These Shocking Numbers Show Organic Farming's Biggest Downfall

Source: thebittenword.com/Flickr.

You've heard this stat before, but it's worth mentioning again: The United Nations has estimated that food production will need to nearly double from 2008 levels by the year 2050 to feed the world's growing population (nearly all from the least developed nations) and make up for shrinking agricultural land. That means that to boost yields and combat pests, farmers will need to increasingly rely on technology ranging from high-yield seeds to agricultural biotechnology to even the Internet of Things.

While progress is being made, consumers in many wealthy nations are demanding that their food be grown using organic farming principles. At a time when the world cannot falter on the path to increasing its food production, these habits can have severe consequences. Some consumers rationalize their purchasing decisions by claiming the health benefits of organic food (which have been thoroughly debunked), the avoidance of health risks associated with genetically modified foods (with which the scientific consensus disagrees), or the more environmentally friendly and sustainable approach to agriculture that organic farming enables.

The last argument might seem the most plausible. After all, organic farming forbids the use of synthetic pesticides, biotechnology, and many (but not all) pesticides. Unfortunately for Whole Foods Market (WFM) shoppers, the argument doesn't quite hold up, according to shocking numbers compiled by the U.S. Department of Agriculture.

Ouch, organic!
Is organic farming really the most sustainable form of agriculture? To answer that, we need to define the word "sustainable" from an environmental point of view. Go ahead, take a minute to think about what the word really means. I'll wait.

If you cheated and looked in a dictionary, then you would have found something similar to this:

• involving methods that do not completely use up or destroy natural resources
• able to last or continue for a long time

That would mean that the most sustainable agricultural methods would maintain natural resources, or in this case, land, to which all other natural resources -- water, soil, energy input, fertilizer use, and the like -- are dependent upon. To use land and derivative natural resources as sustainably as possible requires using the least input to produce the most food. So, how does organic farming stack up?

Not so well, according to numbers from the USDA. When the department logged yield data (food produced per acre) from various crops grown organically, government researchers found that they severely underperformed the same crops grown with more traditional farming methods.

Source: Analysis of USDA data by Dr. Steven Savage.

It's important to note that "traditional farming methods" means the crops were aided by synthetic fertilizers and approved pesticides, but not necessarily biotechnology (for instance, genetically modified wheat is not grown commercially). Will the world really be better off with organic farming if it requires substantially more land to produce the same amount of food? The table above doesn't scream environmental stewardship to me.

So, that's it, game over for organic food investments, right? Not quite.

Wait, there's a catch?
Organic farming may not enable comparable yields to traditional farming, but that doesn't mean investors are left without opportunities. The trend in organic food sales hints that opportunity does indeed exist, even if it's fueled in large part by outsize marketing budgets, a fundamental information gap, or, worst of all, misinformation.

Source: USDA website.

Whole Foods Market embodies the trend perfectly, as the company's stock price, annual revenue, and annual earnings per share have roared higher in the same period. 

WFM Total Return Price data by YCharts.

The profits and returns at Whole Foods Market may be the only organic yields capable of rising in the future, considering the farming method prohibits the use of some of the most proven yield-boosting technologies. However, the trend is unlikely to stop anytime soon, as more and more groceries, restaurants, and farmers take advantage of consumer habits. Even the USDA is joining in after it recently allocated $13 million to help small organic farmers offset the cost or organic certification, which could fund over one-third of application costs.

Organic farming may never feed the world, but it appears to have a role in the future of farming. Congratulations, America. You get to keep your organic food.

What does it mean to you?
Many investors have adopted socially responsible investing practices in an attempt to ensure that they're growing their hard-earned money in ways that don't step on the little guy. After viewing the USDA data on organic crop yields above, I would take it one step further. To ensure your hard-earned money is growing in ways that don't step on the little guy or foster a mistrust of science, you should adopt scientifically responsible investing principles (it often overlaps with its socially responsible cousin). Those extra 1 billion humans who have enough food in the year 2050 will thank you.