2012 GAP REPORTMEASURING GLOBAL AGRICULTURAL PRODUCTIVITY

12012 GAP Report

The Global Harvest InitiativeThe Global Harvest Initiative (GHI) is a private sector policy voice for agricultural productivity growth throughout the value chain to sustainably meet the demands of a growing world. To produce enough food to feed 9 billion people by 2050, GHI proposes key policies that enhance global food and nutrition security through increases in agricultural productivity while conserving natural resources.

Improving productivity requires growing more while using less water, land, energy, labor, and other inputs. Protecting productivity gains in the post-harvest phase and through the entire value chain is equally critical. Productivity increases on the farm may be lost by an inability to get harvest or livestock to markets, lack of infrastructure, inefficient processing, or lack of access to finance.

Enhancing and accelerating agricultural productivity in a sustainable manner is a central component for achieving global food and nutrition security. Productivity can be a growth engine, leading to improved food systems, economic transformation, and poverty reduction. When coupled with access to nutritious food, agricultural productivity is a powerful base for building health and stability.

In October 2010, GHI released its inaugural Global Agricultural Productivity Report (GAP Report), to serve as a benchmark to analyze agricultural productivity growth. Each year, the GAP Report is updated to mark the progress made toward sustainably doubling agricultural output over the next 40 years.

GHI has forged five policy priorities to improve agricultural productivity growth and meet the challenge of feeding a growing global population:

Increasing Investment in Agricultural Development and Rural Infrastructure Strengthening and Streamlining Development Assistance Programs Improving Agricultural Research Funding, Structure, and Collaboration Embracing Science- and Information-Based Technologies Removing Barriers to Global and Regional Trade in Agriculture

2012 Global Harvest Initiative, Inc.

2 2012 GAP Report

Table of Contents

3 2012 GAP Report Executive Summary

5 The Significance of Agricultural Productivity Growth

6 Figure 1 The GAP Index

7 Demand is Global; Resources are Local

7 Figure 2 Sources of Growth, Global Agricultural Output

8 Figure 3 Percent Increase in Food Demand, 2000-2030

9 Figure 4 Net Trade for Major Regions of the World

9 Strategies for Meeting Regional Demand

10 Asia

10 Figure 5 Projected Increase in Food Demand, Asia

11 Figure 6 The Food Demand GAP, East Asia

12 Figure 7 The Food Demand Gap, South and Southeast Asia

13 Middle East and North Africa

13 Figure 8 The Food Demand GAP, Middle East and North Africa

14 Sub-Saharan Africa

14 Figure 9 Projected Increase in Food Demand, Sub-Saharan Africa

15 Figure 10 The Food Demand GAP, Sub-Saharan Africa

16 Latin America and Caribbean

16 Figure 11 The Food Demand GAP, Latin America and Caribbean

17 Transition and Developed Countries

18 Figure 12 Land and Worker Productivity for Major Regions of the World

19 Figure 13 Sources of Growth, Global Agricultural Output

21 Sustaining and Accelerating Agricultural Productivity Growth Through Effective Policy Reform

21 Recommendation 1: Increase Levels of Public and Private Sector Investment in Agriculture

21 Table 1 Agricultural Development Investment GAP

22 Table 2 International Sources of Investment Flows

22 Figure 14 Official Development Assistance for Agriculture

23 Figure 15 Gross Investment in Capital Stock

25 Recommendation 2: Improve Agricultural Research Funding, Structure, and Collaboration

25 Figure 16 Agriculture R&D Spending

26 Figure 17 Returns to Public Agricultural Research and Extension

26 Recommendation 3: Embrace Science- and Information-Based Technologies

27 Figure 18 Annual Output of Animal Products

29 Figure 19 Global Area of Biotech Crops

31 Figure 20 Adoption of No-Till Farming

32 Recommendation 4: Remove Barriers to Global and Regional Trade

34 Conclusion and Acknowledgements

35 Endnotes

32012 GAP Report

Executive SummaryTHE 2012 GLOBAL AGRICULTURAL PRODUCTIVITY REPORT

The Global Harvest Initiative (GHI) is a private sector policy voice for agricultural productivity growth throughout the value chain to sustainably meet the demands of a growing world. GHI releases an annual Global Agricultural Productivity Report (GAP Report) to serve as a benchmark to analyze agricultural productivity growth. The 2012 GAP Report focuses on the most recent global agricultural productivity growth rate and compares it to the rate required to meet estimated demand growth. The report also analyzes global and regional productivity, as each region faces unique opportunities and challenges.

In 2010, GHIs inaugural GAP Report calculated that global agricultural total factor productivity (TFP) must grow by an average rate of at least 1.75 percent annually to double agricultural output by 2050. Recent findings indicate that global TFP is rising at an average annual rate of 1.84 percent. But regional differences exist, and achieving necessary food production by 2050 requires improving the productivity of farmers in every major region, and across all scales of agriculture, from the smallholder to the commercial exporter. Meeting future demand requires improving practices in growing and handling crops and livestock, and improving transportation, processing, and food production through infrastructure and capital investment.

Regional Productivity and Food Demand Findings

Food demand in Asia will result primarily from rising incomes rather than population increases. In East Asia, food demand is estimated to grow 3.64 percent each year between 2000 and 2030. In South and Southeast Asia, food demand is estimated to grow annually by 2.75 percent. If these regions maintain the TFP growth rate of the last decade (3.05 percent for East Asia and 2.48 percent for South and Southeast Asia), a significant food deficit gap will likely be met through imports.

In the Middle East and North Africa region (MENA), food demand is expected to grow at a rate of 2.14 percent by 2050. Productivity growth for the region over the past decade has averaged 1.9 percent. Because almost half of food in the MENA region is imported and water scarcity is increasing in the region, a growing food gap will need to be filled through a combination of productivity increases, imports, and government safety net food assistance programs.

In Sub-Saharan Africa, the average annual growth in food demand is projected to be 2.83 percent per year from 2000 to 2030, primarily due to population increase. With the most rapid regional rate of population growth in the world, and with TFP growth rates on average of 0.5 percent, a significant food demand gap will become much greater unless Sub-Saharan Africa accelerates productivity growth rates, sustainably expands land or intensifies production.

The estimated growth in food demand in the Latin America and Caribbean (LAC) region is 1.8 percent per year from 2000 to 2030. TFP growth from the last decade is 2.74 percent and if maintained or accelerated, this region may expand exports, increase production of biofuels, or withdraw some land from production for conservation.

The vast region comprised of Eastern Europe and the former Soviet Union (transition countries) has enormous agricultural production potential. Agricultural productivity in this region is relatively low (0.8 percent for 1991-2000 and 2.3 percent for 2001-2009) and improvements could significantly raise output, meeting local and regional demand as well as allowing for exports.

Developed countries face relatively low growth in food demand. They are also the most productive, with the lowest use of inputs per unit of output. If investment in science and technology is sufficiently robust to allow productivity to grow at historical rates, then developed nations as a whole should be able to meet their demand for food and biofuel, maintain land and water for conservation, urbanization and recreation, and maintain their historic agricultural export levels.

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Sustaining and Accelerating Agricultural Productivity Growth Through Effective Policy Reform

Effective public policies establish an enabling environment that encourages investments in capital, technology, and labor for agricultural productivity growth. GHI recommends policy positions that will support increases in productivity.

GHI emphasizes the need for increased private and public sector funding for agricultural development, and notes that successful approaches are beginning to make an impact in many developing countries. Development assistance funding to improve infrastructure and establish procedures that reduce corruption can mobilize additional private sector resources for productivity improvements.

Investments by the public and private sector in agricultural research and development (R&D) make significant contributions to growth in agricultural productivity. Investment by the public sector is necessary and must continue in the coming decades.

