Why agricultural productivity depends on food sustainability
Agricultural productivity growth has declined significantly over the last 60 years despite strong increases in demand. Laura Eadie explains the importance of food sustainability and how the issue should be tackled.
Three debates dominate discussions about investment in agriculture. The answer to all three is to focus on agricultural practices which stabilise farmer profits and improve productivity.
The global food boom could be a bonanza for Australian agriculture. Demand is predicted to rise 60 per cent by 2050, mostly due to rising incomes in Asia. Average food prices are expected to be 20 to 30 per cent higher over the next decade compared to the last.
Yet agricultural productivity growth has halved since the 1960s. That means increasing production will take more land, water, labour or capital than before.
So how can Australia grasp the big opportunity presented by rising food demand in Asia? Two debates emerge from this question.
First, how to increase the value of agricultural exports? Most debates assume two options. Either we export greater volumes of commodity agricultural products – such as wheat and coarse grains, beef, sheep meat and dairy. Or we focus on higher value added, specialised products – based on better marketing of high end foods and more efficient production of manufactured food.
Second, where should the investment capital come from to achieve this? There are natural limits to agriculture’s use of land and water. Labour is also relatively scarce and expensive. So capital investment will be a key driver of future agricultural growth. The debate over whose capital is polarised between those arguing the case for domestic investment vs those arguing we also need foreign investors.
Both debates overlook one key fact. The productivity of agriculture depends on the sustainability of food production.
Unmeasured changes to the quality and quantity of natural resources – such as soil condition, or rainfall variability – can have a major negative impact on agricultural productivity growth. This is obvious to anyone with farming experience, or an interest in agriculture and food policy. It’s also obvious that Australia has poorer soils and is more exposed to climate change than many other countries.
What is less obvious is what more we can do about this. Savvy farmers around Australia are already preparing their land for greater weather variability, in many cases by reversing declining soil condition. At a policy level, we have farm extension programs and natural resource management bodies that encourage farmers to shift to more sustainable agricultural practices. Both are generally poorly funded.
That raises a third debate. Can Australia afford a concerted shift to more sustainable agriculture, when other countries benefit in the short-term by farming unsustainably AND subsidising production?
One key insight connects all three debates. The insurance market fails to cover the most common agricultural production risks.
This means current strategies to increase the value of agricultural production– either more intensive production of commodities or more specialised products – are unlikely to be sufficient in a world which will put a higher value on clean, healthy and reliable food supplies.
It means more variable weather due to climate change will increase the risk of capital investment in agriculture, for existing farmers and new investors.
It also means Australia can gain a strategic advantage by developing agricultural practices which stabilise farmer profits and improve productivity, without depleting soils or causing long term damage to the landscape.
Previous innovations have significantly improved land management practices and agricultural productivity. No-till cropping, developed to reduce soil erosion, has been widely adopted. Precision agriculture techniques are increasingly used to improve the efficiency of use of fertilisers and pesticides.
Rapidly identifying and scaling up the next generation of sustainable farming systems and agricultural practices could see Australia both increase the value of agricultural exports AND benefit from sharing that technology with the rest of the world.
So the real question in these debates is not – can we afford to farm sustainably – but can we afford not to?
Laura Eadie is the Research Director for the Sustainable Economy Program at CPD. She is the co-author of ‘Stocking up: Securing our marine Economy’, ‘Farming smarter not harder: Securing our agricultural economy’ and ‘Going solar: Renewing Australia’s electricity options’ published by the Centre for Policy Development. Laura’s core skill is providing rigorous thinking to support evidence-based decision-making, with a focus on the intersection of policy, economics and sustainability. Laura has worked as a corporate strategy consultant with Port Jackson Partners, managed climate funds for a green finance company, and as a policy analyst for the Natural Resources Commission. Laura is a UTS Business School Associate and has qualifications in environmental management, finance and investment, and industrial chemistry.
