ORGANIC ARABLE FARMING - THE OPPORTUNITIES AND CHALLENGES. David Younie SAC Crops Division, Aberdeen

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1 ORGANIC ARABLE FARMING - THE OPPORTUNITIES AND CHALLENGES David Younie SAC Crops Division, Aberdeen 1. Development of the organic farming sector Growing concerns about animal welfare, food quality and safety, including pesticide residues and disease problems associated with food, have focussed public interest on the methods employed in food production. In the UK this has led to a number of quality assurance schemes introduced variously by producer groups, processors and retailers. Organic farming is in effect a food quality assurance scheme with the most clearly defined standards of production, which has been operating since the mid 1970's, and which is recognised at an international level (CEC, 1991). Demand for organic food has increased dramatically, by an estimated 30% per annum between 1992 and 1996, and probably at an even faster rate in more recent years. Retail sales of organic food were estimated to be 360 million in 1998 and are predicted to be over 1 billion by 2002 (Soil Association (1998), this at a time when the food market in general is expected to expand by only 1-2% (Mintel, 1997) (Fig 1). Figure 1. Retail sales of organic food in the UK (actual and * predicted) Soil Association Mintel *98 *99 *00 *01 *02 The number of organic lines stocked by supermarkets has similarly seen a rapid increase (J. Sainsbury now stocks over 300 different lines) and the recent appearance of prepared ready meals signifies the potential for further significant expansion in the market. The main limitation to this expansion in sales is the very restricted supply of raw materials. Demand has vastly outstripped supply, to the extent that approximately 70% of organic food sold in the UK is imported, and naturally this has led to very substantial price premiums at the farm gate (Table 1). Not surprisingly, these prices seem extremely attractive to hard-pressed conventional farmers.

2 Table 1. Organic crop prices, autumn 1999 /tonne Milling wheat 200 Feed wheat 185 Feed barley 180 Malting barley 190 Milling oats 175 Pulses 200 Ware potatoes 290 Shopping swedes 250 Carrots 400 Since the mid 1980's, there has been a very rapid global expansion in organic farming. In the fifteen countries of the European Union, for example, the total number of organic farms increased from 7000 to (an 11-fold increase) between 1986 and 1997 (Lampkin, 1997). The total area of land farmed organically increased by 17 times over the same time period (Figure 2), although a wide disparity exists between countries in terms of the proportion of land farmed organically, from 0.2% in the UK, to over 10% in Austria. This is, at least in part, due to the differential rates of financial support for conversion offered to farmers by national governments, introduced as part of the Agri- Environment Programme in the CAP reforms of Figure 2. Change in area of organic and in-conversion land in Western Europe (* 1000 hectares) Rates of organic aid in the UK Organic Aid Schemes have been the lowest in Europe, but increased payments have recently been introduced by MAFF in England and Wales, and the Scottish Parliament has also ratified higher payments for the SERAD Scheme (Table 2).

3 Table 2. Revised payment rates in SERAD Organic Aid Scheme. Year 1 Year 2 Year 3 Year 4 Year 5 Total ( /ha) AAPS eligible land Ineligible land Unimproved grass, rough grazing Upper area limits: (ha) AAPS land and Improved grassland: Rough grazing: Given this background, it seems certain that organic farming will constitute a major component of the agricultural industry in the future. Lampkin (1997) has predicted that it will account for 10-15% of European agriculture by Interest amongst Scottish farmers in converting to organic has increased dramatically in the last two years, as a result of extremely poor prices for conventional crop and livestock products, the obvious attractions of organic premiums, and the anticipation of improved support payments for converting to organic. SAC, funded by SOAEFD as part of the Organic Aid Scheme, responded to around 1100 enquiries in the last year, through its Organic Helpline and local Advisory Offices. The area of registered organic or in-conversion land in Scotland has increased 18-fold, from to around hectares, in the 22 months since the end of 1997, and the number of organic farmers has also risen sharply, from 120 to around 420, over the same time period. These figures do not tell the full story, however. There is a major imbalance in the pattern of conversion between different land types. The vast bulk of the hectares now registered as organic is rough grazing, upland pasture and inbye. Reflecting this, the majority of SAC advisory enquiries on organic conversion are from LFA livestock farmers. Thus, there are many more livestock farms than arable farms converting at present. This presents opportunities for arable farmers thinking about converting to organic. Firstly, this imbalance has led to an even greater shortage in the supply of organic cereals for feeding to livestock, and hence has led to even higher prices for organic cereals. Major feed compounders have recently introduced organic status concentrates for a range of livestock types. This demand is likely to be maintained in the longer term, since a recently approved EU organic livestock regulation stipulates that the current allowance to feed a proportion of conventionally produced feedstuffs will be withdrawn in six years time. Secondly, there will be opportunities, for those arable farmers with the necessary infrastructure on their farms, to finish or to winter organic livestock from these hill and upland farms. 2. Organic certification and standards 2.1 Legal framework Within the EU, the sale of food as organic is controlled under EU Regulation 2092/91 (CEC, 1991), which became operational in January This Regulation in effect defines organic farming. It sets out the minimum standards of production and defines how certification procedures must operate. In addition to organic production and processing within the EU, the Regulation also covers certification of produce imported from outwith the EU. Regulation 2092/91 has subsequently been supplemented by various amendments, and in 1999 by a further Regulation (No. 1084/1999) covering livestock production (CEC, 1999).

