7 – Agricultural Productivity is Helping Feed the World

31 July, 2017

A seemingly constant refrain from industry leaders and politicians is that we need to work smarter and be more productive. We are exhorted to be an innovative and internationally competitive “clever nation”. In Australia, we even have a Productivity Commission.

Several researchers who monitor the productivity of different sectors within and outside of Australia have pointed to a worrying decline in global agricultural productivity; especially during the first decade of this century. Agriculture is often viewed as a conservative, slow-moving sector with not much productivity upside. However, the most recent evidence from the United States Department of Agriculture (USDA) points to a global uplift in agricultural productivity; an uplift also enjoyed by Australian agriculture.

The chart below from the USDA shows that the global increase in output since the late 1980s is in fact mostly attributable to an increase in productivity.  Globally, the world is getting smarter at producing agricultural products more efficiently.  Growth in output is not coming from any marked expansion in the area of land being farmed or existing farmland coming under irrigation. Nor is the growth coming from by any increase in the quantity of farm inputs being utilised (i.e. accelerated intensification). Rather, the increased output is largely due to astute scientists and farmers who are making agricultural inputs and farming systems much more productive, extracting more units of output from each unit of input.

Source: USDA, Economic Research Service, International Agricultural Productivity data product. Data as of October 2016

The spectacular growth in productivity is allowing the world to more easily feed itself, without consuming ever increasing tracts of land for food production. China’s agricultural production, for example, has increased more than 8-fold between 1961 and 2013, and about half of this growth is due to productivity gains. The latest USDA analyses show that agricultural output has been growing fastest in lower-and middle-income countries, where food demand is also growing rapidly. In low income countries, agricultural growth is primarily driven by greater use of farm inputs. This contrasts with high income countries like Australia, where population and food demand is growing relatively slowly and any growth in output is mostly through productivity gains. In Australia, this productivity growth has even allowed some land, labour and other resources to be withdrawn from agriculture for other uses, while still meeting domestic food demand and creating valuable exportable surpluses.

So, Australian scientists and farmers deserve a pat on their collective backs.

The table below lists the agricultural productivity of various countries over different periods. Since the period 1971 to 1990, all the listed countries have increased the growth rate of their agricultural productivity.

The Black Sea region countries (Russia, Ukraine and Kazakhstan) have greatly increased their agricultural productivity – As pointed out (here), Ukraine and Russia now pose important competitive challenges to Australian grain exports due to the marked increases in their grain production and export prowess.

Hence, in spite of Australia commendably lifting its agricultural productivity, especially in the most recent period 2004 to 2013, nonetheless there are other competitor nations such as those in the Black Sea region that continue to outstrip the productivity growth of Australia. So, the competitive challenges facing Australian agriculture will continue; even in a world that currently now more easily feeds itself.

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