One of the biggest questions most organic or regenerative farms are asked is why the produce or services they offer more expensive compared to conventional. There are many reasons for this - and they move from labor costs to additional tasks performed on the farm.
I am discussing the reasons why buying organic food from farms is more expensive. It can be cheaper to grow your own organic food, but operating a farm comes with a different set of challenges that is not present when running a homestead or a garden. I think everyone should absolutely garden and grow their own food, but a farm has a different set of economic challenges and environmental benefits when compared to a garden. These are reasons why organic is more expensive when looking at a farm as a business.
Going into this, I would like to say that the fundamental reasons organic food is more expensive is because of government policy. There is insufficient policy and incentives to help organic farming become cheaper. There is very low government support to bring costs down or subsidies in place to assist in the transition to organic. There are limited loan programs or training programs to assist farmers in this transition and no crop insurance incase of failure due to pest outbreak or weather. There are no easy loan programs for farmers to borrow money to become organic at low interest rates. The process of ramping up your organic farm can be expensive as you need to put in money upfront for compost, soil tests, machinery, etc.
We can only speak about ourselves and why our produce cost higher than conventional. We focus on reducing unnecessary costs as much as possible but our inputs are large and we try and pay fair prices for the items we purchase. The goal for any farming business (or any business) is to have costs lower than revenue, but in a farm you have to really reduce costs as the changes in the climate affect yield - so you can't predict what your yield will be. The equation becomes a bit more complicated when the weather is a big part of your yield calculation. If you can't guarantee yields you might need some savings in the bank to weather the heavy storms ahead.
We speak as a small-holder farm. We are a small farm that is dedicated to growing as nature intends. We have to make decisions that are in line with ecosystem health and restoration and focus on soil building. These sometimes don't align with revenue as we have to make decisions where the outcome might be we loss a crop, but we have to look at the long run and focus on creating a healthy community. We're on the larger side of small-holder farms so we can absorb shocks in climate, but when growing techniques fail we fail in a larger way.
We don't want to use harsh chemicals not just for our ecosystem restoration, but also we don't want to expose our employees to those chemicals. They have to spray or apply those chemicals and they will eventually get into the water systems in our local area. In the long run, they will be affected by these chemicals as their children and grandchildren will grow up in environments with chemical pollutants.
The revenue from our business, in some part, goes to reducing the cost of organic food. We are very open to sharing all of our techniques of growing food as we learn and make more mistakes. We are very active in trying to see how to reduce the cost of growing each vegetable. I'd like to reduce our prices every year rather than increase, but we haven't been able to achieve that goal yet.
Here are some reasons why organic is more expensive at the moment. I do think that chemical prices will rise over time and organic will become cheaper. Our business is not global - most of our inputs come from within 10km of us and the changes in the global industry impacts our business less in the long run.
1. Economies of scale & subsidies
There is no or less economies of scale or large scale subsidies when purchasing equipment for organic farms. A lot of the seeds are grown by other organic farming companies that are usually picking and storing the seeds themselves & not using large machines to keep the seeds. A lot of the compost is made by small local composting companies rather than large scale composting factories. Organic movement is small in Thailand and so all of the inputs you need are expensive or need to be imported.
For example, there are no large-scale organic seed companies in Thailand. You need to build a lot of infrastructure to become a large-scale organic farm in Thailand. There is no good source of certified organic seeds in bulk quantities. We have to rely on other small farms to produce the seed, but there is no consistency in the quality or taste of the vegetable. So, we have to import seeds from other countries, but it does push up the price of production.
There are no government subsidies in most south east asian countries that offer reduction of prices of organic farming inputs. There is limited farm scale infrastructure that is built for organic farms as well - such as organic pest control and high quality compost. There is no help from the government in transitioning or incentives to become a large company.
There are developed countries where large scale organic farming infrastructure can be purchased. For example, in America you can apply to get a greenhouse from the government. This is helpful to have a place to start seedlings in so you are able to grow a variety of vegetables. There are grants that you can also get to do research on organic farming from the government - this is so you can run trials of what works in each climate, but nothing like that exists here, which means that trials need to come out of the pocket of farmers.
2. Input costs
There are many tasks that are done on an organic farm, such as weeding that are not done on a conventional farm. In conventional farms they use herbicides to kill weeds - we have a big task of weeding our vegetable areas and the rest of our agroforestry lands. When we have a mixed vegetable garden, we are not using large machinery to till or manage the land - so we have to have staff to individually de-weed them. Especially during the rainy season when the large amounts of water increases weed coverage. As your soil improves you have less weeding issues, but the journey to that goal is paved in weeds.
