Transitioning to Organic Crop Production: A Dynamic Programming Approach

Author

Timothy A. Delbridge and Robert King (rking@umn.edu)

Journal of Agricultural and Resource Economics, 2016, vol. 41, issue 3

Abstract: Despite evidence that organic cropping systems in the Midwest can be more profitable than conventional systems, only a small percentage of cropland has been certified as organic. This paper models the decision to transition to organic crop production as a dynamic programming problem in which investment is reversible but includes sunk costs. Results indicate that the risk and unrecoverable costs associated with organic transition lead to a significant option value, and this provides a partial explanation for low transition rates in the baseline scenario. Sensitivity to expected organic yield and price levels is explored, as are the costliness of reverse transition and the short-term effect of high conventional return levels.

Keywords: dynamic programming; organic farming; organic transition; real options; Crop Production/Industries; Farm Management (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://purl.umn.edu/246250 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ags:jlaare:246250

Access Statistics for this article

More articles in Journal of Agricultural and Resource Economics from Western Agricultural Economics Association Contact information at EDIRC.
Series data maintained by AgEcon Search (aesearch@umn.edu).

For further details log on website :
http://econpapers.repec.org/article/agsjlaare/246250.htm