Total Factor Productivity

Why We Are Here

• We believe the right policies can improve global food and nutrition security

• Increasing total factor productivity (TFP) is the sustainable way to meet the demands of 2050

• The annual GAP Report® presents required rate of TFP to meet demand vs. actual rate and policies that foster productivity growth

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Recent Developments in Global Agricultural Productivity

Dr. Keith FuglieEconomic Research Service, USDA

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Future agricultural growth will rely more on raising yield rather than expanding resources

Yield growth

Area growth

Ou

tpu

t g

row

th

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Yield growth itself may come from input intensification or from technological change (total factor productivity)

Yield growth

Area growth

Ou

tpu

t g

row

th

Input intensification

Total Factor Productivity

(TFP)growth

Area growth

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Yield growth itself may come from input intensification or from technological change (total factor productivity)

Yield growth

Area growth

Ou

tpu

t g

row

th

Input intensification

Total Factor Productivity

(TFP)growth

Area growth

Research & extensionRural educationResource qualityInfrastructureInstitutions

Resource endowmentsPrices & costsAg policiesInfrastructureExchange ratesInstitutions

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Globally, improvement in total factor productivity accounts for a rising share of agriculture growth

Source: ERS

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Though robust overall, agricultural TFP growth is highly uneven among countries

> 3%1-3%< 1%

Average annualTFP growth

Average annual TFP growth between the mid 1990s and 2008/09

Source: ERS

The views expressed here are those of the author and do not necessarily reflect official policy of ERS or USDA

Sustaining TFP growth into the future will require robust investment in research and innovation

2012 GAP Report® Conclusions

Laura BarringerSenior Associate

Global Harvest Initiative

A closer look at demand growth and regional strategies to meet demand

• Demand growth and resource distribution are not equal

• Opportunities everywhere to increase productivity strategies may be different

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

Projected Increase in Food Demand

2000 – 2030

East Asia – If TFP Growth is maintained a gap will exist

• Increase in food demand is primarily driven by the

growing middle class

• Trade is vital for increasing the availability of food for urban populations

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

Between 2000 - 2030

Estimated Food Demand / year

3.6 %

TFP Growth / year

3.1%

Est. Food Demand and Productivity Growth

South and Southeast Asia - If TFP Growth is maintained a gap will exist

• Asia accounts for 70% world’s land under irrigation – likely to become more water stressed

• More trade will be necessary to meet future demands

Between 2000 - 2030

Estimated Food Demand / year

2.8 %

TFP Growth / year

2.5 %

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

Est. Food Demand and Productivity Growth

Middle East and North Africa - If TFP Growth is maintained a gap will exist

• Increasing water scarcity makes technologies to improve water‐use efficiency important

• Nearly half of food in region is imported ‐ a combination of productivity, imports and safety net programs will be required to fill this gap

Between 2000 - 2030

Estimated Food Demand / year

2.1 %

TFP Growth / year

1.9 %

Est. Food Demand and Productivity Growth

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

Sub‐Saharan Africa needs to dramatically improve productivity to sustainably meet demand

• Increase in food demand primarily driven by population growth

• Investment in research and adoption of suitable technologies would make a significant impact on productivity and food security

Between 2000 - 2030

Estimated Food Demand / year

2.8 %

TFP Growth / year

0.5 %

Est. Food Demand and Productivity Growth

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

Latin America and Caribbean region has potential to be a larger net exporter

• Policies that continue to encourage productivity and invest in infrastructure can create an environment conducive for growth

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

Between 2000 - 2030

Estimated Food Demand / year

1.8 %

TFP Growth / year

2.7 %

Est. Food Demand and Productivity Growth

Effective Policies Can Enable Growth

Investments will determine environment and to what extent technologies will be available

• Increased public and private sector funding is necessary

• Development assistance can mobilize private sector

• Significant on farm capital investment is required

Farmer

Private

Sector

Public Sector

AG R&D spending and extension is the most important predictor of TFP growth

• More investment in public R&D is needed to sustain productivity growth

• Investments lead to higher profits for

farmers and lower prices for consumers

Science‐ and information‐based technologies are necessary to improve productivity

• Numerous tools available that not only improve productivity, but also reduce environmental footprint

• Need a rules-based and predictable regulatory system

No-till adoption is increasing

Trade liberalization can be a major contributor to economic growth

• Agriculture trade is expected to grow to $1 trillion by 2020

• Further trade liberalization can expand market access, improve efficiency and increase investment

Key strategies for meeting the demand

• Productivity needs to continue to increase in every major part of the world

• Close the investment gap to provide sufficient infrastructure

• Increase R&D spending to generate needed science- and information-based technologies

• Remove barriers to global and regional trade

Panel Discussion

Dr. Christopher DelgadoStrategy and Policy Adviser

World Bank

Mr. Rajesh KumarFarmer

Salem, India

Dr. Keith FuglieBranch Chief for Resource, Environmental and Science

Policy, Resource and Rural Economic Division

Economic Research Service, USDA