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Thursday, June 15th 2023

Emilien Véron (BETA-Université de Strasbourg) will present “Analysis of the presence of an organic farmland premium price”

The European "Green Deal" sets a goal of 25% of land in organic agriculture by 2030, compared to currently 8.5%. However, the transition to organic agriculture is not encouraged because it does not generate additional income for farmers. This lack of monetary incentive slows the conversion dynamics of farmers in France.
In order to solve this problem, we are looking to identify other sources of income allowed by organic farming. We are assuming here the existence of a "premium" for organic farmland (organic land would be sold at higher prices than conventional land), allowing the farmer to realize a capital gain. The existence of this premium is justified as the payment for the relatively more numerous ecological services on conventional land (reduction of erosion, improvement of soil water storage capacity, etc.). In this study, we compare the sales prices of 189,000 lands sold between 2017 and 2020 (15,600 of which are organic).
The results, based on an OLS regression controlling for Ricardian rent and the determinants of residential rent, show that organic land is sold at a lower price than conventional land. After a match based on the characteristics of the land influencing organic farming practice (Propensity Score Matching), we obtained that organic land is sold for 3% less, i.e. around €333 per hectare. This can be explained by a spatial mismatch between the supply and demand of organic land. If an organic farmer wants to buy farmland, he will have a conventional opportunity about 3km from his farm compared to 6.3km for an organic opportunity. This average difference of 3km allows us to understand the non-difference in prices between the two types of land.