Comparative Cost Analysis of Organic and Conventional Farming in Hungary

Abstract

The cost–profit relations of organic and conventional farming were examined using natural and financial data of a large agricultural company in western Hungary and economic models characterizing private farms in eastern Hungary. The differences in cost structures reflect variable conditions relating to certain crops but they can be well explained by the differences in the technologies used. According to the production data, direct costs per hectare in organic farming were less in all of the four examined crops. Even cost per production unit and contribution were more favorable in three of the investigated crops. Regarding the calculation done by economic models, the costs per hectare relating to the two production methods were not significantly different. Yields in organic crop production were typically less; however, costs per unit and selling prices were greater. Differences in gross profits may be explained by different yields and selling prices. In most of the developed model variations, organic farming is more profitable; however, the extra price for organic products is not sufficient for achieving a greater profit in every year.

Keywords:

• Conventional farming
• costs
• organic farming
• profit

Acknowledgment

The authors express their thanks for the financial support provided by the Hungarian National Research Fund (OTKA) No. K60444.

Notes

¹The five levels of subsidies are as follows: I, no subsidy; II, level of SAPS and TOP-UP; III, subsidies of II level supplemented by subsidies of less favored areas; IV, subsidies of II level supplemented by basic target programs of agrienvironmental farming measures (AEM) in the conventional model and by target programs of plant production and grassland farming in organic farming; and V, subsidies of level II supplemented by subsidies of less-favored areas and the mentioned target programs of AEM.