November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 12 Figure 12: Technical and Environmental Efficiency in Bavaria Source: own elaboration based on the results of Kantelhardt et al. 2009

4. Summary and Conclusions Organic farming is less productive Mixed evidence with efficiency Sampling issues  Balance in the sample  Structural issues Little discussion on topics specific to organic  Conversion to organic farming  Environmental efficiency  Little data on economic and environmental variables November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 13

Thank you for your attention! GEORG-AUGUST UNIVERSITÄT GÖTTINGEN

1920s – 1930s 1. Introduction: History of organic farming November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: s – 2000s 1980s ‚Natural farming‘ Ecological Farming AGÖL, BÖLW Ecological Farming AGÖL, BÖLW East- Germany ? Gäa Bioland, Naturland EU-Bio 1950s s ‘Organic-biological farming’ Müller & Rusch ‘Organic-biological farming’ Müller & Rusch ‚biological farming‘ Source: own elaboration, see also Vogt 2000, p.19 ‘Bio-dynamic farming’ Demeter Rudolf Steiner 1924

Retailing in the organic market November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 16 Figure 10: Shares of sales channels in the German market for organic food Source: Authors’ elaboration, data from IÖW (2007), R IPPIN and H AMM (2007), AMI (2011) 1: Farmers on weekly markets and farm-shops; including delivery-services from farmers. 2: Including Special Fruit and Vegetable stores. 3: Including drugstores, petrol-stations and other delivery services.

Farm-sizes in of German Farms November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 17

November 11, 2011Efficiency of organic farms - Lakner & von Cramon-Taubadel Figure 4: Regional concentration of organic farms in Germany in 2007 Source: Regional Database 2007 and 2005 from the German Federal Statistical Office (D ESTATIS 2006) 18

The organic market worldwide The world of organic farming in 2007: share of land November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 19

Table 1: Premium for organic grassland-farming in Germany Status August 2009 Programm ländl. EntwicklungELER-Verordnung VO (EG) Nr. 1257/1999(VO (EG) Nr. 1698/2005) UmstellungBeibehaltungUmstellungBeibehaltungDifferenz Berlin 153 € 102 € 131 €128% Brandenburg 180 € / 130 € 130 € 131 €101% Baden-Württemberg 130 € 150 €115% Bayern 255 € 190 € 75% Bremen 285 € / 160 € 160 € 137 €86% Hessen 190 € 160 €84% Hamburg 153 € 160 € 137 €86% Mc-Pomm 210 € 160 € 135 €84% Niedersachsen 285 € / 160 € 160 € 137 €86% Nordrhein-Westfalen 409 € / 204 € 153 € 262 € 137 €90% Rheinland-Pfalz 205 € / 153 € 120 € 100% Schleswig-Holstein 285 € / 160 € 160 € 137 €86% Saarland 210 € 160 €262 € 116 €73% Sachsen 244 € 262 € 137 €56% Sachsen-Anhalt 252 € 192 € 252 € 192 €100% Thüringen 230 € 205 € 187 € 160 €78% Germany 210 € 160 € 262 € 137 €86% November 11, 2011 Efficiency of organic farms - Lakner & von Cramon-Taubadel Quelle: Eigene Recherche, Nieberg & Kuhnert 2006 Slide No.20

technology 2. Methods: Efficiency Analysis Figure 6: Production function and production frontier Source: Cantner et al. 2007: p.5 November 11, 2011 Efficiency of organic farms - Lakner & von Cramon-Taubadel Production-“frontier“ „Best practice“ Production function „actual practice“ B C „Optimal practice“ Output Input Slide No.: 21

Used model approaches November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.: 22

November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelFolie Nr. 23 von 30 Figure 10: Technical efficiency of organic farms during and after the conversion period Source: own calculations

Figure 5: Milk-Yields in Organic and Conventional Farms in Germany Source: own calculation, data from the Federal Ministry of Food, Agriculture and Consumer Protection 1. Introduction: Milk-Yields on organic farms November 11, 2011Efficiency of organic farms - Lakner & von Cramon-TaubadelSlide No.24