When a focus on productivity leads to system inefficiency

When a focus on productivity leads to system inefficiency

Rethinking how we view 'success' in farming could ensure the global population has sufficient nutrients.

Summary: The 2018 Farm Act is up for renewal imminently with critics pointing out that it disproportionately benefits 'big agriculture'. An alternative proposed bill, whilst unlikely to pass, has garnered support and brought attention to wider stakeholder interests. With a number of megatrends converging - climate change, biodiversity loss, water scarcity and food security - the agriculture sector globally needs innovation and reform. Historically, investment in agriculture has been focused on increasing yields or increasing farm productivity - from research into pesticides and fertilisers through to agtech designed to irrigate, cultivate and process more efficiently. However, could it be that a focus on farm productivity actually promotes system inefficiency? We discuss a proposal from Chatham House that suggests a shift in focus from yields per unit input or ‘Total Farm Productivity’ to the number of people that can be fed healthily and sustainably per unit input or ‘‘Total Resource Productivity’.

Why this is important: Many larger investible companies rely on our agricultural supply chains (think food producers and supermarkets for instance), so it’s a big long-term issue all investors should be considering. Recent food supply disruption and price inflation will bring it more to the fore.

The big theme: Agriculture (and its sibling, aquaculture) sit at the intersection of a number of UN Sustainable Development Goals (UN SDGs). As one reads through the list of goals they are either directly relevant (for example goal 2: zero hunger or goal 3: good health and well-being) or have a causal relationship (for example, education improving with better nutrition and less pollution). Reforming agriculture is a big deal, in terms of greenhouse gas emissions, environmental impact, food security and rural society. It’s going to require massive social and economic change and disruption, to production methods, to supply chains and to employment.

The details

"We simply pay too much to the wrong people, to grow the wrong foods the wrong way, in the wrong places"

Earl Blumenauer, US representative for Oregon's 3rd congressional district.

Every 5 years in the US, the package of agricultural and food policies is renewed with the next renewal imminent. The Agricultural Improvement Act of 2018 better known as the '2018 Farm Act' comprises a number of programs including nutrition assistance (76% of total outlays), crop insurance (9%), commodity support (7%) and conservation (7%).

Approximately $63 billion of the total outlays was for subsidies with 70% going to just 10% of farms most of which produce commodity crops - often used to make animal feed - and in 2019 10% of funding went to concentrated animal feeding operations.

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