Originally published on October 23, 2025 on Organic Science Cluster, written by Desirée Jans.
The true cost of farming is more than the expense column in a farmer’s account book. Agriculture also has costs in terms of its impact on the environment and human health. These external costs, also referred to as externalities, are imposed on society at large.
When we pay the bill at the grocery checkout, we’re paying the marketplace price set by those who produce, process, distribute and retail the products. But what if food costs reflected not just the marketplace value but also the environmental and social costs of producing that food?
The true cost of farming lies largely in how agricultural products are produced. Farming systems from organic to conventional have a range of impacts; externalities can be negative or positive. Agriculture’s negative externalities include greenhouse gas emissions from the land and from production of inputs, water pollution, soil erosion, loss of biodiversity and exposure to pesticides. Positive externalities include improved soil health, carbon sequestration, increased biodiversity and strong rural communities.
As farmers make their myriad daily decisions managing farm businesses, they may not be thinking about externalities. The marketplace does not recognize a dollar value for ecosystem services. Furthermore, government policy that incentivizes sustainable farming systems is still minimal in Canada. But this may be changing – countries around the world are now reporting natural capital (which includes all kinds of ecosystems) and gross ecosystem product (GEP) as measures of economic sustainability along with gross domestic product (GDP) (Mehra and Daouda 2025; IISD 2024). In Canada, programs like the Sustainable Canadian Agricultural Partnership are increasingly interested in assessing and valuing the external impacts of agricultural production to tailor appropriate policy response, such as linking certain practices to direct farm support (Zafiriou 2022).
Organic Science Cluster 4 (OSC4) is supported in part by the Sustainable Canadian Agricultural Partnership. OSC4 researchers are working to validate and improve organic practices to enhance positive externalities and support farm profitability in the marketplace. Research data, coupled with a growing understanding of the value of externalities, will help guide producer decisions and create a strong case for government policy supportive of organic agriculture. The recently released Organic Task Force report is an example of this.
OSC4: Balancing soil building with farm economics
The transition period from conventional to organic production can be a challenging and financially vulnerable time. Producers are learning new skills, yields may be lower as the land adjusts to new management and organic price premiums are not available until the operation is fully certified. At AAFC-Lacombe, AB, Dr. Hiroshi Kubota and his team are studying different production systems during the transition period including reduced tillage and crop-livestock integration. They are monitoring GHG emissions and soil C sequestration and will evaluate whole-farm economics to identify practices that best meet environmental and economic objectives.
OSC4: Advanced organic nutrient management
Organic nutrient management requires a systems approach with a good understanding of supply and demand. Digital tools can help to plan day-to-day farm operations but they can also serve as collaborative platforms to address broader challenges. Dr. Sean Smukler at UBC, along with a group of participating farmers, is using the LiteFarm app to monitor and verify the climate mitigation potential and economic outcomes of various organic vegetable management practices including different combinations of tillage intensity; summer and winter cover crops; and compost and feather meal amendments.
OSC4: Reducing externally sourced nutrient inputs
Specialized greenhouse vegetable farms rely on costly externally sourced nitrogen-rich nutrient inputs. Dr. Martine Dorais at Laval University is assessing alternatives. Thinking about the greenhouse as an organic agroecosystem, she is evaluating the agronomic, environmental and economic effects of intercropping legume cover crops with greenhouse vegetables. This system could supply “in-house” nitrogen fixation while increasing soil health, biodiversity, and beneficial insect habitat.
OSC4: Cost effective Integrated Pest Management
Integrated pest management (IPM) reduces pesticide use by adding – or switching to – biological and physical pest control methods. Reducing the use of pesticides has several positive externalities including lower farm worker exposure and reduced pesticide residues on food, along with reduced contamination of soil and water and less chance of harm to non-target organisms (beneficial soil microorganisms, insects, fish, birds and other wildlife). In Quebec, Didier Labarre (Cranberry Research and Innovation Centre) and Dr. Éric Lucas (Université du Québec à Montréal) are working on novel IPM strategies for organic cranberry, a perennial crop with unique pest challenges. Their multi-pronged approach employs parasitic wasps, viruses and bacteria, mating disruption and herbivory induced plant volatiles. They will evaluate the compatibility, complementarity and profitability of the different methods.
Back to the earlier question: What if food costs reflected not just the marketplace value but also the environmental and social costs of producing that food?
This is a complex task but by making an effort to account for agriculture’s externalities, true cost pricing would result in a higher price for food produced with higher negative externalities (e.g. through taxes on practices that diminish natural capital). Alternatively, lower prices for food produced with positive externalities would be possible if policy existed to incentivize those practices (e.g. through subsidies). However, much work is still needed to create Canadian policy and programs that are effective, efficient and well-targeted (Zafiriou 2022).
The current scenario – and the one driving organic agriculture today – is that some consumers are willing to pay price premiums for the positive externalities of organically produced food, essentially rewarding producers for using practices that benefit the environment and human health. And the demand continues to grow with Canadians spending $7.77 billion on organically produced food and beverages in 2024, up from $7.18 billion the previous year (COTA 2025).
As for the financial viability of organic farming, even though yields are often lower in ecologically balanced vs fertilizer enhanced systems, the average profitability of organic operations is higher than that of conventional operations (COG 2025) and research continues to find ways to improve practices and profitability.
The next time you’re at the grocery checkout (or Farmers’ Market!), take a moment to consider the true cost of your food.
References
Canadian Organic Growers (COG). 2025. Cultivating the organic opportunity for Canadian farmers and consumers: Economic and environmental impacts of organic agriculture and policy recommendations for Canada. Organic Task Force Summary Report. https://cog.ca/wp-content/uploads/2025/08/COG_OTF_Summary-Report_EN_Digital.pdf
Canadian Organic Trade Association (COTA). 2025. Quick facts about organics in Canada [Fact sheet]. https://canada-organic.ca/en/what-we-do/research
International Institute for Sustainable Development (IISD). 2024 Sep 9. The urgency and complexity of moving beyond GDP. [accessed 2025 Sep 19]. https://www.iisd.org/comprehensive-wealth-beyond-GDP
Mehra S, Daouda A. 2025 Jun 16. What is natural capital, and can it help economic resilience and global stability? World Economic Forum. [accessed 2025 Sep 19]. https://www.weforum.org/stories/2025/06/natural-capital-economic-resilience-global-stability/
Zafiriou M. 2022. Externalities and Canadian agriculture policy: Role, rationale, and results. Ottawa, ON. The Canadian Agri-Food Policy Institute. https://capi-icpa.ca/wp-content/uploads/2022/10/2022-10-19-Externalities_EN_.pdf
Organic Science Cluster 4 is an industry-led research and development endeavour co-managed by the Organic Federation of Canada and the Organic Agriculture Centre of Canada at Dalhousie University and supported by the AgriScience Program under Agriculture and Agri-Food Canada’s Sustainable Canadian Agricultural Partnership together with over 80 funding partners.