New science- and information-based technologies can improve productivity along the entire agriculture value chain. Implementing rule-based and predictable regulatory systems will allow these new technologies to be adopted and used by developing country farmers.

Trade liberalization through multilateral, regional, or bilateral trade agreements can be a major contributor to economic growth by expanding market access, improving efficiency, and increasing investment in the food and agriculture sectors. For developing countries, these gains are most likely to materialize when agreements and related development assistance facilitate market development.

5 2012 GAP Report

The 2012 GAP Report

THE SIGNIFICANCE OF AGRICULTURAL PRODUCTIVITY GROWTH

Improving agricultural productivity has been the worlds primary defense against a Malthusian crisis a scenario in which the food requirements of an ever-increasing population overwhelm the natural resource base and lead to widespread famine.i In the more than 200 years since Thomas Malthus set forth his theory, advances in productivity have driven an expansion of agricultural output that averted such an outcome despite a nearly four-fold increase in global population.ii Productivity gains during much of the 20th century also contributed to a reduction in the proportion of disposable household income spent on food, which has led to a downward trend in food prices relative to income.iii

Since the turn of the millennium, agricultural commodity prices have been increasing as demand has grown faster than supply. Strong growth in demand for agricultural commodities is projected to continue for several more decades due to population growth, dietary changes resulting from rising incomes, and the growing use of biofuels. These factors together could double total agricultural demand by 2050. The challenge can be met by raising agricultural productivity and harnessing the worlds land and water resources in a sustainable and efficient manner.

In 2010, GHI calculated that global agricultural total factor productivity (TFP) must grow by an average rate of at least 1.75 percent annually to double agricultural output by 2050. The United States Department of Agricultures Economic Research Service estimates that global agricultural TFP has been rising by an

average annual rate of 1.84 percent1 (Figure 1). If maintained, this rate of growth would be sufficient to more than double agricultural supply by 2050 at current resource levels. However, maintaining this rate of productivity growth will require the right set of policies and investments. Todays growth rate reflects outcomes of decisions made a decade or more ago to boost agricultural productivity, including investments in research and infrastructure.

Gains in agricultural productivity risk being offset by factors including adverse weather, climate change, natural resource degradation, diversion of water and land from agriculture to urban and other uses, and rising input costs. Sustainability growing more with less while conserving the natural resource base and minimizing loss along the value chain while adapting to changing external conditions, are critical for policies and practices affecting agricultural productivity.

Total factor productivity (TFP) is the ratio of agricultural outputs (gross crop and livestock output) per inputs (land, labor, livestock, fertilizer and machinery) used. TFP can be highly variable as yields will rise and fall, reflecting changing weather patterns and other factors. The extended 2012 drought in the U.S., the worlds largest food-exporting nation, will have a negative impact on global agricultural output and may reduce future TFP growth estimates.

1 Fuglie (2012). The 1.84 percent estimate is the average annual TFP growth measured in constant 2005 US$ using the latest available global data 2001-2009.

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Source: Global agricultural TFP growth is from Fuglie, 2012. The required rate of TFP growth to double agricultural supply using existing resources is estimated by GHI.

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Required Rate of TFP Growth

Actual TFP

Total Factor Productivity must continue to increase to feed 9 billion by 2050.

1.84

CurrentRate of TFPGrowth

RequiredRate of TFP

Growththrough 2050

on target,investment and commitment

but we should recognize the

needed to stay on track.

The global level is

FIGURE 1

The GAP IndexTM

Total Factor Productivity Required to Meet Global Demand vs. Actual

7 2012 GAP Report

Demand is Global; Resources are Local

While global TFP may meet current demand, regional details indicate vast differences in agricultural productivity improvement since the mid-1990s (Figure 2).iv Given the wide global disparity in purchasing power, achieving necessary food production by 2050 requires improving the productivity of farmers in every major region, and across all scales of agriculture, from the smallholder to the commercial exporter, and preserving these productivity gains throughout the entire value chain.

TOTAL FACTOR PRODUCTIVITY (TFP) GROWTH IN GLOBAL AGRICULTURE SINCE THE MID-1990S

>3%

1-3%

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The U.N. Food and Agriculture Organizations (FAO) yield gap2 reveals significant opportunities to improve regional productivity. Cereals, roots and tubers, pulses, sugar crops, oil crops, and vegetable yields in Sub-Saharan Africa only reach about 25 percent of their potential, while yields in Central America, Central Asia, Eastern Europe, and the Russian Federation reach approximately 40 percent of their potential.v Beyond improving yields, these regions can improve productivity along the entire value chain through better infrastructure, processing, transportation, education, data analysis, and information management.

Projected food demand varies between developed, transition, and developing countries as a result of rising incomes (that enable consumers to purchase more high-value foods such as meat and dairy products) and/or growing populations. For developed countries, the increase in total food demand from 2000-2030 is estimated to be only 12 percent; transition and developing countries will experience a projected increase of almost 38 percent and 115 percent, respectively (Figure 3).3,vi,vii

0%20%40%60%80%

100%120%

PERCENT INCREASE IN FOOD DEMAND2000 - 2030

DEVELOPED TRANSITION DEVELOPING

INCOME POPULATION

Projected food demand varies between developed, transition, and developing countries due to population growth and rising incomes.

Source: Calculations based on data from Fischer (2009) and Tweeten and Thompson (2008)

2 FAOs yield gap measures the difference between current yield and the potentially achievable yield with inputs and management practices optimized to local soil and water conditions. 3 The projected growth in food demand uses Fischers (2009) estimates of population and income growth and estimates of the income elasticity of food demand from Tweeten and Thompson (2008). The income elasticity of food demand indicates the share of the growth in per capita income that will be spent on food. Multiplying the income elasticity with the growth rate in per capita income gives the growth in per capita food consumption, holding food prices fixed. Adding this to population growth gives the total growth in food demand for a given price level.

FIGURE 3

2 50 m

2 0 0 m

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Value of Agr icu lt ur al Pr oduct s Tr ade d U S$

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NET IMPORTS: ASIANET EXPORTS: AMERICAS

Global trade in agricultural goods has steadily increased, and eective trade policies will be important to help sustainably meet future regional demands by facilitating international trade flows.

FIGURE 4

Net TradeFor Major Regions of the World

9 2012 GAP Report

Because food demand is not expected to increase equally for all regions, nor can all regions meet food demand solely through productivity improvements, sustainably meeting future demand will require other mechanisms to close the gap, such as trade or, where appropriate, land expansion. The global value of agricultural trade has grown steadily in the last several decades (Figure 4), a trend that is expected to continue. Effective trade policies are needed to facilitate the growing movement of agricultural products between regions with sufficient land and water resources, and those that are resource-scarce.

Strategies for Meeting Regional Demand

Each region has its own set of challenges and opportunities to increase agricultural productivity and food security, so solutions need to be site specific. Regional differences in productivity growth and natural resource allocation require various strategies to meet the needs of growing populations. The following section highlights the anticipated growth in total food demand for major regions of the world, projects the proportion of demand that could be met with productivity improvements, and describes likely trade and resource demands through 2030.

102012 GAP Report

Asia

Asian populations are transforming rapidly: urbanization is increasing, incomes are rising, and the middle class is expanding. By 2030, 75 percent of Chinas population could enjoy middle-income lifestyles, compared to only 12 percent today, and Indias middle-income population could grow to account for 70 percent.viii In Indonesia, more than 80 percent of the population could be middle-income by 2050.ix

Such transformations not only affect where people live, but how much and what they eat. These increasingly affluent consumers will demand higher value food products, most notably consuming more animal protein in their daily diets. By 2040, the new middle class in Asia is projected to increase food spending by $1.5 trillion per year, a modest $500 per middle class member. The resulting demand for new niche food products in Asia, such as organics, nutritionally enhanced products, and prepared foods, will further increase the need for productivity improvements.x Studies show that most of the projected growth in total food demand for Asia will result from rising incomes rather than population increases (Figure 5).

