Rising to the agriculture challenge: Increasing food production while limiting environmental impacts

This year, the OECD-FAO Agricultural Outlook's prospective analysis comes at a time of marked economic risks, uncertainty and high energy prices, whilst sustainable productivity growth remains indispensable to increase production without harming the environment.
Rising to the agriculture challenge: Increasing food production while limiting environmental impacts
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In November 2022, Ministers of Agriculture of OECD countries and partner economies worldwide adopted the Ministerial Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems. Through this declaration, they committed to taking action to ensure food security and nutrition for a growing global population, while addressing environmental challenges and providing better livelihood opportunities for people employed along food supply chains.

The annual OECD-FAO Agricultural Outlook supports policymakers, stakeholders and researchers in identifying future challenges and opportunities in the agricultural sector. It assesses the ten-year prospects for agricultural commodity and fish markets at the national, regional and global levels, and analyses the medium-term effects of current market developments on food security and environmental outcomes. This year, the Outlook’s prospective analysis comes at a time of marked economic risks, uncertainty and high energy prices.

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The impact of rising energy prices on agriculture

The evolving energy and nutrition requirements of a growing and increasingly affluent global population are expected to remain the key drivers of demand for agricultural commodities from 2023 to 2032. Half of the demand for agricultural commodities worldwide will be used for food consumption and this is projected to increase by 1.3% per year until 2032. In terms of food composition, basic agricultural crop commodities are expected to account for just over 50% of calories consumed at the global level. To meet this increasing demand, global crop production growth is expected to mainly be driven by increased productivity rather than increased land use. Investments in raising yields and improved farm management will therefore remain essential.

The current context of high energy prices creates new challenges for the agricultural sector, particularly as natural gas is a key input in fertiliser production. Fertilisers provide essential nutrients for maintaining yields, quality and quantity of agricultural crops, making their efficient use crucial for agricultural sector prospects. In particular, nitrogen-based mineral fertilisers are critical for crop yields and their effectiveness depends on the timing of their application, largely preventing farmers from delaying their use in response to short-term cost variations.

The Outlook estimates that direct global greenhouse gas (GHG) emissions from agriculture will increase by 7.5% in the next decade. While livestock production will account for 80% of this increase, synthetic fertilisers are another important source of direct GHG emissions.

The scenario analysis in this year’s Outlook demonstrates how rising fertiliser costs can lead to higher food prices: for each 1% increase in fertiliser prices, agricultural commodity prices are estimated to increase by 0.2%. Overall, the increase would be more significant for crops that use fertilisers as direct inputs. The mixed price effect within livestock products is explained by the difference in feeding across animals: on average, poultry and pigmeat would be more impacted because their production relies heavily on compound feed manufactured from fertiliser-intensive crops. Beyond fertilisers, agricultural commodity prices would also be affected by fluctuations in energy, seeds, labour and machinery prices.


This type of scenario analysis shows that further energy price increases over the coming decade could raise agricultural production costs. This would result in food price inflation, particularly affecting households that spend a high share of their budget on food and fuel, and could undermine global food security. The impact on producers would be mixed, as only the most efficient users of fertilisers would see their margins increase thanks to higher product prices.

The environmental impact of business as usual

If current trends continue, the expected increase in agricultural production will result in greater environmental impacts, notably regarding climate change.

The Outlook estimates that direct global greenhouse gas (GHG) emissions from agriculture will increase by 7.5% in the next decade. While livestock production will account for 80% of this increase, synthetic fertilisers are another important source of direct GHG emissions. However, this projected growth in GHG emissions is lower than in the period 2012-2022. It is also lower than the projected 12.8% growth in agricultural output, which indicates a decline in the carbon intensity of agricultural production.

Nevertheless, pioneering efforts such as supply-side carbon capture technologies or demand-side waste reduction measures need to be widely adopted to ensure that agriculture contributes effectively to global climate change mitigation efforts, as set out in the Paris Agreement.

Several factors, including high energy prices, domestic policies and developments in ma

rket access, will influence the use of fertiliser at the global level. Improvements in crop management can bring both economic and environmental benefits. For instance, the widespread and inclusive use of precision agriculture technology, new generation “special fertiliser products”, nitrogen-fixing crops or biofertilisers, can play a critical role to increase nutrient use efficiency, hence lowering GHG emissions from fertiliser application, without compromising production yields. Sustainable productivity growth is indispensable to increase production without harming the environment.




To learn more, read also the OECD-FAO Agricultural Outlook 2023-2032

The OECD-FAO Agricultural Outlook 2023-2032 provides a consensus assessment of the ten-year prospects for agricultural commodity and fish markets at national, regional, and global levels, and serves as a reference for forward-looking policy analysis and planning. 

 

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