4 Under Regulation 2092/91, each member state is required to establish a National Certifying Authority to ensure adherence to the law (in the UK, the UK Register of Organic Food Standards (UKROFS)). Organic farmers must be registered with a certification body which must be approved by the National Certifying Authority. There are six approved certification schemes for organic producers in the UK (Irish Organic Farmers and Growers Association (IOFGA), Biodynamic Agricultural Association (BDAA), Organic Farmers and Growers (OFG), Organic Food Federation (OFF) (which is primarily concerned with processors), Scottish Organic Producers Association (SOPA) and the Soil Association (SA). The majority of Scottish organic producers are registered with SOPA, with a significant minority registered with the Soil Association and a small number with BDAA. 2.2 Standards for organic food production The standards of the SOPA and SA schemes are fairly similar and, on the whole, mirror those of UKROFS. The BDAA has more wide-ranging standards. The main features of UKROFS standards are as follows (UKROFS, 1997): * It is not necessary to convert the whole of a holding, although the unit to be converted must be large enough to impose a valid crop rotation * It is not necessary to convert the whole unit at once - a field by field conversion is possible (and may even be desirable in order that a grass/clover ley can be established in each field, in turn, to ensure that the soil fertility during the conversion phase is satisfactory) * A two year conversion period, monitored by the certification body, is required between the last application of a prohibited substance and the sowing of the first full organic crop. * The crop rotation must have a balance between fertility building crops (e.g. grass/clover ley) and exploitative crops (e.g. cereals, potatoes), e.g. LeyÔ LeyÔ LeyÔ CerealÔ RootsÔ CerealÔ * Regular inputs of organic matter (e.g. farmyard manure -FYM) should be made. * Conventionally produced FYM (from ethically acceptable livestock systems) may be brought-in to supplement the fertility building crops in the rotation, but must not form the basis of the crop nutrient strategy, and must be composted or stockpiled prior to application. * Fertilisers such as lime and rock phosphate, which are slowly soluble in the soil, are permitted but soluble mineral fertilisers are prohibited. * Most manufactured agrochemicals are prohibited but some natural biocides are permitted The inspection and certification scheme is operated on an annual basis. Detailed records of inputs must be kept and the farmer has to submit an annual return describing the inputs to each field/livestock enterprise. 3. Practical and financial implications of conversion to organic farming. Although, compared to conventional agriculture, there has been very little expenditure on research in organic farming over the last 50 years, organic farmers have a wide range of techniques available to them with which to meet the challenges of the standards (e.g. Lampkin, 1990, Younie, 1997; Younie and Ramsay, 1997; Taylor et al, 1996). Basic soil fertility can be maintained in organic systems through the use, on a rotational basis, of lime, rock phosphate and some permitted forms of potash. The most important crop nutrient, nitrogen (N), must be generated by legumes (e.g. clovers, peas, beans). Thus, grassland plays a

