There is a substantial demand among consumers for organic foods. One of the key strengths as it relates to owning and operating an organic farm is that these businesses are typically able to enjoy higher gross margins than their non-organic counterparts. The demand for these organic products typically remain strong even during times of economic recession. Additionally, the higher than average gross margins allows most organic farms to remain profitable and cash flow positive at all times. As many Americans have become wealthier, the demand for organic produce and healthy eating has remained substantial. This trend is expected to continue in perpetuity.
For weaknesses, like any farming business there are a number of inputs and cost fluctuations that can substantially impact the profitability of organic form. Additionally, weather concerns and climate concerns are always an issue for many organic farming businesses. One of the ways that these risks can be ameliorated is that many organic farms can purchase futures contracts or spot contracts in order to ensure that their crops will be sold at a specific price.
As it relates to opportunities, organic farms can expand by simply acquiring additional parcels of land in order to develop new crops. Additionally, many organic farms have taken to using farm share operations in order to sell their produced produce on an upfront basis rather than bringing these products to market. This can substantially reduce the risks associated with operating organic farm as all revenues are required prior to the actual production and growing of organic products. This is a very common trend among organic farms given the number of inputs that are needed in order to produce organic products.
For threats, the biggest issue faced by these businesses is that valuations of produce commodities can fluctuate greatly depending on the overall economic climate. Additionally, climate change is often a major concern for organic farming given that changes in weather can substantially impact the harvesting of crops. This is something that the whole world is concerned about, and organic farmers are going to need to find innovative ways in order to ensure that these diseases can continue to produce its products affordably. Many organic farms have begun to develop indoor growing facilities that allows them to be immune from negative changes in the overall climate.