I have been very busy with the launching of the Swedish version of Global Eating Disorder and some consultancies. Now I am soon going to Indonesia to look at palm oil production. Therefore I don't have time to produce much new material for the blog. I offer you a chapter of Global Eating Disorder below, discussing two of the most deceptive words I know. Efficiency and Productivity.
We often hear
that ’productivity in farming has increased tremendously’, ‘the farmer of
today is much more efficient than her ancestor’ and similar expressions. But
those are deceptive words. They come with an air of being measurable and
objective. And while they can be measured, the yardstick we choose to measure
them against already predetermines the outcome. One has to also reflect over
who benefits; what is productive or efficient differs depending on who asks the
question.[1] Most
choices are made on the basis of the profitability for the person or entity
that has managed to, with whatever means, control that piece of nature.[2]
Throughout modern
times the prevailing measure of grain productivity in Europe
was the ‘yield ratio’, i.e. the quantity that could be harvested from a certain
quantity of seeds. This ratio was often in the range of five in Scandinavia and
Germany, reaching ten under
good conditions in England
and the Low Countries.[3]
For a grain-based culture, with access to rather abundant land and labor
resources, this way of measuring makes some sense. And this also explains quite
well why the Asian rice based cultures were more advanced than the Europeans,
until the industrial revolution; the seed ratio of paddy rice is normally very
high. Today, seed is only one of many inputs in farming and most farmers would
find it strange to measure productivity in terms of seed use even if it still
prevails in some places.
The size of the area
unit itself was often dynamic and linked to the land’s ability to support
people. Around the world, the amount of seed that had to be sown to feed a
family from the harvest provided a basic measurement of the land. Even in the
20th century, fields in Guangdong
Province next to Hong Kong continued
to be measured in dou, roughly
equivalent to seven kg of rice seed, while up the mid-19th century
land in New Mexico
was computed by the fanega, approximately
fifty kg of wheat seed. I have also encountered land measurements based on how
much land a man could ‘open’ in a days work, common in cultures with swiddening
farming. And ’acre’ has similar roots; an acre was the amount of land that
could be ploughed in one day with a pair of oxen. When land, labor and food
become commodities, most of these localized and subjective measurements fell
into disuse.[4]
These examples are
good to remember when we discuss productivity and efficiency. Productivity in
farming can be measured in many ways. Per area unit; per person-hour; per unit
of deployed capital; per energy input or; per water unit. The comparisons can
consider total biological production, ecosystem services or only what is
directly useful to human beings in the form of food, fiber and fuel. And the
results, the useful resources, can also be expressed in different ways, for
example, as kg (tons or bushels), as calories, as proteins or simply as money.[5] We
can also ask if the productivity is serving to maintain the productive
resources or if it is based on extraction of non-renewable resources,
resources which perhaps were abundant but now are increasingly scarce? Can we
even talk about productivity if the production is based on the unsustainable
use of irrigation, fossil fuel and soil management practices which erode the
soil?
We can also compare
farming with ‘nature’. For example, the biological production (mass, energy or
protein) in a farmed system can be compared with that in the natural system
before farming. ‘Productivity’ can have a completely different meaning if we
counted the impact on ecosystems and the external costs caused by farming.
Studies of a wetland in Canada,
a forest in Cameroon and a
Mangrove forests in Thailand
showed the total value of these ecosystems was much higher than the value of
the farming systems to which they were converted.[6]
But, importantly, the benefits of the systems accrue to different people.
In the long term, it
is more interesting to increase the productivity relative to a resource that is
limited rather than relative to a resource that is abundant. From this
perspective, the contemporary obsession with labor productivity is strange, as
we never had so many people on the planet and so limited natural resources. But
if we look at monetary value we understand why we always try to save on labor
as labor is costly and nature is ‘free’.
The total
energy harvested per hectare can increase with increased use of ancillary
energy; in many situations one can increase yield per hectare fivefold (or
more) by using more energy. This energy can be used for better (and timelier)
soil preparation, irrigation, fertilizers, etc. The ratio between energy output
and energy input (i.e. efficiency in the use of energy) seems to be fairly
constant up to a certain level, after which it rapidly deteriorates. Industrial
farming systems, have long since passed the optimal energy use level.[7]
According to FAO, industrial farming methods require 6,000 MJ of fossil energy
(corresponding to a barrel of oil) to produce a ton of maize but traditional
methods in Mexico
only require 180 MJ (corresponding to 4.8 liters of oil) to produce the same.
This calculation includes the energy needed for chemical fertilizers,
irrigation and running machinery, but not the ‘shadow energy’, the energy used
for making the machinery, for transporting products to and from the farm and
for constructing the farm buildings. The energy ratio is below one – i.e. more
energy is consumed than produced – for modern rice farming and just above one
for modern maize farming, whereas traditional production of rice and maize
gives a 60-70-fold return on energy used.[8] In light
of this, to make statements that ‘productivity has increased tremendously in
farming the last hundred years,’ is simply misleading.
