Constructing an Organic Price Series: Not as Easy as Expected

Abstract

The growth of organic farm production and consumer demand has raised questions regarding the profitability of organic systems. A primary component of this profitability is the size and sustainability of organic price premiums. Additionally, there have been recent large increases in the prices for conventionally-produced commodities due to increases in input costs (particularly fertilizer and fuel), changes in export demand (including the value of the dollar), and also perhaps the ethanol market. We explore the relationships between organic and conventional grain prices over the period 1998 to 2008 using monthly price series. This relatively long period allows us to assess the nature of the price relationships between organic and conventional prices for periods prior to and after the recent run-up in conventional prices. Our focus is on the three key crops for Montana: corn (as a feed barley substitute), hard red spring wheat, and hard red winter wheat.