Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact and Partnerships at the Agricultural Research Council; mkhabelat@arc.agric.za
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the Group Executive: Impact and Partnerships at the Agricultural Research Council; [email protected]

Agricultural research, productivity and long-run implications on food prices

By Opinion Time of article published Oct 8, 2020

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By Thulasizwe Mkhabela

JOHANNESBURG - According to the Food and Agriculture Organisation (FAO) of the United Nations, more than 1 billion people suffer malnutrition.

This is despite declines in food prices from the 2008 highs as a result of the economic meltdown then because local prices in many developing countries are still high by historical standards.

Suffice to say that long-run global food commodity prices are driven by differential rates of growth in the supply and demand for food crops, feed, and livestock products.

Growth in demand for agricultural commodities largely results from growth in demand for food, which is driven by growth in population and per capita incomes, coupled with new demands for biofuels.

Growth in supply of agricultural commodities is primarily driven by growth in productivity, especially as growth in the availability of land and water resources for agriculture has become more constrained, given that these are finite resources. Thus, agricultural productivity growth will be a pivotal determinant of long-term growth in the supply, availability, and price of food over the coming decades.

What is lamentable is, however, a slowdown in growth of agricultural productivity and grain yields. If this slowdown in productivity continues unabated, it could have profound implications for food price trends in the future.

Global crop yields and productivity global yields for maize, rice, wheat, and soybeans (in metric tons per harvested hectare) grew rapidly from 1961 to 2007. Maize and wheat yields each grew by a factor of 2.6, while rice and soybean yields increased by a factor of 2.2 and 2.0, respectively. However, for all four crops, in both developed and developing countries, rates of yield growth were slower during 1990 to 2007 than during 1961 to 1990. A slowdown in crop yield growth was seen in more than half of the countries that grew these four crops. More critically, compared with all producing countries, a higher proportion of the top 10 producing countries experienced a slowdown for all four crops.

Global land productivity, reflecting worldwide output of 185 crop and livestock commodities per harvested and pastured area, was 2.4 times in 2005 what it was in 1961, equating to growth of 1.96percent per year. Labour productivity, the output per agriculture worker, grew by a factor of 1.7 during that span, equating to 1.2percent per year growth.

These productivity developments reflect relatively slow growth in the use of agricultural land and labour of 0.31percent and 1.07percent per year, respectively, compared with growth in global agricultural output (2.27percent per year).

In parallel with global crop yields, global land productivity grew at a slower pace from 1990 to 2005 (1.82percent per year) than from 1961 to 1990 (2.03percent per year). Labour productivity increased at a faster rate from 1990 to 2005 than from 1961 to 1990 (1.36percent versus 1.12percent per year, respectively). These world totals are influenced by the significant, and in many respects exceptional case of China, where land and labour productivity growth has accelerated recently. If China is excluded, global land and labour productivity growth has been substantially slower since 1990 than during the previous three decades. Among the top 20 producing countries land and labour productivity grew substantially more slowly from 1990 to 2005 than from 1961 to 1990, with China being the exception.

Many factors may have contributed to the slowdown in agricultural productivity growth. Changes in weather or climate, land degradation, shifts of the location of production to less favourable environments, farmer responses to resource scarcity or higher prices of inputs, changes in public institutions, and evolving pests and diseases may all have contributed.

Agricultural R&D also is an important element of the story, a critical policy instrument that governments can apply to influence the path of agricultural productivity. Organised public and private investment in agricultural R&D was a primary driver of the comparatively rapid growth in agricultural productivity experienced in the latter half of the 20th century.

The interactions are complex, with long and uncertain time lags between initial investment in research and realisation of the returns. However, although it takes a long time, perhaps decades, for R&D to affect productivity, it then typically affects productivity for decades more. These effects may be subtle. Much investment in agricultural R&D is of a maintenance type, designed not to increase yields so much as to prevent yields from declining in the face of coevolving pests and diseases or other environmental changes.

Despite the long lags, numerous cost-benefit studies have reported that investments in agricultural R&D have yielded high returns. Such studies have indicated that the world has persistently underinvested in agricultural R&D and have been cited by economists to justify an increased rate of growth in agricultural R&D spending, which may help restore productivity growth and ameliorate hunger and poverty.

Instead, we have seen a slowdown in the growth rate of public agricultural R&D investments and a change in the balance between private and public investments to increase the private share. Moreover, funds have been redirected away from farm productivity toward other concerns, such as the environmental effects of agriculture; food safety and other aspects of food quality; and the medical, energy, and industrial uses of agricultural commodities.

For example, in 1975, an estimated 66percent of all research conducted by the state agricultural experiment stations in the US was directed to maintaining and enhancing farm productivity; by 2007, this share had slipped to 57percent.

Data for other developed countries show patterns somewhat consistent with those in the US. In the latter half of the 1990s, public agricultural R&D was massively reduced in Japan and also in several European countries, albeit to lesser extent.

In the past, most countries, especially the poorer ones, have relied heavily on spillovers of knowledge and technology resulting from agricultural R&D undertaken by a small number of developed countries. Thus, a continuation of recent trends in funding, policy, and markets is likely to have significant effects on long-term farm productivity for food staples in developed and developing countries alike.

A revitalisation of agricultural R&D investments in developed countries can be justified on narrow cost-benefit criteria. In addition, it will contribute to the global public good by restoring and sustaining productivity growth over the long run, which in turn will mitigate hunger and poverty and, at the same time, reduce pressure on the natural resource base.

Thus, a significant increase in agricultural research funding and activities in South Africa can be expected to benefit not only South Africa, but also the Southern African community and Africa at large.

Dr Thulasizwe Mkhabela is an agricultural economist and is the group executive: Impact & Partnerships at the Agricultural Research Council; [email protected]

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