The food and agriculture sector is expected provide healthy, safe and nutritious food for a growing population, while at the same time supplying feed for more and more farm animals, and furnishing fibre and fuel and other bio-based products for a range of industrial uses. The sector must also use natural resources more sustainabily to preserve available land, water, and biodiversity resources, and respond to climate change. To meet these challenges and respond to opportunities, the sector will need to embrace innovative approaches to improve productivity in a sutainable manner.
Trends in agricultural productivity and sustainability performance
The most comprehensive productivity indicator is Total Factor Productivity (TFP), which reflects the efficiency with which producers combine inputs to make outputs. In recent decades, productivity improvements have driven considerable growth in agricultural production, but there are large differences in productivity growth between countries, and by farm type, size and region as illustrated in recent OECD farm-level analyses. Productivity gaps remain significant among farms, and improving the productivity of farms lagging behind remains a challenge even for the strong performing countries.
Agri-environmental issues also vary in scope and severity in countries studied by the OECD. Like physical capital, natural (environmental) capital requires investment and maintenance to retain its productive capacity. For agriculture, this encompasses managing natural resources to ensure their long-term viability and reducing the negative environmental impacts of agriculture production, such as pollutants and waste, which can damage the natural assets. Sustainable agriculture production systems also need to account for the projected impacts of climate change and the associated adaptation responses, as well as the mitigation of greenhouse gas (GHG) emissions.
To help measure the sustainability of agriculture, the OECD agri-environmental indicators monitor trends in use of land, water and energy, and agriculture’s impact on the environment, via the intensity of use of polluting inputs (pesticides) and the sector’s emission of pollutants (greenhouse gases, ammonia).
Adoption of innovation is the main driver of productivity growth, and can improve sustainability
At the farm level, many innovations are “process innovations” as they relate to improving production techniques; for example, adopting improving seeds or irrigation systems. Downstream industries also innovate new and improved products, such as functional attributes for food (health) or in the chemical or pharmaceutical industry (bioeconomy). All along the the supply chain, marketing and organisational innovations are increasingly important.
OECD work on innovation systems in food and agriculture explores the relationships between innovation, productivity and sustainability, and examines the respective roles for the government and the private sector in strengthening agricultural innovation systems and facilitating adoption of more innovative practices at the farm and agri-food firm level. As part of this work, we have developed a framework to review the impacts of a wide range of policies on the creation and adoption of innovations needed to increase productivity and sustainability in food and agriculture, leading to concrete recommendations for each policy area.
What can policy makers do?
The future of food and agriculture depends on the capacity of agricultural innovation systems to provide farmers with innovations that address an increasingly diverse and complex range of needs, including improved farm productivity and environmental performance, as well as better responses to climate change.
Governments have a role to play in ensuring that the policy environment is conducive for the agro-food sector to improve productivity, sustainability and resilience. OECD research shows that the whole policy package matters, and that policy strategies should cover the whole food supply chain: improving policy coherence and transparency are crucial to building trust and increasing effectiveness and efficiency. The first step to improving the policy environment is to roll back policies that retain farmers in uncompetitive and low-income activities, harm the environment, stifle innovation, slow structural and generational change and weaken resilience.
Agricultural policy should instead focus on measures to improve the sector’s long-term productivity and sustainability, such as investment in general services that strengthen human and infrastructure capacity, and farmers’ connection to input and output markets. There must also be a business case from the farm to the fork for producers to innovate and to improve productivity and environmental performance. Well-functioning markets and a sound regulatory and policy environment are key to harnessing these market opportunities.
In particular, governments should strengthen agricultural innovation systems to make them more collaborative and responsive to needs, which would increase the impact of public expenditure. Improving the relevance of innovations would also increase adoption in the sector and acceptance by society. Governance is the key to such improvements, which would include forming clear strategic objectives in consultation with stakeholders and comprehensive mechanisms and procedures for evaluation. Finally, attention needs to be paid to adoption, including skills improvements.