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2. Methodology


Our first step is to define the elements making up the technical and economic parameters used to define the farms studied. We shall then subject those elements to the evaluation methodology outline below, and this will enable us to achieve our declared objectives.

The farms used as samples to obtain our initial data are farms that, both because of their structure and their agro-climatic characteristics, may be regarded as typical of citrus growing in the Valencia Region.

Thus, these farms are typical of the smallholdings found in the Valencia region, with a surface area of less than 1 Ha, traditional or locally specific irrigation systems, and agronomic characteristics that are not significantly different from those of most citrus farms in the region (Annex II).

We took data from farm plots belonging to members of two cooperative organizations that have been selling organic citrus over recent years (Table III), and whose growing methods, structurally speaking, were typical of citrus growing in this region, with the sole difference that they were organic farming methods, in contrast with conventional methods (Labrador J., et al, 1999).

Table III
Number of plots in the sample

  Oranges Mandarins
Conventional production 1 225 2 275
Organic production 11 14

Source: Authors' figures

They are therefore farms whose production figures, which will be used to determine their cost structure, may be considered representative. Moreover, their figures are, in the case of conventional farming for which data are available, similar to figures published in other studies.

With regard to prices, note that it is hard to pretend that they have great significance, given the considerable price swings observed with organic agriculture. Those swings have indeed been noted in some studies (Michelsen J. et al., 1999). Consequently, the evaluation methodology must include a sensitivity analysis able to give us a very broad price scenario, and is without doubt the most critical aspect of our study.

The expected trend in organic-citrus prices - which, in the opinion of the experts consulted (Anecoop, Coopego, Valfruit), will certainly be upward - requires that demand growth be synchronized with that of supply, and that suitable distribution channels be created. Some studies (e.g. Michelsen J. et al., 1999) make it clear that, despite price differences that are very often markedly in favour of organic products, a very high percentage of such products are, paradoxically, marketed as conventional products.


Traditional assumptions

Given the objectives of the present study, since we are attempting to compare the economic and financial efficiency of organic citrus farming systems and conventional systems, and this requires analysis of investments with a time horizon of more than one year, the methodology used must necessarily include reference to discount values _ that is, as we have already mentioned, criteria that consider the value of money over time (Juliá J. F. and Server R. J., 1996).

Traditionally, this type of evaluation, which is known as economic/financial evaluation, and whose main indicators are Net Current Value, Internal Rate of Return, and Recovery Period, is formulated on the basis of an initial series of generally accepted assumptions, designed to simplify the process of evaluation (Romero C., 1998).

Those assumptions are:

Specific assumptions

Furthermore, we must also design a series of specific assumptions, since we are concerned with a few sample farms and a few determined agricultural models, which might in some cases be different. These assumptions are basically of a technical nature.

The indicators and how they are formulated


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