FIGURE 5

11 2012 GAP Report

In East Asia, food demand is estimated to grow 3.64 percent each year between 2000 and 2030.xi,xii In South and Southeast Asia, food demand is estimated to grow annually by 2.75 percent.xiii,xiv If these regions maintain the TFP growth rate of the last decade (3.05 percent for East Asia and 2.48 percent for South and Southeast Asia), a significant food deficit gap will emerge4 (Figures 6 and 7).xv

Asia already accounts for 70 percent of the worlds land area under irrigation, and the FAO estimates that there will be little additional land or water available to expand production. The World Resources Institute estimates that 75 percent of the currently irrigated cropland in Asia will experience two to eight times greater stress by 2025 due to shifting patterns in climate, population, and levels of economic development.xvi The impact of the additional stress could range from occasional supply disruptions to basic services (e.g. power, drinking water distribution) being at risk and requiring significant intervention and major sustained investments.xvii

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Food Demand Index

Agricultural Outputfrom TFP Growth

ProjectedAgricultural Outputfrom TFP Growth

74%of total demand can be met by maintaining the current TFP growth rate.

If TFP growth rate is maintained, a significant gap would need to be met through imports.

Source: Calculations based on data from Fuglie (2012), Fischer (2009), and Tweeten and Thompson (2008)

4 The projection of agricultural output from TFP growth uses Fuglies (2012) estimate of average TFP growth during 2001-2009 for the region and assumes this is maintained through 2030. The projected growth in food demand uses Fischers (2009) estimates of population and income growth and estimates of the income elasticity of food demand from Tweeten and Thompson (2008). The income elasticity of food demand indicates the share of the growth in per capita income that will be spent on food. Multiplying the income elasticity with the growth rate in per capita income gives the growth in per capita food consumption holding food prices fixed. Adding this to population growth gives the total growth in food demand for a given price level.

FIGURE 6

The Food Demand GAP

EAST ASIA

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Agricultural Outputfrom TFP Growth

ProjectedAgricultural Outputfrom TFP Growth

82%of total demand can be met by maintaining the current TFP growth rate.

If TFP growth rate is maintained,

a significant gap would need to be met through imports.

Source: Calculations based on data from Fuglie (2012), Fischer (2009), and Tweeten and Thompson (2008)

FIGURE 7

The Food Demand GAP

SOUTH and SOUTHEAST ASIA

Asian farmers produce about 90 percent of the worlds rice crop, and rice farming is the main economic activity for hundreds of millions of rural poor in this region. Strategies for food production in Asia must target rice yield increases, particularly for rain-fed rice, while making irrigation water use more efficient and targeted.xviii Improvements in irrigation methods to increase water-use efficiency, such as alternate wetting and drying (AWD) of rice fields, will be necessary to maintain and expand existing production.

In addition to increasing productivity, the role of trade will be critical in closing the gap between food demand and food production. Regional and global trade agreements can help address rice price spikes and volatility when weather-related disruptions in production occur. Trade will also be a vital means of increasing the availability of lower-priced food for urban populations, and help meet the growing demand for aquaculture, dairy, and meat products in Asia.

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Middle East and North Africa

In the Middle East and North Africa (MENA) region, food demand is expected to grow at a rate of 2.14 percent by 2050.xix,xx Productivity growth for the region over the past decade has averaged 1.9 percent.xxi Because almost half of food in the MENA region is imported, global price volatility for grains, particularly for wheat, is highly disruptive and can destabilize political systems and contribute to conflict. If the region is able to maintain the current productivity rate, a food gap will still need to be filled, most likely through imports and government safety net food assistance programs (Figure 8).

MENA is the most water-scarce region of the world, with an average annual water availability of 1,200 cubic meters per person, compared to the world average of close to 7,000 cubic meters.xxii One half of the MENA population lives under conditions of water stress, and per capita availability of water is expected to halve by 2050.xxiii There is increased competition for water for agriculture, domestic consumption, and industry in many MENA countries. Across the region, water withdrawn for agriculture exceeds 50 percent of the renewable water resources.xxiv

Increasing agricultural productivity in the MENA region will rely on improved irrigation technologies, such as micro-irrigation. Pioneered by 2012 World Food Prize Laureate Dr. Daniel Hillel, micro-irrigation is a revolutionary system that dramatically reduces the amount of water needed to nourish crops, maintain crop health, and increase yields.

To increase productivity in the MENA region, a full range of strategies need to be explored. In particular, water-use efficiency, targeted irrigation, and drought-resistant food crops must be further developed. Some MENA countries are using foreign lease or purchase of land in Sub-Saharan Africa for future food production to fill their own production gaps. This practice presents challenges due to the potential for displacement of local populations, and unsustainable land use and production practices that can occur when land-acquisition agreements are unfairly negotiated or implemented.

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83%of total demand can be met by maintaining the current TFP growth rate.

Source: Calculations based on data from Fuglie (2012), Fischer (2009), and Tweeten and Thompson (2008)

FIGURE 8

The Food Demand GAP

MIDDLE EAST & NORTH AFRICA

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Sub-Saharan Africa

In Sub-Saharan Africa, the average annual growth in food demand is projected to be 2.83 percent per year from 2000 to 2030, primarily due to population increase (Figure 9).xxv,xxvi The United Nations estimates that from 2000 to 2030, Sub-Saharan Africas population will more than double the most rapid rate of population growth in the world.xxvii

Sub-Saharan Africas TFP growth has been low over the past decade, around 0.5 percent, and nearly all of the agricultural output growth has come from expansion of rain-fed land with very little use of modern inputs.xxviii The result has been low yields and declining soil fertility. The current food demand gap is significant, and will become much greater unless Sub-Saharan Africa accelerates productivity growth rates (Figure 10). There are opportunities to increase agricultural output through expansion of cropland, employing more youth, and increasing intensification. In fact, the FAO suggests that 25 percent of the production growth in Sub-Saharan Africa will come from farming more hectares of land.xxix However, these strategies alone may not sufficiently improve food security, or reduce poverty, and may threaten to open up fragile lands and forests to exploitation. Sustainable expansion of land for agriculture will require careful selection, land use management practices, and conservation approaches to prevent desertification and rainforest destruction.

Agricultural productivity in parts of Sub-Saharan Africa has suffered from decades of policy neglect and extractive practices. To produce more successfully and sustainably, farmers need enough land, water, crop nutrients, appropriate equipment and tools, and vastly improved infrastructure such as rural roads, bridges, and storage. In Sub-Saharan Africa, less than four percent of cropland is irrigated, compared with 35 to 40 percent in much of Asia.xxx Farmers in Sub-Saharan Africa apply less than eight kilograms per hectare of inorganic fertilizer nutrients nitrogen, phosphorus, potash compared with more than 150 kilograms per hectare in much of Asia.xxxi Corruption, political instability, conflict, and the lack of intra-regional trade capacity also act as barriers to agricultural production and food security.

