Why is organic produce more expensive than non-organic produce?
Submitted by Aguanomics Blog
This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.
Sabine Johnson says:
Why is organic produce more expensive than regular (i.e. non-organic) produce? For example, at Safeway a pound of regular Fiji Apples costs $1.99, while a pound of organic Fiji Apples costs $2.39, a pound of regular Bananas costs $0.48, compared to a pound of organic Bananas for $0.99 per pound. The price difference at other supermarkets, such as Whole Foods, tends to be even bigger.
But shouldn’t the price difference be the other way around? In order to grow regular produce, farmers use lots of expensive chemical fertilizers, pesticides and herbicides. Furthermore, in many cases they buy expensive genetically modified seeds (e.g. Monsanto’s Roundup Ready Corn). On the other hand, organic produce is supposedly grown without chemical fertilizers and pesticides, and many organic farmers say they cultivate their own seeds. Therefore the production cost of regular farmers should be higher than the production cost of organic farmers, and organic produce consequently be cheaper. Why is this not the case?
I think there are two reasons for the price difference. First, regular farmers (due to the use of fertilizers, etc.) have higher yields per acre, which translates into a lower average fixed cost, and more than makes up for the cost of fertilizers and pesticides.
Second, non-organic farming methods create a lot of externalities, for which the farmer does not have to pay. These externalities range from environmental damage such as water pollution, topsoil erosion, poisoning of insects and insect eating animals to the health risks for the consumer.
Non-organic produce is cheap due to the lack of full cost pricing: the price of regular produce does not reflect the entire cost of production as externalities are not taken into account. In contrast, the organic produce farmer does not use chemicals, therefore creates no (or few) externalities, but has lower yields per acre. Therefore the real question we should ask is: why is regular produce so cheap?
Bottom line: Lower average fixed cost combined with the lack of full cost pricing allows farmers of regular produce to sell their products for less than organic farmers.
