Comparative advantage of organic wheat production in the Western Cape

In a context in which the framework of agricultural policy and business is changing radically the objective of the government and farmers should be to support the development of systems that look likely to be winners in the future. As a result this paper uses a Policy Analysis Matrix (PAM) to determine whether wheat production would have a comparative advantage if produced under organic practices. The paper starts by analysing the comparative advantage of wheat under conventional practices, and later contrasts conventional with organic practices. The results of the analyses mainly indicate a comparative advantage for wheat grown under organic practices especially when the social cost benefit ratio (SCB) is incorporated into the analyses. This is because the domestic resource cost (DRC) criterion that is used by the PAM is confirmed to understate the social profitability of systems that use domestic factors intensively like organic wheat systems and favours systems that use less of these factors like conventional systems. The results also show the existence of distortions in the market even if wheat were to be produced under organic practises, although these are shown to be less than for wheat produced under conventional practices.