FIGURE 8

The Food Demand GAP

MIDDLE EAST & NORTH AFRICAFIGURE 9

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Improving the productivity of smallholder farmers and increasing yields are the regions best opportunities to provide the needed food and enhanced livelihoods for those actively engaged in farming. Farms are the most important employment and income source for more than two-thirds of Sub-Saharan Africas economically active workers, especially women, the young, and the poor. Since more than 70 percent of the poor reside in rural areas, and most depend on agriculture for food production, effective poverty reduction strategies must fully embrace the needs of smallholder farmers.xxxii Studies have found that each one percent increase in agricultural yield translates into a similar increase in the number of people that can afford basic needs.xxxiii

Raising productivity in Sub-Saharan Africa will require new technologies that are appropriate and adaptable for African smallholder farmers and pastoralists and suitable for agro-environmental conditions. The application of information technology can promote good agricultural practices and will help smallholder farmers produce more. New technologies to store more and lose less will also help farmers reduce post-harvest losses. In particular, unleashing the productive power of women farmers in Africa giving them access to credit, training with appropriate innovative technology, and enabling them to use land through secure tenure laws would make a significant impact on productivity, household income, and food and nutrition security.

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Agricultural Outputfrom TFP Growth

ProjectedAgricultural Outputfrom TFP Growth

13%

If TFP growth rate is maintained,

a significant gap would need to be met through productivity improvements, selective expansion, intensification, and imports.

of total demand would be met by maintaining the current TFP growth rate.

Only

Source: Calculations based on data from Fuglie (2012), Fischer (2009), and Tweeten and Thompson (2008)

FIGURE 10

The Food Demand GAP

SUB-SAHARAN AFRICA

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Latin America and the Caribbean

The estimated growth in food demand in the Latin America and Caribbean (LAC) region is 1.8 percent per year from 2000 to 2030.xxxiv,xxxv TFP growth from the last decade is 2.74 percent (Figure 11).xxxvi Maintaining or accelerating TFP growth will enable such options as expanding exports, increasing production for biofuels, or withdrawing some land from production for conservation or carbon credit strategies, thereby easing pressure on the resource base. The FAO predicts that food exports from the LAC region will continue to grow as countries move from 118 percent to 130 percent agricultural self-sufficiency by 2050.xxxvii Policies that encourage productivity, while sustainably managing water, land, and forest cover, can provide an environment conducive to future food exports.

In order for the LAC region to realize its productivity and export trade potential, governments must commit to improvements in infrastructure. Latin American countries exhibit a significant infrastructure gap due to decades of low, and often inefficient, public investment. The World Economic Forum ranks Brazils quality of infrastructure 104th out of 142 countries surveyed, behind China (69), India (86), and Russia (100).xxxviii Modern roads, ports, and railroads reduce transportation costs and increase the competitiveness of domestic producers and firms. Latin America will have to double its total investment infrastructure to at least 4 percent of the GDP to reach its expected economic growth.xxxix

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Agricultural Outputfrom TFP Growth

ProjectedAgricultural Outputfrom TFP Growth

Source: Calculations based on data from Fuglie (2012), Fischer (2009), and Tweeten and Thompson (2008)

If TFP growth rate is maintained,

and the region will likely become a larger exporter.

Food demand will be met and exceeded,

FIGURE 11

The Food Demand GAP

LATIN AMERICA and CARIBBEAN

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Eastern Europe and the Former Soviet Union (Transition Countries)

The vast region comprised of Eastern Europe, the Russian Federation, and other former Soviet states has enormous agricultural production potential. The agricultural productivity growth rate in this region is relatively low (0.8 percent for the decade 1991-2000 after the breakup of the Soviet Union, thereafter increasing to a rate of 2.3 percent from 2001- 2009) and improvements could significantly raise output.xl In 2009, Russia, Ukraine, and Kazakhstan together made up over half of gross agricultural output in this region and may have the biggest potential for increases in productivity.xli The Russian Federation in particular has a vast natural resource base, including nine percent of the worlds arable land and eight percent of the fresh water, along with a climate suitable for production. With only 139 million people, it can fulfill its domestic needs for abundant, affordable food and be a major supplier to the rapidly growing world food market.

In this region, constraints to improving agricultural productivity include a lack of producer incentives due to non-market-based pricing, aging and inefficient former state farms, poor infrastructure and roads, aging machinery and storage facilities, and limited access to credit. In addition, productivity is hindered by the lack of effective research and extension capacity to deliver suitable new technologies and modern best agricultural practices. The modernization of the agriculture sector would facilitate productivity and the output increases that could make the region a significant contributor to meeting global demand.

Developed Countries

A comparison of trends in output per worker and output per land, for major global regions over the past 50 years, illustrates the importance of past investment in productivity growth, and in the science and education that drives productivity (Figure 12).xlii Generally, developed nations are on the technology frontiers, with the highest agricultural land and labor productivity rates. They are also the most productive, with the lowest use of inputs (water, labor, energy, chemical, and land area) per unit of output. This highly productive agriculture is the product of long-established agricultural research and extension services. Science-based technologies, including mechanization, advances in genomics, irrigation, and other management practices, are some of the drivers of this productivity growth. The productivity growth of developed countries may be limited by prohibiting science-based technology adoption due to public opposition and a lack of information. Continued investment in agriculture and the adoption of science- and information-based technologies will be required to continue to push out the technology frontier. Currently, Southeast Asia, China, and Latin America are only beginning to reach the 1960s productivity levels of todays developed nations.

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Technology Frontier1961-1965

Source: Fuglie, Wang and Ball (2012)

Note: Output is gross crop and livestock output measured in constant 2005 international dollars. The number of workers is the number of economically active adults in agriculture. Land is the sum of total cropland and permanent pasture in hectares. The technology frontiers sketch out the highest land and labor productivities achieved in these regions in 1961-65 and 2006-09. Europe includes all European states except those in the former Soviet Union (FSU).

FIGURE 12

LAND AND WORKER PRODUCTIVITYFor Major Regions of the World

19 2012 GAP Report

1961-1

970

1971-1

980

1981-1

990

1991-2

000

2001-2

009

1 .00

-1 .00

0 .50

-0 .50

0 .00

Rat

e o

f G

row

th (

% p

er y

ear)

1 .50

-1 .50

2 .00

-2 .00

TFP

INPUTS/LAND

AREA EXPANSION

IRRIGATION

DEVELOPED COUNTRIES

Source: Fuglie, Wang and Ball (2012)

While the developed countries face relatively low growth in food demand, they are requiring significant agricultural production for biofuels. Moreover, agriculture is facing increasing competition for land and water from demand for conservation, recreation, urbanization, and alternative uses. Future growth in agricultural output for developed nations will be heavily dependent on productivity increases on land already in use for agriculture and livestock production. Increase in TFP is the primary source of output growth since the 1970s (Figure 13).

If investment in science and technology is sufficiently robust to allow productivity to continue to grow at historical rates, then developed nations as a whole should be able to meet their demand for food and biofuel, maintain land and water for conservation and recreation, and maintain their historic agricultural export levels.

FIGURE 13

Sources of Growth

GLOBAL AGRICULTURAL OUTPUT

Note: The color components delineate the source of the growth due to (i) agricultural land expansions, (ii) extension of irrigation to cropland, (iii) greater use of fertilizer, machinery, labor, and other inputs per acre of cropland, and (iv) TFP.

202012 GAP Report

Global Food Security Index: Generating Timely Insights to Food and Nutrition Security

The Economist Intelligence Unit, with sponsorship by DuPont, developed the Global Food Security Index a comprehensive scoring model that measures the drivers of food security in 105 countries across the categories of affordability, availability, and nutritional value and safety. This tool identifies specific underlying factors of food security and assesses vulnerabilities country by country. The index adjusts for changes in food prices and other macroeconomic factors quarterly, allowing it to serve as a timely monitor of shocks that might compromise a countrys food security. This tool will help inform decision making that leads to sustainable solutions. http://foodsecurityindex.eiu.com

Summary

Sustainably meeting the increased global demand for food by 2050 will require farmers and pastoralists in every major region of the world from the smallholder farmer to the commercial exporter to continue improving their overall productivity. Understanding and assessing the potential for productivity increases is a necessary first step in establishing the policy environments and the appropriate strategies that lead to greater food security. The GAP Index and other measures of total factor productivity are tools that can provide insight. Other tools, such as the Global Food Security Index, can provide additional, timely information for assessing comprehensive food and nutrition security by country.

