Files
Abstract
Although the benefits of organic farming are already well known, the conversion to
organic farming does not proceed as the Dutch government expected. In order to
investigate the conversion decisions of Dutch arable farms, a discrete stochastic
dynamic utility-efficient programming (DUEP) model is developed with special attention
for yield and price risk of conventional, conversion and organic crops. The model
maximizes the expected utility of the farmer depending on the farmer’s risk attitude.
The DUEP model is an extension of a dynamic linear programming model that maximized
the labour income of conversion from conventional to organic farming over a
10 year planning horizon. The DUEP model was used to model a typical farm for the
central clay region in the Netherlands. The results show that for a risk-neutral farmer
it is optimal to convert to organic farming. However, for a more risk-averse farmer it
is only optimal to fully convert if policy incentives are applied such as taxes on pesticides
or subsidies on conversion, or if the market for the organic products becomes
more stable.