Yield per area unit
has increased considerably, both in developed and developing countries. For
example, in the United
States, maize yield increased from around
3,700 kg per hectare in 1961 to around 9,500 kg in 2011. Wheat yields in Sweden
tripled between 1900 and 2000. Global rice yields increased by one third in the
twenty years between the end of the 1970s and the end of the 1990s. The most
dramatic increases can be accomplished in highly regulated systems. In
greenhouses with climate and water control, productivity per hectare is up to
more than ten times that in an open field. The more advanced producers in the Netherlands
take more than 60 kg of tomatoes per square meter, whereas open-field
production may only reach some 5 kg per square meter. Still, the profitability
of Dutch greenhouse tomato production is very low and largely rests on them
getting very favorable gas prices. One should not forget that in many cases
yield per hectare is low just because it doesn’t pay to increase it.
Land price is a factor
that greatly influences productivity per area unit. To some extent, it works
both ways. Land with high yield potential has a higher price than land with
low potential and when you pay a lot for land you have to get a high yield per
area unit. But in many countries and places, the correlation between land
productivity and land prices is weak and land prices are influenced also by
alternative uses (conversion to forest, industries, and housing), status and
culture.
Farming today is very
capital intensive. In Sweden,
it comes only after utilities and real estate in capital intensity; car-making
has less than half the capital costs for a full-time job,[9]
and in United States
US$1.2 million is invested in each full-time agricultural job.[10]
Yet at the same time the return on invested capital in farming is mostly low.
The real return is often realized when the farm is sold. As the saying goes
’farmers live poor and die rich’: they reinvest most of their profits in their
farms. For most farms, especially family farms, the concept of return on
capital is somewhat alien. Families invest their capital and their labor on the
same farm and there is no distinction in their way of thinking or in their
books (if they have any) between the return on capital and the return on labor.
One way to assess return on capital is to look at land rents. In the highly
commercialized agricultural sector in the Netherlands, land rents are
administratively defined on a level of 2% of the calculated production value of
the land. If this was not the case, if the farms had to render a commercial
rent of say 4% of the land price, farming would not be profitable.[11]
Land rents in the United
States have fallen from around 7% of the
productive value in the 1970s to a low of 3.4% in 2008.[12]
A lot of the support
to farms in high-income countries is ’capitalized’ in the form of higher land
prices. This means that the subsidies increase the cost of the land and this
makes it more difficult for new farmers to establish themselves. Depending on
the nature of support other production factors can also be affected. In 2006,
milk quotas (if you produce more you face a levy) in the Netherlands were valued at an
astonishing €20 billion, whereas the gross annual value of milk production was
around €3 billion. The right to produce milk thus became a commodity, more
important than actual milk production[13]
(due to changes in EU agriculture policies the prices of the quotas have
dropped recently, and they are about to be abolished in the future). The right
to direct support from the EU’s CAP (the ‘single farm payment entitlement’) has
also become a tradable commodity. Buying and selling these rights has become a
business in itself; ’buying an entitlement to a stream of future payments is an
investment decision’, according to one analyst.[14]
Contrary to what many
may believe, return on capital in farming in developing countries is high.
There is very little available capital and even less is invested in farming,
but that which is invested is often borrowed at rates of 20-40%, a return on
capital which few investors in high-income countries can dream of. Despite
this, international capital is not rushing to support the farming sectors in
developing countries, at least not in the shape of credits to small farms. The
risks involved are also high; farmers can be unreliable borrowers who often can
get away with not paying their debts, or delaying payment for years.[15]
While a human
being needs a few liters of water to drink, at least one thousand times as much
water is used to produce food.[16] The
water needed for different foods varies tremendously and even varies for the
same product grown under different conditions. Often the figures used mix
different kinds of water with no clear distinction. There is ‘blue’ water – water
in rivers and lakes, ‘green’ water – water in rainfall and in the soil, and
‘grey’ water – the water that is needed to absorb or purify the waste. Together
these make up our ’water footprint’. The Water Footprint Network broke down the
water footprint of a margherita pizza (one topped with tomato, mozzarella and
basil). They found that it takes 333 gallons (1,260 liters) of water, enough to
fill almost ten bathtubs to make a single pizza.[17]
But statistics can be
presented in many ways. The water footprint of beef is big, ten times bigger
than for grain and fifty times bigger than for (some) vegetables. On the other
hand it is smaller than the water footprint of sesame oil, olive oil, coffee,
cocoa and a number of other crops. Rainfall is also not the same as the water
in lakes or wells. In all dryland areas, except where there are irrigation
possibilities, livestock keeping has been the traditional way to get food from
the land. And this for very obvious reasons; it is more water-efficient to
raise livestock than to try to grow crops that don’t get enough water. In Namibia
– one of the driest countries on the planet – most of the water falls on the
dry rangeland as rain and only a small part is supplied as drinking water for
the animals. A borehole for cattle with a solar pump and a capacity of 2 m3
per hour (20 m3 per day) can service some 250 cattle. They will
produce in the range of 20 tons of meat per year. The same quantity of water
would be enough to irrigate approximately a hectare of farm land, which would
produce considerable less food (say 3-7 tons of maize) and a lot less money. If
we calculate the total water use of the land and include the rainfall, we
arrive at a high water foot print. But this rangeland cannot be used for
cropping as the rainfall is to low. The only other alternative use of the land
would be to have game roaming there.[18]
Therefore, we cannot conclude that cattle-breeding, under those conditions is
wasteful of water.