Each regions access to natural resources and investment for agriculture and development will dictate the amount of potential growth. Countries and regions will need to continue investing in on-farm productivity and in infrastructure, reduce post-harvest loss, improve animal health and wellness, and harness the power of information technology to increase productivity along the entire value chain. In addition, it will be critical to employ policies that enhance trade and, using careful environmental consideration, expand land area for production to meet growing food and energy demand.

Sources of Growth

GLOBAL AGRICULTURAL OUTPUT

21 2012 GAP Report

SUSTAINING AND ACCELERATING AGRICULTURAL PRODUCTIVITY GROWTH THROUGH EFFECTIVE POLICY REFORM

Effective public policies establish an enabling environment that encourages investments in capital, technology, and labor for agricultural productivity growth. Policies and investments also determine whether, and to what extent, such technologies will be made available to farmers, pastoralists, processors, handlers, and food companies to improve their productivity. In this section, GHI proposes several policy recommendations that will have a transformational impact on productivity, and highlights progress and developments on each recommendation.

Recommendation 1: Increase Levels of Public and Private Sector Investment in Agriculture

Investment in agriculture is increasing in developing countries, but a significant gap still remains

In 2011, GHI estimated a developing country agricultural investment gap for middle- and lower-income countries of nearly $90 billion for 2008 (Table 1). This sizeable gap is based on estimates of the overall investment needed to achieve the production growth required to meet mid-century demand, compared with the amounts currently being invested from domestic and international sources.xliii More recent 2010 data indicate that international assistance and domestic investment in development has increased and thus the overall development gap has decreased. If we assume agricultural development needs are 15.8 percent of the total the agricultural share of GDP averaged for developing countries and that development dollars are allocated relative to size of the sector, then the agricultural development gap would have decreased slightly, but a sizeable gap remains.

Table 1: Agricultural Development Investment Gap (US$ billions)

2008 2010

Development Spending Needs, 10% of GDPa 1741 2000

Development Spending, Own Resources, 4%b 696 799

International Assistance & Investment 475 703

Development Spending Gap 570 498

Agricultural Needs, 15.8% of Development Gapc

89 79

International investment flows from four main sources: private philanthropy (foundations and individuals), remittances from nationals living overseas, official development assistance from bilateral and multilateral donors, and private-sector foreign direct investment (FDI). For low- and middle-income countries, international investment flows increased from $475 billion in 2008 to $703 billion in 2010 (Table 2). The largest category increase came from the private sector, nearly doubling since 2008.

a The World Bank estimates 10 percent of GDP is needed to put developing countries on track to meet development needs. b Developing countries economies grew significantly between 2008 and 2010, so their own domestic investment in their agricultural sectors likely grew as well. c Agricultural needs for development are estimated to be 15.8 percent - the average share of disposable income spent on food.

222012 GAP Report

Table 2: International Sources of Investment Flows, 2008 & 2010

(US$ billions)

2008 2010

Private Investment 121 329

Official Development Flows 120 128

Remittances 181 190

Private Philanthropy 53 56

Total 475 703

Total official development assistance for agriculture increased slightly from 2008 to 2010, and the share devoted to agriculture has also increased in recent years, but this is after declining sharply in the 1980s and 1990s (Figure 14). The importance of the private sector as a source of agricultural investment to meet future food demand is rising. Developing country governments will increasingly need to leverage and coordinate partnerships with private sector investors and bilateral and multilateral development agencies to continue making advances in agricultural productivity. To increase incomes and reduce hunger, these investments must also directly benefit smallholder farmers.

Agricultural development requires expanding the capital base through investment from both the public and private sectors. Physical capital, such as roads, railways, bridges, and port facilities, will require large public sector investments. Capital that is farm-specific, such as machinery, irrigation systems,

Source: OECD

0%

5%

10%

15%

20%

25%

0

5

10

15

20

25

1983 1988 1993 1998 2003 2008

% of total deve lopment ass i stance

Constant 2010 US$ bi l l ions

Agricultural Development Assistance Dollars

Agricultural Percent of Total

After decades of decline, agriculture development assistance has begun to increase, but more public- and private-sector investment is necessary.

FIGURE 14

Official Development Assistance for AgricultureFrom OECD Member Countries

storage structures, barns, livestock, and orchards are predominantly private investments made by farmers. Other capital investments required to manufacture farm inputs and to transport and process farm commodities into food products such as fertilizers, seeds, feeds, and machinery are supplied primarily by agribusiness and food processing industries.

The public sector must also play a large role in investing in knowledge capital, which includes research, extension, and farmers education. These investments play complementary roles

in the production process and are necessary to increase productivity.

Agricultural capital stock is a measure of accumulated capital investment held on farms. It encompasses the total physical capital available for repeated use in agricultural production and includes farm tools and machinery, livestock herds, land improvements (such as irrigation and drainage facilities), and orchards and other tree crop plantations. The FAO estimates that total global agricultural capital stock has grown from $3.7 trillion in 1980 to $5.1 trillion in 2007

23 2012 GAP Report

for Major Regions of the World

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1990

1995

1980

1985

2000

2005

Capital Investment (Constant 2005 $)

DEVELOPINGCOUNTRIES

DEVELOPEDCOUNTRIES

TRANSITIONCOUNTRIES

Declining capital stock investment in transition countries will limit future growth.

Source: FAOSTAT

(constant 2005 dollars), but overall growth slowed from 1.7 percent annually between 1990 and 1999 to 0.5 percent annually from 2000 to 2007.

For developing countries, the trend has been more positive. Developing-region agricultural capital stock grew from $2 trillion in 1980 to $3.1 trillion in 2007. The pace of growth in developing countries reached 1.9 percent per year between 1990 and 1999, but

slowed to 1.2 percent per year from 2000 to 2007. Net capital investment in developed countries has remained fairly level over the past three decades, while it increased in developing countries.

Capital investments in major regions of the world are increasing or holding steady; this is not the case for Eastern Europe and the former Soviet Union, where capital investment has decreased

by 40 percent since the early 1990s. In 1999, the Russian Federation Ministry of Agriculture reported that 25 percent of the countrys total tractor fleet and 30 percent of the grain combine fleet were non-operational.xliv Despite a lack of more recent data, it is assumed that the situation persists. Limits to financing needed for upgrading and modernizing machinery, and declining investment in the region, continue to limit agricultural growth (Figure 15).

Development Assistance Programs for Productive Agriculture:

The Case of MoldovaAs Moldova is the poorest country in Europe, its degraded roads, challenging corruption levels, and inefficient water use have impeded agricultural productivity and economic growth. Subsequently, the Millenium Challenge Corporation entered into a $262 million Compact Program, providing irrigation reconstruction, access to agricultural finance, and road rehabilitation. These activities are improving the production and marketing of high-value fruit and vegetables and higher yields of grain for livestock. http://www.mcc.gov

FIGURE 15

GROSS INVESTMENT IN CAPITAL STOCKFor Major Regions of the World

242012 GAP Report

GHI emphasizes the need for increased private and public sector funding for agricultural development, and notes that successful approaches are beginning to make an impact in many developing countries. Development assistance funding to improve infrastructure and establish procedures that reduce corruption can mobilize additional private sector resources for productivity improvements.