5 central role in most successful organic systems, including the arable cropping phase, especially in relation to enhancing the nitrogen supply via its influence on N-fixation, soil organic matter, structure and biological activity. (In organic crop rotations, the grass/clover ley or the forage legume green manure crop also have major roles to play in restricting the build-up of arable weeds and of soil-borne crop diseases.) Whilst N-fixation by legumes is the original source of N generation on organic farms, a second factor which plays an equally important role in N-supply to crops is soil-n mineralisation. Thus good soil management is essential, to enhance mineralisation through maintaining soil organic matter and good soil physical condition. This is achieved by addition of manure and ensuring good soil aeration - avoiding compaction by timing cultivations correctly and through use of double wheels, subsoiling and chisel ploughing, etc. Avoidance of N loss from the farm system is also important, e.g. through late rather than early winter ploughing, late rather than early winter application of manures and slurries, use of winter cover crops where appropriate, careful storage of livestock wastes. Thus, lowground mixed livestock/arable farms, or all-grass farms, particularly those with housed cattle enterprises for the generation of manure, are ideally suited to organic farming and are relatively easy to convert.the most difficult and costly type of farm to convert is the all-arable farm. The main stumbling block is the requirement to have a rotation which contains a balance between fertility building and fertility exploitative crops. This normally means that around 50% of the rotation needs to be in fertility building crops, and although grain legumes such as peas or beans fall into this category, herbage legumes, usually in the form of grass/clover leys, are seen as essential. Quite apart from the investment costs which establishment of a livestock enterprise entails, there is likely to be a significant reduction in Arable Area Payments. The ley, however, is an important feature of organic systems, as outlined above, particularly because it is the boilerhouse in terms of generating N, but also because of weed, pest and disease control benefits. At present there are few true stockless organic farms, i.e. systems in which the nutrient supply is largely internally generated, with no ruminant enterprises and no import of livestock manures. There is at present a lack of information on the long-term reliability of stockless organic systems, although positive short-medium term results have been reported from a number of sources (e.g. Cormack, 1997; Anon., 1997), but all of these are based on soils with a high nutrient release capability. On these farms, as on ley/arable farms, the N supply is also based on N-fixation, sometimes from grain legumes such as beans, but primarily from forage legume green manures (e.g. red clover). The rotation at ADAS Terrington (Cormack, 1997), has a rotation with 40% N-fixing crops in a fivecourse rotation: red clover green manure potatoes winter wheat spring beans spring wheat u/s. Without a livestock enterprise, the only source of income from the green manure crop is the set aside payment. Peas have generally been a disappointing crop when grown organically. Beans can be grown successfully under organic conditions in Scotland, but they are late maturing and so there may be climatic limitations on where they can be grown. On anything but the best soils, an organic system which does not include a livestock enterprise is likely to require an input of brought-in manure for second and third arable crops after grass, even if it does have a proportion of legumes in the rotation. On poorer soils, eg. light sandy soils, it may be necessary to import substantial quantities of FYM. However, the standards specify that the system cannot be based entirely on brought-in manure and the need for this import of conventional manure must be justified to the certification body. Thus, whilst such a system may find approval by the certification body, depending on the quantity of FYM imported and the proportion of legumes in the rotation, accepting the restrictions of a mixed ley/arable rotation with a ruminant livestock enterprise makes organic arable cropping much easier.

6 Given that there are relatively few safety nets in organic farming, in terms of pesticides for the control of weeds, pests and diseases, crop protection is a matter for careful planning and anticipation. Enhancing the vigour and competitiveness of the crop is essential and so weed control should primarily be tackled through cultural measures such as correct choice of rotation (competitive grass/clover leys, avoiding long runs of arable crops), choice of crop (e.g. oats and potatoes are very competitive against weeds), choice of variety (those providing rapid early ground cover and prostrate canopy architecture), appropriate sowing arrangements in terms of seed rate, row spacing and/or orientation, stale seedbeds, undersowing. These essential preventative measures can be coupled with active weed control measures such as mechanical cultivation (comb harrowing in cereals, inter-row cultivation in row/root crops) and pre-emergence thermal weeding. Hand weeding should only be necessary in crops with an open, slowly developing canopy, e.g. many vegetable crops. An adequate rotation is also the starting point in the fight to control pests and diseases. Second, it is vital to select varieties which have a high degree of resistance to diseases and pests prevalent in the area. Organic crops, with a reduced N supply compared to conventional crops, will have a higher dry matter and lower N content, which may make them less susceptible to leaf-borne disease. With a disease such as potato blight, the effect of the disease can be reduced by enhancing the earliness of crop yield development, e.g. by chitting and choice of early, rather than later varieties. Air-borne insect pests can be effectively controlled by using a physical barrier such as fleece, albeit at a considerable cost per hectare. It is also important to enhance populations of natural predators such as ladybirds and ground beetles by establishing beetle banks and/or boundary vegetation e.g. grass strips. Some natural biocides are also currently permitted, e.g. sulphur for mildew and copper for blight control, but approval for copper, at least, is being withdrawn from Although organic farming requires greater management skill than conventional farming, in a ley/arable rotation organic cereals and potatoes are relatively easy to grow. Vegetables, whilst having higher profit potential, have additional challenges in terms of weed and pest control. In these crops, a degree of hand weeding, in addition to the cultural and mechanical approaches mentioned above, is likely to be inevitable. Organic crop yields are generally lower than in the conventional sector, as would be expected. The yield level depends very much on soil type, as it would in conventional crops, on place in the rotation, and on manure inputs (e.g. first year cereals after grass might yield around 5t/ha with no FYM, whereas third year crops may produce only 3.5t/ha with a moderate amount of FYM) (Table 3).

