LIBERTYVILLE, Ill.— Stagnation in farm productivity growth, measured in total factor productivity (TFP), is contributing to a loss in international export competitiveness and putting excess pressure on U.S. farmland. This is according to economists who participated in a recent Farm Foundation forum, “Power Shifts and the Future of the Global Food System,” which offered insights on the forces shaping global agricultural productivity.

“A decline in public research and development investment is leading to a stagnation in U.S. agricultural productivity growth,” said Keith Fuglie, chief economist for the Food Security Leadership Council and senior fellow at the National Center for Food and Agricultural Policy. 

Jessica Agnew, director of the GAP Initiative at Virginia Tech University and associate director of CALS Global, agreed. “TFP looks at the changes in how efficiently our agricultural inputs, so land, labor materials, machinery and livestock — are transformed into output,” she said. “What we have seen in TFP over the last several decades is a cooling in our development of innovation within our system, or our system-wide efficiency. In the early 2010s we saw robust growth that was matching pace with the target growth rate to sustainably meet the agricultural demands on our system.

“But what we’ve seen in the last decade is a cooling of TFP growth, which is telling us something about the innovation in our system. Either we are not keeping pace in technological innovation, or our farmers are unable to access those technologies. We’ve had to revise our target growth rate to make up for this shortfall we’ve been experiencing in the last decade.”

While TFP in innovation must increase by two percent per year to meet efficiency goals, Agnew explained that U.S. TFP growth has registered a yearly average of 0.76 percent over the last 10 years. Annual average output growth from agriculture has slid correspondingly, according to data she shared that is supported by the United States Department of Agriculture. 

“The dataset that we use was actually developed by Keith Fuglie and can be found on the USDA’s Economic Research Service website. It measures total output from over 200 commodities, and (reflects) the decline in output growth,” Agnew said. “We were averaging between 2.5 and 3 percent annual output growth in the early 2000s, and that has come down to under 2 percent. This actually has really important implications around food prices and food insecurity globally; import-dependent nations need us to continue a certain pace of output growth to ensure that food prices remain affordable.”

Without output growth, Agnew said, you will see an increase in output prices. “That can be good for farmers, but can also be challenging for our global food markets,” she said. 

A recent and alarming trend is that U.S. agriculture output growth is being partially driven by input growth — in particular, through farmers paying more for fertilizer and seed. Where technological innovation historically served as the primary driver for output growth, it is now an equal split between TFP growth and input intensification.

“I will note that input intensification is not necessarily a bad thing or inherently unsustainable, but it can lead to practices that are unsustainable and contribute to certain types of environmental degradation. That is why we want to see input intensification come down and be able to capture output growth from technological innovation within the agriculture system,” Agnew said. 

“TFP is a measure of technical change and efficiency improvement in how we produce food. This concerning trend (Agnew) identified is a slowing rate of growth of TFP at the global level,”

said Fuglie, who spent 25 years with USDA ERS, where he conducted research on the economics of technical change and science policy for agriculture. He also served as a senior economist for USAID and has consulted for the World Bank and FAO. “Output growth, too, has been falling.” 

Probable drivers behind sluggish TFP include barriers to the adoption of new innovations, environmental degradation including climate change and loss of soil and water, and biodiversity losses, according to Fuglie. “Especially this underinvestment in agricultural R&D (research and development) that is not keeping the pipeline of new innovations full, leading to current and emerging challenges,” he added. 

A major shift in worldwide agricultural R&D investment by higher-income nations has been noted since around 2010, when TFP began to stagnate, Fuglie continued. He noted that larger middle-income countries such as China and Brazil have been increasing their R&D investment and are now spending more on agricultural R&D than higher-income countries. Meanwhile, lower-income countries with higher food insecurity have shown very little investment. 

Mikayla Mooney, venture partner at Ag Startup Engine, which serves as a conduit between early stage ag startups and investors, said there has been less venture capital investment in U.S. agricultural R&D in recent years. “In the past couple of years we’ve seen venture capital pretty much walk away from ag-tech,” said Mooney. “The reality is a little nuanced; in 2021 there was a plethora of capital available but over the last couple of years we’ve seen that decrease from $51 billion down to $16 billion. The number of new funds that are launching to support early ag-tech innovation has decreased from 49 down to 17, and overall only about one percent of all global venture capital actually goes into food and ag-tech. What I think we are seeing is that in today’s market, capital is just getting more selective.”

The Farm Foundation forum, “Power Shifts and the Future of the Global Food System,” is archived for review at https://www.farmfoundation.org/forums.