Targeted and effective public donor funding for international agriculture development and food security initiatives can provide a powerful starting point for productivity gains. The U.S. government and other OECD donors, as well as several middle-income nations, have provided increased funding in recent years, enabling developing countries to accelerate their agriculture and national food security plans. Rising global food prices in 2008 prompted a strong consensus at the LAquila G8 meeting in July 2009, resulting in a commitment of $20 billion over a three-year period for sustainable agriculture development and nutrition. Developing country governments, in partnership with donors, are increasingly creating policy environments that enable long-term economic growth. In May 2012, the G8, African partners, and the private sector launched the next phase of a multi-year effort that began at LAquila. The New Alliance for Food and Nutrition Security initiative commits to lifting 50 million people out of poverty over the next 10 years through inclusive agricultural growth, and mobilizes greater participation by the private sector for investments in food and nutrition security.

The U.S. governments Millennium Challenge Corporation (MCC) provides an especially effective model for encouraging policy frameworks that support economic growth, agricultural production, and food security. Using the incentive concept of Threshold Compacts, the MCC provides an entry point for investments in agriculture, irrigation, road construction, health, and nutrition. Candidate countries are encouraged to design and implement reforms in the areas of democracy and governance, improve the business environment, and establish anti-corruption systems, and can eventually become eligible for an MCC Country Compact. Similar approaches for partnership and investment are being implemented by the U.S. Agency for International Developments Feed the Future Initiative, which targets 20 countries ready for productive agriculture, food security, and nutrition investments.

Multilateral Rapid Responses to the 2008 Global Food Price Crisis

In the wake of the food price crisis in 2008, the G8 and G20 undertook a number of measures to bolster food security for countries most vulnerable to food price shocks. The World Bank Group administers two major programs that have been addressing both immediate and long-term agriculture and food security needs since the 2008 food price crisis. The Global Food Crisis Response Program (GFRP) provided rapid grants to the most impacted countries for targeted safety net programs, such as conditional cash transfers, school feeding, and food-for-work programs. The Global Agriculture and Food Security Program (GAFSP) implements pledges made by the G20 in Pittsburgh in 2009, and assists countries needing investments for regional- and country-level food security plans. Comprised of both Public and Private Sector Windows, GAFSP is providing funding for agricultural and food security programs administered by the International Development Association (IDA) countries, as well as private firms and financial institutions that operate in IDA countries. Activities include connecting smallholders with credit, providing financial products that manage farmer risk, and supporting technology and innovation to increase agricultural productivity and lower the use of inputs. The fund has received pledges of $1.2 billion with financing received to date of $752 million.http://www.worldbank.org/foodcrisis

25 2012 GAP Report

Recommendation 2: Improve Agricultural Research Funding, Structure, and Collaboration

More investments in public agricultural research and development are needed to sustain productivity growth

As the global population and dietary diversity increase, farmers and pastoralists will be called upon to produce more food with little or no increase in arable land and water. Maintaining high productivity growth rates to meet growing global demand for food, fiber, and biofuel requires robust investment in agricultural research and development (R&D) from both the public and private sectors. Agricultural R&D spending and the capacity to develop and extend locally adapted technologies to farmers are the most important predictors of a countrys ability to sustain long-term TFP growth.xlv

As a percentage of agricultural gross domestic product (GDP), agricultural R&D spending in developing countries remains much lower than in high income countries (Figure 16). In Africa, where agricultural TFP growth has been very low, R&D spending as a percentage of agricultural GDP has been declining. The commonly accepted target for public spending on agricultural R&D for developing countries is one percent of agricultural GDP.xlvi As of 2008, the only countries in Africa that have reached or exceeded the one percent target were Botswana, Burundi, Kenya, Mauritania, Mauritius, Namibia, South Africa, and Uganda.xlvii

Agricultural R&D investments have a long gestation period, and it could take more than a decade to realize the full benefits of todays R&D. These investments pay high dividends, from higher profits for farmers to a more abundant food supply at lower prices for consumers (Figure 17). Public investments in agricultural research and extension have high social returns, which include all economy-wide benefits, for both developed and developing countries. Studies also show that the rate of return on public investment in agricultural research is higher than the social rate of return on most other forms of public spending, as well as on private capital investment.xlviii

In 2000, the latest year for which comprehensive estimates are available, global public-sector agricultural research spending was $25.1 billion (in 2005 international prices).xlix In 2007, the latest year for which comprehensive estimates are available, the private sector spent $19.7 billion on food and agricultural

0%

0.5%

1.0%

1.5%

2.0%

2.5%

Sub-Saharan Afr ica

Asia & Pac i f ic Lat in America& Car ibbean

West As ia & North Afr ica

High- Income Countr ies

Ag R&D isrecommended to be

1% of Ag GDP.

1981

1991

2000

Source: See Figure 3 in ASTI Background Note: Measuring Agricultural Research Investments - A Revised Global Picture (October 2008), IFPRI

research (56 percent in food manufacturing and 44 percent in agricultural input sectors), accounting for about half of total public and private spending on food and agricultural R&D in high income countries.l Private sector investment in R&D has been growing, with most investment occurring in high income countries and focusing on a few key commodities.

Public research spans several agriculture sectors and commodities, with a focus on basic and pre-discovery research, which the private sector can then use for future commercial innovations. Research by the private sector does not replace basic foundational research by the public sector: public research helps fill the talent pipeline for the next generation of scientists. Countries that have built national agricultural research systems (NARS) that are capable of producing a steady stream of new technologies suitable for local farming systems have generally achieved higher growth rates in agricultural TFP.li The extension and commercialization

FIGURE 16

Agricultural R&D Spendingas a share of Ag GDP

Recommendation 3: Embrace Science- and Information- Based Technologies

During the 20th century, the application of innovative agriculture technologies dramatically improved productivity, made food more abundant, and reduced poverty and hunger. These innovations not only bolstered food security, but helped minimize the environmental impact of agriculture. To feed 9 billion people by 2050, a science-based approach to new and existing technologies must be applied to the entire agriculture value chain. There are appropriate and readily available improvements that simply require funding and extension, which could empower the smallholder farmer if adopted. These include information to support better agricultural decisions, incremental improvements in post-harvest technologies, and the adoption of current animal- and crop-based technologies and practices. Implementing rule-based and predictable regulatory systems that allow technology appropriate for local environments will help implement these technologies in a timely fashion.

262012 GAP Report

of these new technologies should be pursued through collaborative public-private partnerships. Investments in agricultural R&D make significant contributions to

sustained growth in agricultural productivity, alleviating poverty, and improving food security.

Failure to Maintain On-Farm Productivity Growth is a Sign of Underinvestment in Agricultural R&D

The United States has maintained agricultural TFP growth at an average rate of 1.5 percent per year for the last 50 years, largely driven by public and private investments in research and innovation.a However, growth in spending on public R&D stagnated in the 1980s and then turned negative from 1990 to 2009. If this trend continues, agricultural productivity growth is likely to also decline. In China, we see the opposite: the average annual growth rate in agricultural R&D was around 4 to 5 percent from 1986 to 2000, and then accelerated between 2001 and 2007 to about 10 percent per year. This correlates to a strong TFP of 2.8 percent per year, well above the global average. Agricultural R&D accounted for 45 percent of Chinas agricultural growth from 1995 to 2000. Agricultural R&D has played a significant role in improving food security and alleviating poverty in China.ba Fuglie, K. (2012). Productivity growth in the global agricultural economy and the role of technology capital. b Chen, K., & Zhang, Y. (2011). Regional Case Study R2: Agricultural R&D as an engine of productivity growth, China.