Also, water footprint per kg is a dubious measurement. We eat very
different quantities of food, and the concentration of useful nutrients that
they contain differs widely. As an example, we have to eat 10 kg of broccoli
for our daily calorific needs, but only 0.5 kg of bacon. If we look at the use
of blue and green water per calorie, nuts have
the lowest efficiency in water use and root crops the highest, according to
researchers Mekonnen and Hoekstra. Most vegetables and meat rank quite
similarly. In terms of blue and grey water use for protein, oil crops are the
best, followed by milk, lamb, root crops and grains. Nuts and vegetables are
the least efficient.[19]
Seen on a larger scale, attempts to increase yield per hectare mostly also
increase water productivity. An unirrigated hectare of wheat uses more or less
the same quantity of water when it produces 1500 kg as when it produces 5000
kg.[20]
If irrigation is introduced into the systems, the effect is, perhaps surprisingly,
that water productivity increases; that is, the increased yield resulting from
irrigation uses less water per kilogram than the original yield based on
rainwater. In a situation where the annual rainfall is around 400 mm, water
stress poses a real limitation to crops, adding some 100 mm of water at
critical moments can easily double yields.[21].
According to researchers at the Stockholm Environment Institute there is a
large potential to improve water productivity through using improved, existing,
water management practices. They predict that, globally, we will need to
increase water usage by around two thirds of present levels (7000 km3/yr)
in order to feed the world in 2050 but that water productivity improvements
could save up half of that quantity.[22]
Because labor
costs represent a very high share of farm costs, productivity per person-hour
or per person-day has been central in leading to the increased mechanization of
farming. Labor productivity is also very important from a broader societal
perspective as increased productivity of agricultural has released people to
work in other sectors. Industrialization could not have taken place unless
labor had been released from farming. One person in the United States occupied
in farming can now produce food for some 300 people, in some developing
countries one farm worker can only feed a few. Another way of looking at labor
productivity is to see how much grain can be produced per person-year. Grains
are the most important foods in the world, are grown in most places and as such
are used as a proxy for general agriculture development. In the areas with
lowest productivity, one person can produce not even 1 ton of grain per year,
whereas the most productive farms produce up to 5000 tons per person-year as is
the case on Bob Stewart’s farm in Illinois.
Of course, these
comparisons mask the fact that a modern farmer doesn’t even ‘feed’ him or
herself or the family or their animals. A modern farm is a company where other
people’s goods and services are bought and sold. There are accountants,
repairmen, consultants, machine operators, computer service technicians and
meteorologists, all in the service of the modern farmer. All this work is
embedded in the farm produce. Earlier generations of farmers, and still many
farmers in developing countries, produced not only food and fodder for
themselves and their animals, but also fiber for clothing, leather for shoes
and most of their own tools and medicines from their farms. But even when we
have taken that into account, the difference in labor productivity between
farms in high-income and low-income countries is still staggering. Energy use
is the single most important determining factor here as there is a very strong
correlation between the energy resources commanded by one person and that
person’s productivity.