7 Table 3. Yield of organic oats in SAC crop rotations trials at Tulloch, Aberdeen and Woodside, Elgin. First crop after grass Third crop after grass Overall mean Tulloch Woodside Tulloch Woodside 1994 (A) (B) (A) (B) (A) (B) (A) (B) (A) (B) Mean Although yields may be lower than in conventional crops, variable costs are also considerably lower and, when coupled with attractive price premiums, can leave Gross Margins which are substantially better than the conventional equivalent (Table 4). Table 4. Typical Gross Margins for organic enterprises. Feed barley Ware potatoes Breeding ewes Finishing cattle ( /hectare) ( /head) Output (incl. AAP) Variable costs Gross margin ( /head) 168 ( /head) 344 ( /ha) 420 ( /ha) It is often claimed that fixed costs in organic farming are higher than in conventional agriculture. Obviously, in a situation where a previously all-arable farm invests in a livestock enterprise, interest charges are likely to be a significant factor. However, in the case of an existing mixed crop and livestock farm converting to an organic system with cereals and potatoes as the main crops, little or no additional fixed costs should be incurred. It is only where vegetable production is intended that fixed costs are likely to increase, in the form of hand labour for weed control, and perhaps additional purchases of machinery. 4. Conclusions The very large increase in demand for organic produce over recent years, coupled with a modest level of supply in the UK, has led to very substantial price premiums being available at the farm gate. The area devoted to organic farming has also increased very rapidly in Europe as a whole over the last decade, and is now increasing at a rapid rate in the UK. The current imbalance between conversion of livestock farms and mixed or arable farms offers opportunities for converting lowground farmers to supply the rapidly growing demand for feed grains, and to finish store stock produced on upland/hill organic livestock farms

8 Inevitably, the reliability of premiums is a major concern among farmers considering converting to organic. This is a real issue with livestock products, particularly store stock, but for crop products good premiums should remain for the foreseeable future, given the very rapid increase in demand, the development of differentiated product lines such as ready meals, the very restricted supply of raw materials, which in fact is restricting the expansion of the market, the high level of imports. The extent to which organic price premiums will be eroded over time will depend on how the increase in supply develops in relation to the predicted increase in demand (given that increased supply and lower prices will further stimulate increased sales). As a result of these substantial price premiums, organic farming is currently significantly more profitable than conventional farming, at enterprise level (although it should be remembered that the whole farm picture needs to be taken account of, since the organic standards demand a rotational, whole farm approach, emphasising the point that all-arable farms are the most costly and difficult to convert). In contrast, even in the normally prosperous arable sector, conventional agriculture is at crisis point because of severely depressed prices. For many farmers the status quo is no longer an option. With an expanding market, a product that consumers are willing to pay a premium for, satisfactory levels of profitability and given also that financial support for conversion to organic farming is increasing (and also in the medium-long term if, as has been suggested, support shifts in the direction of environmentally friendly farming systems), a very real opportunity exists for arable farmers to change direction towards a farming system which has potential benefits in terms of profitability, environmental impact and public image. References Anon. (1997). Focus on Farming Practice, Organic Farming Experiments CWS Agriculture, Stoughton, Leicestershire. CEC (1991). Council Regulation No 2092/91 on organic production. Official Journal of the European Communities, L198, CEC (1999). Council Regulation No 1084/1999 ssupplementing Regulation No. 2092/91 on organic production. Official Journal of the European Communities, Vol. 42, L222, Cormack W. (1997) Testing the sustainability of a stockless arable rotation on a fertile soil in eastern England. In (Isart J, & Llerena J.J. eds.) Resource Use in Organic Farming, Proceedings of Third Workshop of European Network for Scientific Coordination in Organic Farming (ENOF), University of Ancona, Italy, June 1997, pp Lampkin N. (1990) Organic Farming. Farming Press, Ipswich, 701pp. Lampkin N. (1997). Opportunities for profit from organic farming. Paper presented at Royal Agricultural Society of England Conference: Organic Farming - Science into Practice. RASE, Stoneleigh, November Mintel (1997) Organic and Ethical Foods. Market Intelligence Report, Mintel International Group Ltd. Soil Association (1998) Food and Farming Report, Bristol. Taylor B.R., Younie D. & Franklin M. (1996). Influence of cultural practices on weed/crop interactions in organic cereals. Proceedings Crop Protection in Northern Britain, Dundee University, March 1996, UKROFS (1997). UKROFS Standards for Organic Food Production. United Kingdom Register of Organic Food Standards, London Younie D. (1997) Organic Beef and Sheep Systems. Paper presented at Grass is Greener British Grassland Society Winter Meeting Great Malvern, November Younie D. & Ramsay D.A. (1997) Converting to organic farming. SAC Technical Note 451.