Returns to Public Agricultural Research and Extension

Developed Nations

Developing Nations

Research Extension

Research Extension

46% 40%

43% 49%Median Internal Rate of Return

(percent per year)

Source: Returns to research from 292 studies reviewed by Alston, et al. (2000);Returns to extension from 54 studies reviewed by Evenson (1997)

Public investments in agricultural research and development have very high returns, including higher incomes for farmers and more abundant food supply at lower cost for consumers.

FIGURE 16

Agricultural R&D Spendingas a share of Ag GDP

FIGURE 17

27 2012 GAP Report

This section discusses several of the available science- and information-based technology solutions and the impact these solutions may have on productivity.

Increasing Animal Productivity in Response to High Protein Demand

In developing countries, the rural poor depend heavily on income from livestock production. Livestock provides a source of direct food and concentrated protein, and livestock manure can be used as fertilizer

for crops or fuel for local energy. Livestock also serves as a savings mechanism that can be sold when the need for income arises.

Global output of meat, milk, and eggs per farm animal grew by an average annual rate of 1.24 percent from 1961 to 2009 (Figure 18). Increases in output per head of livestock held on farms reflect a number of technological advances in production efficiency, including improved animal breeds, better healthcare and nutrition, and improved animal

housing and management. Another important source of productivity gain has been greater feed conversion efficiency: the average amount of feed required to produce one kilogram of meat or liter of milk has fallen dramatically, especially in poultry, swine, and dairy production.

These are important advances because animal protein consumption is expected to double across the globe over the next 40 years. Some three billion people will diversify their diets with the addition of protein.

Per Head of LivestockANNUAL OUTPUT OF ANIMAL PRODUCTS

1961

-65

1966

-70

1971

-75

1976

-80

1981

-85

1986

-90

1991

-95

1996

-00

2001

-05

2006

-09

0

100

200

300

400

500

600

700

800 DEVELOPED COUNTRIES

TRANSITION COUNTRIES

WORLD

DEVELOPING COUNTRIES

Constant $ of meat, milk, and egg production per

head of cattle-equivalents in stock

Worldwide demand for animal protein is expected to double over the next 40 years. Productivity increases are necessary to meet future demand.

Source: Derived from FAOSTAT data

Figure 18

Note: Livestock output is total output of meat, milk, eggs, and animal fibers measured in constant 2005 US$. Total number of livestock in cattle-equivalents includes cattle, buffalo, camels, equine species, goats and sheep, pigs, and poultry, aggregated using weights based on relative size of animals to cattle.

FIGURE 18

ANNUAL OUTPUT OF ANIMAL PRODUCTSPer Head of Livestock

282012 GAP Report

Livestock production is projected to grow 1.4 percent annually between 2005/2007-2050.lii This expansion in output can be achieved by a combination of increased animal numbers and increased production efficiency. Use of science-based technologies for increased protein production, and increases in animal husbandry and animal health and wellness, will help increase productivity.

Enabling poor farmers and pastoralists in developing countries to take advantage of these innovations will pose a challenge, particularly in Sub-Saharan Africa. Livestock is typically owned by men but raised and cared for by women. Empowering women to be more productive in this sector has powerful implications for their income and household nutritional status. Promising mechanisms for reaching resource-poor pastoralists include using a cooperative approach that links womens groups to enterprise training and access to financing to meet local and regional demand for dairy and meat products.

Participation in high value livestock markets also requires adherence to safe production techniques. Sanitary and phytosanitary (SPS) regulations pose obstacles to small-scale livestock producers seeking access to livestock markets. Such regulations require, for example, that farmers maintain disease-free animals and meet stringent food safety and quality standards for processed meat and other livestock products.liii Developing country livestock enterprises have difficulty meeting these requirements or may lack access to information about end market demands. Small-scale livestock owners and sellers need pragmatic and cost effective options that reduce these barriers.

Science- and information-based technologies to improve the health and productivity of animals could greatly assist livestock producers and help them climb out of poverty, meeting the explosive growth in demand for their products within their own countries and regions.

Adopting New and Existing Technologies to Increase Egg Production

In recent years, the productivity of eggs, one of the most basic, affordable, and accessible protein sources for people across the world, has been declining by one egg per hen per year. If continued, this trend will require three times more hens, 17.7 billion, to meet the estimated egg demand in 2050. Adopting new and existing technologies and practices that optimize animal welfare, health, and productivity can help hens produce a modest 1.5 more eggs per year, restoring overall productivity to necessary growth levels. Such a change in productivity would require just 10.4 billion additional hens to meet egg demand in 2050 or approximately 7 billion fewer birds. Source: Calculation based on data from FAO (2011). World Livestock 2011 Livestock in food security.

29 2012 GAP Report

Crop Technology

Advancing technologies in the crop sector offer the opportunity to increase farm income and improve on-farm productivity for smallholder and commercial farmers. The adoption of improved hybrid seed, biofortification of food crops to increase nutritional value, and advancements in biotechnology that more efficiently use water, nutrients, and pesticides all contribute to food and nutrition security. Science-based regulatory systems enable farmers and businesses to adopt and use these important tools safely.

The adoption of biotechnology has begun to transform the production of crops in numerous countries. As reported by Clive James, the founder and chair of International Service for the Acquisition of Agri-biotech Applications, 16.7 million farmers in 29 countries planted 167 million hectares of biotech crops in 2011 (Figure 19). Of these 16.7 million farmers, 15 million were small, resource-poor farmers in developing countries.liv Developing countries accounted for almost 50 percent of the biotech hectares planted.

The rise in the adoption of biotech crops is increasingly accompanied by new regulatory and biosafety systems. China and Mexico are each exploring the development of such systems that would manage access and use of biotech cotton. Although biotech crop adoption in Africa has been slow, South Africa, Burkina Faso, and Egypt are commercializing biotech crops, and Kenya, Nigeria, and Uganda have conducted field trials.

Biotechnology has also increased farmer incomes and provided environmental benefits. In 2010, the direct global farm income benefit from biotech crops was $14 billion: $7.7 billion for developing countries and $6.3 billion for developed countries.lv It has helped reduce pesticide use by 443 million kilograms of active ingredient between 1996 and 2010.lvi Biotechnology is improving productivity, increasing the income of farmers, and reducing harmful impacts to the environment.

Million Hectares (1996-2011)GLOBAL AREA OF BIOTECH CROPS

29 Biotech Countries

Source: ISAAA (2011)

0

20

40

60

80

100

120

140

160

180

1996 2001 2006 2011

Hec

tare

s

Total HectaresDevelopedDeveloping

-

In 2011, a record 16.7 million farmers in 29 countries planted 160 million hectares (395 million acres) an 8% increase over 2010

Figure 19FIGURE 19

GLOBAL AREA OF BIOTECH CROPSMillion Hectares (1996-2011)

302012 GAP Report

A Success Story:

The PhilippinesThe Philippines was the first country in the Association of Southeast Asian Nations (ASEAN) to implement a regulatory system for transgenic crops. In 2002, the Philippine government facilitated the commercialization of insect-resistant Bt corn MON 810 through the issuance of an order stipulating the rules for the importation and release into the environment of plants and plant products derived from the use of modern biotechnology. After 10 years of successful commercialization of biotech corn, 400,000 Philippine farmers have benefitted from this technology, receiving farm-level economic benefits of $108 million between 2003 and 2009, in addition to lower pesticide use.

Today, the Philippines has become a role model in the region due to its working regulatory system, supportive political environment, and collaborative efforts of the public and private sectors. This environment has set the stage for investment in Golden Rice and other biotechnology applications in eggplant, papaya, cotton, and sweet potatoes.

