By DOUG SCHMITZ
Iowa Correspondent

AMES, Iowa — Researchers at Iowa State University’s (ISU) Leopold Center for Sustainable Agriculture last week released findings they said affirmed existing ISU research demonstrating how U.S. farmers choosing organic methods over conventional practices would receive greater, region-wide economic returns.

“(The) organic alternative requires greater mechanical inputs, more labor and yields a higher return to the operators,” said David
Swenson, the study’s principal investigator. “All of these factors combine to yield greater amounts of income-based economic impacts in the study region.”

Funded by the Leopold Center, Swenson, ISU Economics Professor Liesl Eathington and ISU Extension Farm Management Field Specialist Craig Chase, assessed the potential economic impact the switch in production practices would have on local farmers.

The April 18 study, titled, “Determining the methods for measuring the economic and fiscal impacts associated with organic crop conversion in Iowa,” had shown that the potential regional economic impact of organic crop production exceeded that of conventional crop production.

The project employed economic models to gauge whether the investment of public tax monies to “spur the conversion would yield long-term economic benefits for the area’s population,” researchers said.

The chief model used was the Woodbury County plan out of Sioux City, Iowa, which would provide producers who switch from conventional to organic farming with tax and other economic incentives. Woodbury County was the first in the United States to implement a county property tax abatement plan.

On Jan. 10, 2006, the Woodbury County Board of Supervisors also became the first in the nation to mandate the purchase of locally-grown organic food as part of the Local Food Purchase policy, which defines “local” as that food which is grown and processed within 100 miles of Sioux City, Iowa, and the limitation may be extended if there is not a supplier within that radius.

The policy supports the Organics Conversion Policy, which the county adopted in 2005. The Local Food Purchase Policy provides a market for farmers converting to organic production of certain items needed for Woodbury County facilities.

In addition, transitional crops are included in the mandatory sections of the policy, which enumerates price provisions that protect the county from significant increased costs that may result from the policy.

The impetus for the research, the study said, was the passage of a county ordinance in Woodbury County, which allowed a maximum of $50,000 of county property tax abatements for qualifying conventional-to-organic production conversions.

The study used ISU Cooperative Extension Service crop enterprise budget information to compare the returns to operators of two productions systems: a conventional corn-soybean rotation versus an organic rotation consisting of corn-soybeans-oats-alfalfa.

“That information was translated into a format for inclusion within an input-output model of the Woodbury County economy,” the study said. “That modeling system accounts for how industries buy labor and inputs for production and what the consequences are to the regional economy when labor and other input demands change.”

As a result, ISU researchers measured the economic impact of the difference between conventional and organic practices, which had considered all ties with the local economy.

Swenson said the research demonstrated that there were very strong differences not only in the superior average returns to organic farming operators when compared to conventional corn–soybean operations, but in the overall economic impacts.

“Comparing the two scenarios and supposing 1,000 acres in each, we found that the organic rotation produced 52 percent more industrial output economic impact (gross sales) than the conventional option, 110 percent more value added, 182 percent more labor income, and 56 percent more jobs from the same 1,000 acres of production than from conventional corn and soybean rotations,” Swenson said.

“Our research found that the five-year abatement program would be worth $14,119 a year for 1,000 acres of converted organic land and that the county could therefore support 3,541 acres of conversion with its $50,000 property tax abatement program,” he said.

According to the study, the economic impacts of the organic alternative were substantially larger than the conventional configuration, which was a significant observation for those engaged in rural and regional economic development.

“Specifically, organic rotation farming produced 52 percent more gross sales revenue, 110 percent more value added, and 182 percent more labor income than from the same 1,000 acres farmed using conventional corn-soybean rotation practices,” Swenson said.

Swenson added that these outcomes would hold up “even with the recent spike in corn prices as the spread between organic and conventional crop prices has remained relatively constant.”

But there was one drawback to the conventional-to-organic transition: Researchers found that the analysis for the effective economic use of property tax abatements as an incentive for farmers making the switch would leave huge property tax deficits.

“The research found that the labor income economic impacts of the organic conversion would generate $7,918 annually in property taxes, leaving an annual estimate gross property tax deficit of $6,281,” Swenson said.

The research also noted that, because the region was generating more laborers paying those property taxes, “their households would require county services leaving the net increase in property taxes after paying for county services to be very close to zero.”

The study concluded that over a reasonable period of time, the county wasn’t likely to recover the forgone property tax revenue used to fund the original program with sufficient new, economic impact-driven, property tax collections.

“This leads us to conclude that it is unlikely that the economic impacts of the conversion would be sufficient to repay the property tax abatements over a reasonable period of time,” Swenson said.

What’s more, the fund that the county and public school services would need to hire additional workers, which included family members, in all impacted economic sectors of the organic conversion wasn’t likely to reap financial dividends either.

However, the study said, there may be “important non-economic criteria in favor of a property tax inducement to alter farming practices.”

“These would include environmental benefits, diversifying agricultural production, and supporting the development of organic foods production, processing and consumption in the region.”

To read the report, visit www.leopoldiastate.edu/research/marketing_files/woodbury.htm