Other large costs are trial and error - there is no one path to organic. You cannot apply NPK exactly as mentioned on the packet. Every soil is different and every landscape is different. We all start off with different soil conditions - so we cannot apply the same techniques to balance our biology and soil chemistry. This means that you have to spend revenue doing trial-and-error to see what set of techniques work on your land. This is, of course, done in any business, but sometimes it feels like the public doesn't view organic farms are "businesses". There is research and development that goes into the outputs of the farm and you are paying for this research (as you do when you buy anything). But this research is directly related to the nutrients in the food.
3. Changing weather & climate
We have to buffer against the changing weather and climate. We have to have savings for when the weather changes or when we have a poor year. For farmers you usually only have about 60 farming seasons in your life. You don't get too many chances to iterate & earn revenue. You don't have many chances to develop the mental model for growing food. This + the changing weather means that you might not be able to predictably have the same costs year-over-year. It is a bit strange - pretend you are a factory but the conditions in your factory change every month and you don't know what they will be next month anymore.
When an organic system becomes established, it is more resilient to changing weather and climate. But when you are establishing a new farm - you have poor organic matter, biology, not enough biomass, and many other issues. This means that you will face a lot more issues when the weather is not ideal & you might lose some yield. Not just that, but you are also new to organic farming and might not have built up the necessary infrastructure to weather out heavy rains or heavy droughts. This means that at certain points of the year your produce might cost more as your personal costs increase. Or, you might need to charge more in your high season to get through the poor season.
It sometimes can become a seasonal business - such as tourism in Thailand. Prices are very high in the holiday seasons so they can maintain the hotels for the rest of the year. Farming sometimes can become this as we need to make money to cover farm expenses for the rest of the year.
4. Ecosystem restoration services
There is a big investment you make in ecosystem restoration services that is not priced in or subsidized. The focus on building soil organic matter, ponds, growing insect populations, planting trees, and more. Farms can become ways to sequester massive amounts of carbon - if they are managed in a positive way. Especially in Thailand where you can maintain bamboo fields and tropical forests. They can make a big difference in keeping ecosystems going.
I think this is something where governments can give incentives or subsidies to take the cost load off the farms. Farms are building and planting trees to maintain and create forests as well. It is beneficial for governments to give subsidies on these so farmers can allocate parts of their land to agroforestry without losing revenue.
5. Distribution economies of scale
The distribution of organic vegetables has also not scaled to a high-level in Thailand or most developing countries. Produce are sold directly by farms or by small super-markets. It is difficult for farmers that are not connected or technologically advanced to sell to different cities or clients around Thailand. This is being solved by different companies at the moment, but it is hard to reduce the price of organic farming unless a meaningful amount of distributors get involved in the selling of organic vegetables.
More farms need to sell organically and more restaurants or private clients need to be involved to drastically reduce the price. Once more people are buying the good we will be able to sell larger quantities at one time, which means more people are interested in growing and selling infrastructure tools for the organic movement. There needs to be more people trained to grow organically and more people trying and sharing information to make a healthy exchange of ideas.
6. Customer loss
Additionally, customer loss is sometimes a big issue in periods of climate stress on a farm. People usually want very specific groceries and when an individual farm is not able to provide those they go back to supermarkets or to other farms. It is just a different way of operating where you have to know you can't provide everything that conventional farms can. In this way it makes sense to create cooperatives and groups of farms that have more resilience against this problem.
The customer is used to having most vegetables available to them at any given point of the year. This is because we import a lot of large-scale grown vegetables from around South East Asia when supplies are low for that vegetable in Thailand. That is not a bad thing, but it comes with its own set of challenges to train customers that eating seasonally is important.
There are many more of these in India but not as many in Thailand yet. For example, it is tough or impossible to provide tomatoes in large quantities in the rainy seasons. It is possible if you have greenhouses, but outdoor cultivation of tomatoes in an organic way is very tough. It is definitely possible for some farms to achieve this goal, but it is a long journey to perfect this technique.
These are some of the reasons that organic is sometimes more expensive than conventional. Different farms face costs for different reasons. Some organic farmers are cheaper than conventional. It depends on each farm and their management techniques (or scale). It is a complicated space as it is developing everyday and more farmers are moving to this space.
It feels a bit selfish to me to not use these techniques because we have a choice. We can save our employees from exposure to harsh chemicals. It is different when you don't have a choice and you have to use chemicals to make your income. We are passionate about figuring out ways to reduce the cost of organic inputs so we can share our knowledge, but until then we have to sell our products for higher prices. Over time, we are hopeful that we can reduce the price of organic food, but we need to survive as a business to make it to that point. Most new industries start at a high cost of production, but as we fine tune our operation we will be able to share what works and what does not.
Farming is more complex than it gets credit for (in my opinion). Running a healthy farm involves not just running a business, but also being able to adapt and be resilient in the face of upcoming challenges. You are not just working against the market economies, but also now as the global weather becomes weird - you have to adapt your techniques and produce you grow.