Understanding the importance of stewardship and compliance, the seed industry is working continuously with farmers and regulators to adopt best management practices for proper and sustainable use of biotechnology. Farmer adoption is expected to increase as more products having multiple, useful traits and locally developed products produced by public research institutions are introduced into the market. Sustained capacity building of regulatory agencies and the provision of balanced information to the public should help to address the lingering concerns of those not supportive of biotechnology. Source: ISAAA

31 2012 GAP Report

No-Till Farming

No-till farming is the practice of leaving crop residue on the soil surface instead of plowing it under, thereby preserving the soil, decreasing erosion, and increasing water-holding capacity and organic nutrients. No-till farming can also be used to mitigate climate change by storing, or sequestering, carbon in the soil. This technology benefits farmers by saving energy, labor, and capital costs in crop cultivation.

The adoption of no-till farming is spreading to every region of the world, with adoption highest in North and South America (Figure 20). Today, more than 50 percent of Brazilian farmers practice no-till farming, and it has been particularly effective for increasing productivity in the historically acidic and nutrient-deprived soils of Brazils Cerrado region.

In 2009, approximately 35 percent of the U.S. cropland planted in eight major crops was under no-till management. From 2000 to 2007, no-till farming increased for cotton, corn, soybeans, and rice at a median rate of 1.5 percent per year.lvii No-till farming offers a conservation management practice that is both environmentally sustainable and economically beneficial. Where appropriate, opportunities exist to adopt this practice more widely in all regions of the world.

Information Technology

In the past decade new information and communications technologies have offered farmers opportunities to sustain and improve their operations. Data collection through field sensors, tractors, mechanized equipment, and satellite imagery, and the rapid analysis of data enables producers to increase their productivity. This technology is scalable and affordable, and can increasingly be delivered through simple platforms and devices, such as mobile phones, to remote users in developing countries.

Governments and regulatory bodies will need to improve policies governing the use and ownership of agricultural data. Data analytics can maximize the benefits of technologies in the seed, fertilizer, farm equipment, and pharmaceuticals for animal health and wellness.

Source: FAO Aquastat

2010

2005

2000

1995

1990

1985

1980

1975

1970

The adoption of no-till farming is increasingworldwide. When appropriate, no-till cultivation reduces soil erosion, provides greater efficiency in water use and absorption, and reduces CO2 and other greenhouse gas emissions.

Africa

Europe

Asia

Former Soviet Union

South America

North America

FIGURE 20

ADOPTION OF NO-TILL FARMINGFor Major Regions of the World

322012 GAP Report

Many information- and science-based technologies have contributed significantly to increased productivity and have benefited consumers around the world. The adoption of current technologies and the innovation of new technologies will be critical for continuing the momentum of agricultural productivity.

Recommendation 4: Remove Barriers to Global and Regional Trade

Agricultural trade totals $800 billion today, and is expected to exceed $1 trillion by 2020. As the global agricultural trade system continues to expand, it has the potential to supply needed food between areas of surplus and demand. But with only approximately eight countries presently filling much of the global demand for cereal and oilseeds, extreme climate events in several of these countries in the same year (such as the multi-regional droughts and flooding of 2012) may reduce supply from a portion of these exporting countries, potentially disrupting supply and increasing prices. The impact of climate change must be explored and incorporated more fully into future trade policies and agreements.

Agriculture and food trade liberalization worldwide began in earnest with the implementation of the Uruguay Round Agreement on Agriculture in 1995. The launch of the Doha Development Round in 2001 was meant to further liberalize trade and reflect the growing importance of developing countries in global commerce. These negotiations are now stalled with little hope of revival, prompting countries to explore a range of regional and bilateral agreements instead.

In late 2011, leaders of the 10 Trans-Pacific Partnership countries Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States announced an ambitious outline of the 21st century Trans-Pacific Partnership Agreement (TPP). This agreement aims to enhance trade and investment among the TPP partner countries; promote innovation, economic growth, and development; and support the creation and retention of jobs. Subsequently, Japan, Mexico, and Canada announced their intentions to join the negotiations.

The importance of the proposed TPP reflects the economic significance of the countries involved, which now account for 27 percent of world GDP, and include some of the fastest growing economies. TPP countries also account for

nearly ten percent of the worlds population and have a rapidly growing middle class. The potential for agricultural trade is evident in the currently high-bound tariff levels: all members but two have tariff rates higher than 18 percent, with Malaysias the highest at 67.6 percent. Current expectations are that most tariffs on agricultural products will be reduced sharply and possibly phased out over 10 years. The TPP agreement has strong potential to open up new avenues for growth and trade.

There are currently 231 regional trade agreements in force, the majority of which were ratified after 2003. Further trade liberalization through multi-lateral, regional, or bilateral trade agreements can be a major contributor to economic growth by expanding market access, improving efficiency, and increasing investment in the food and agriculture sectors. For developing countries, these gains are most likely to materialize when agreements and related development assistance facilitate market development.

In Sub-Saharan Africa, a more incremental approach may be needed to develop regional markets before trade agreements can deliver on their potential. This will require a focus on underdeveloped investment and business opportunities, as well as impediments to growth such as inefficient customs procedures, weak regulatory structures and institutions, and trade-restricting export bans.

Effective Trade Facilitation Contributes to Improved Productivity

Trade facilitation is important to the food production cycle. It is imperative that farmers have access to tools and spare parts when farm equipment breaks down, during planting and harvest. Farm equipment and spare parts are often shipped across borders, but inefficient customs processes and corruption can cause delays that impede work during critical production windows. Clear and efficient procedures that facilitate trade are vital for farm productivity, allowing farmers to plant and harvest at optimal times.

FIGURE 20

ADOPTION OF NO-TILL FARMINGFor Major Regions of the World

33

There are multiple additional avenues for policy enhancements to improve trade structures. To facilitate opportunities for investments that build value chains and integrate smallholder farmers into commercial markets, good business models and untapped market potential in developing countries must be identified and mapped. Research is needed to understand how trade agreements can best address specific market challenges, and how private-sector needs can be fully incorporated into policy initiatives.

Investment and Business Opportunities in East Africas Value Chains

As the U.S. government discusses a new model for trade and investment with the East African Community, the potential exists for a market-driven process that will support development of unexplored investment opportunities, address concrete market impediments, and increase productivity through more open markets. With these goals in mind, TransFarm Africa has established the Advisory Council on Trade, an expert group that has developed recommendations for an opportunity-driven approach to trade, development, and investment policy. See A Market-Based Approach to Trade and Development: Policy Recommendations for the Prospective U.S.-EAC Trade and Investment Partnership. http://transfarm.org/act

34

ConclusionThe global rate of productivity growth reflected in this report represents the realization of investments and initiatives undertaken roughly a decade ago. We must be vigilant as we recognize the investment and commitment needed to stay on pace to meet the needs of 9 billion people by 2050. Significant shocks to food production, such as massive climate events in multiple regions of the world, combined with other economic and political disruptions, can impact food supply and price.

Producing enough food in the face of daunting challenges, such as climate change, regional economic volatility, population growth, and political unrest, requires a deep, sustained commitment and science-based knowledge and practice. It requires that investments be made now and in the future to continue the accelerated productivity growth needed every year through 2050. Meeting the demands of a growing world requires innovative leadership at every level farmers and pastoralists, national governments, United Nations agencies, foundations, the private sector, civil society organizations and an enduring commitment to close the global agricultural productivity gap.

AcknowledgmentsThe Global Harvest Initiative would like to thank everyone who contributed to the 2012 Global Agricultural Productivity Report, especially Dr. Keith Fuglie, Katrin Kuhlmann, J.D., and Dr. Sue Schram.

2012 Global Harvest Initiative, Inc.

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