Agricultural productivity and innovation

We depend on agriculture for healthy, safe and nutritious food, but current production risks depleting and damaging the natural resources upon which it depends. The sector must also adapt and respond to climate change and new challenges facing global food systems.

Innovation lets us do more and better with less. At the farm level, many innovations are “process innovations” that improve production techniques; for example, higher-yielding seeds or more efficient irrigation. “Product innovations” are created by downstream industries, and include new and improved products, such as healthier foods, or new chemical or pharmaceutical products. “Marketing and organisational innovations” are also increasingly important throughout the supply chain.

The OECD’s work on innovation systems in food and agriculture explores the relationships between innovation, productivity and environmental sustainability. The OECD examines how governments and the private sector can work together to strengthen agricultural innovation systems and foster innovative practices on farms and at agri-food firms. The OECD Productivity-Sustainability-Resilience (PSR) Policy Framework looks at the impacts of a wide range of policies on the creation and adoption of innovations that generate sustainable productivity growth and a more resilient agri-food sector.

Productivity improvements have been driving growth, but the environment remains under pressure

Total Factor Productivity (TFP) growth – the efficiency with which producers combine inputs to make outputs – has driven most of the growth in agricultural production in the last two decades, though progress is uneven across countries and sector. Productivity gaps remain significant among farms, and improving the productivity of farms lagging behind remains a challenge for structural adjustment, even for high performing countries.

Innovation can provide an opportunity for agriculture producers to increase productivity while better managing natural resources. This helps to ensure long-term viability and reduce the negative environmental impacts of production, such as pollutants and waste. Sustainable agriculture production systems also take into account how to adapt to climate change and mitigate greenhouse gas (GHG) emissions.

To broaden the understanding of these interlinkages, the OECD has established two networks of experts from research and government: the Farm-Level Analysis Network and the Network on Agricultural TFP and the Environment. Furthermore, to help measure the sustainability of agriculture, the OECD agri-environmental indicators monitor trends in land use, water and energy, and agriculture’s impact on the environment.

Policy makers must consider the whole policy environment

Evidence from the PSR framework suggests that policy strategies should cover the whole food supply chain, and that improving policy coherence and transparency are crucial to building trust and increasing effectiveness and efficiency.

• According to the latest OECD Agricultural Policy Monitoring and Evaluation report, the first step to improving the policy environment is to roll back policies that retain farmers in uncompetitive and low-income activities, harm the environment, stifle innovation, slow structural and generational change and weaken resilience.
• Good agricultural policy should focus on measures to improve the sector’s long-term productivity and sustainability, such as investments in human capital, infrastructure and farmers’ connections to markets. A sound regulatory policy environment and well-functioning markets ensure that there is a good business case for producers to innovate responding to current productivity and environmental challenges of food systems.
• Stronger agricultural innovation systems must be collaborative, with all actors working in networks to produce innovations that the sector needs and can use. Good governance can help by forming clear strategic objectives (in consultation with stakeholders) and comprehensive mechanisms and procedures for evaluation. Finally, there needs to be a way to bring new ideas into practice, helping farmers to build the skills they need.

The OECD helps countries to evaluate their agri-food policy environment and innovations systems by providing country reviews that apply the Productivity-Sustainability-Resilience Policy Framework and provide tailored policy advice.

Policies for the Future of Farming and Food in the European Union

The European Union is one of the world’s largest agro-food players. In an ever-changing economic and policy environment, the EU agro-food system has demonstrated its resilience and the ability to keep productivity growing. More needs to be done for the agricultural sector to improve its environmental sustainability performance in line with expectations.

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Policies for the Future of Farming and Food in Spain

Spain has a dynamic and competitive agro-food sector. However, higher productivity has not always reduced environmental pressures. The agricultural innovation and knowledge system could play a key role in addressing the environmental challenges and improving the sector’s resilience.

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