Date

12-2011

Degree Name

BS in Agricultural Business

Department

Agribusiness Department

Advisor(s)

Marcia Tilley

Abstract

This study focuses on the possible risks associated with the conversion of a farm from conventional to organic farming practices. The purpose of the study is to test the feasibility of the conversion to organic practices using lettuce as the focus crop and following the changes in a 150 acre farm's net income through a four year conversion time span. Revenues and expenses will be gained from cost and return studies and financial documents will be generated for the base year and the four year conversion period in order to generate five net incomes. The four net income that are generated during the conversion period will utilize the net present value method to accurately compare those forecasted cash flows to the net income of the base year; the current cash flow. In order for the conversion to be deemed feasible, the net present value of the net income in year four of conversion must have decrease by less than five percent when compared to the net income of the base year. If the net present value of the net income in year four of conversion has decreased by greater than or equal to five percent, comparable to the net income of the base year, the conversion must be deemed unfeasible. The hypothesis of the study is that conversion of a 150 acre conventionally operated farm to an organic operation if will be feasible without a five percent decrease in net income because the farm will be able to qualify for or increase its operating loan to accommodate for the added stress of the conversion period like increase in expenses or decrease in yields. This hypothesis was upheld due to the 150.30% increase in revenue generated by the attainment of the organic price premium in year four of conversion creating a net present value of net income of $283,360.11 comparable to the base year's net income of $188,529.02. The hypothesis is upheld and the conversion is deemed feasible for the farm.

Included in

Agribusiness Commons

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