Conversion subsidies for organic production: results from Sweden and lessons for the United States

Organic conversion subsidies used in Europe are less likely to be politically acceptable in the United States, where organic agriculture development is market-driven. Persistent barriers to conversion in the United States include limited availability of and access to production and market information, training in management systems and cost of conversion-related investments. By determining whether these factors affect the requirement of a subsidy to convert, we can suggest whether U.S. policy makers need to provide subsidies to encourage conversion and identify policy variables consistent with market-based approaches that could stimulate conversion. A utility difference model is used with Swedish data to analyze factors that determine whether a subsidy is required to motivate organic conversion. The results show that farmers requiring subsidies manage larger less-diversified farms and are more concerned with organic inspection, quality, and adequacy of technical advice. Access to more market outlets and information sources substitutes for payment level in the farmer's utility function, indicating that services rather than subsidies may be used to encourage organic agriculture. To the extent that conditions are similar in the U.S. organic sector, market-based programs such as cost-sharing for conversion and market access improvement should stimulate growth of this industry. © 2000 Elsevier Science B.V. All rights reserved.