Productivity, measured
in added value per worker, is quite naturally much higher in high-income
countries than in developing countries. For instance, a farmer or farm worker
in Malawi
produced an added value of just US$130 per annum in 2001-2003, a Chinese farmer
US$368 while their French and American colleagues produced US$39,000 and
US$36,000 respectively. Even more worrying is that this gap is widening. The
OECD countries had an agricultural labor productivity that was 25 times higher
than that in Sub-Saharan Africa in 1971. By 2005 this had increased to 68
times.[23] A
report to the FAO projects that revenue per agriculture worker in Sub-Saharan
Africa will increase by a meager 50% between 2010 and 2050. Growth in
productivity in South Asia (India
and its neighbors) will also be slow, and Latin America
is the only region likely to catch up with developments in the OECD countries.[24]
Those figures come
close to what farmers earn and give an idea of what farm workers are – and can
be – paid. It works both ways; if workers are productive they can get a good
salary which in turn means that there are incentives for saving labor, which in
turn means that income per worker will increase. In addition, if wages in other
sectors are high, agriculture wages will follow (even if they mostly stay
comparatively low). A particularity of farm labor is that, in most parts of the
world, it is markedly seasonal. When it is too cold, to dry, too hot or too
wet, there is simply not much to be done in the fields. This means that farm
labor often is underemployed, or that seasonal workers take up the jobs. Farm
work is also considered to be ‘unskilled’ even though I personally object to
this categorization. In my former role as farmer and employer I can assure the
reader that the productivity of people weeding or making bundles of parsley can
easily differ by a factor of three or four, depending on their skills. Taking
good care of animals also requires a huge amount of skill, know-how and
ability. And modern farm work is certainly highly sophisticated.
It is somewhat
puzzling why most agronomists and institutions focus so much on yields of crops
per hectare as the main measure of agriculture productivity, when in reality
that is not a driving force for farmers who look more at productivity per labor
unit, or if they are modern agri-business operations, the productivity of
capital invested. If we compare farms globally the farms with the highest
yields per hectare are rarely the most competitive. European farmers generally
have much higher yields per hectare of wheat than their Argentinean, American
or Australian colleagues, still they cannot compete and are dependent on
support programs of the European Union, because their general cost levels are
higher. Similarly in the dairy sector, the world market is dominated by a
country with a low milk yield per cow. The dairy industry in New Zealand is still primarily
built on grazing cows and production per cow is low by international standards.
The average production per cow in Israel
was 12,500 kg in 2007, while it was less than 4,000 kg in New Zealand,[25]
but New Zealanders produce milk a lot cheaper than Israelis.
If we compare
efficiency in various systems, e.g. in farming or food processing, in most
cases this will show that the bigger and more technological advanced system is
more competitive. But are they more efficient and productive? Often, small
farms have a higher yield per hectare than large farms, but large farms are
still gradually squeezing smaller farms out of the market, because of market
access, possibilities for rational specialization, economies of scale, better
access to credits or governmental policy distortions.[26]
Larger crop farms perform better financially, on average, than smaller farms.
This is not because the larger farms have higher revenues or yields per area
unit, but because they have lower costs. As expressed in the report Farm Size and the
Organization of U.S.
Crop Farming from USDA:
“larger farms appear to be able to realize more production per unit of labor
and capital. These financial advantages have persisted over time, which suggests
that shifts of production to larger crop farms will likely continue in the
future.” Their yield per hectare is mostly the same as on smaller farms but USDA’s
research shows that farms with more than 2,000 acres spend 2.7 hours of work
per acre of maize and have equipment costs of US$432, while a farmer less than 249
acres will spend more than four times as much labor and twice the amount for
equipment per acre. In this limited sense the larger farms are indeed more
’efficient’ and ’productive’.
There are many
different ways to look at farm productivity and, depending on what and how we
measure, we can draw different conclusions. In principle, the factor which is
scarcest will, and should, be the most important. Farms in high-income
countries are characterized by a high input of energy and a low input of human
labor. They have no shortage of labor but it is costly and therefore
productivity per work-hour has been the strongest driver of change. Close to
cities, or in very densely populated areas, land is scarce and farms are more
shaped by high land prices. At a certain land price, grain farming is no longer
viable and farming will move towards higher value crops, or will become a
playground for the rich, golf courses or paddocks for race horses.
Economists talk about
‘total factor productivity’, a rather opaque measure which has a scientific
air. It does sound like a good idea to combine all the factors of production in
one measure. But as this is measured in monetary terms it will just value
things by their market value. So if labor is 200 times more expensive in one
country than in another you have to produce 200 times more per hour to achieve
the same productivity. And if water is free, water productivity will not be
reflected at all. In this way, productivity comes to mean more or less the same
as profitability and becomes a circular form of reasoning that is of little
value in discussing the big picture, even if it does reflect quite well what
guides a modern commercial farmer.
We need to redefine
productivity. But it is not sufficient to theoretically redefine productivity,
we also need to redesign the economic system which has created a distorted view
of what is productive and what is not. Today, productivity is measured by how
many trees one person can cut down with her chainsaw or how much fish a
fisherman can scoop up from the sea. But as natural resources dwindle, the real
productivity lies in how these resources re-generate. We are productive if
there is more forest next year than today, if there are more fish and if the
soil becomes more fertile by the years instead of being exhausted and eroded.
In a similar way we are efficient if the food we produce and consume is healthy
rather than if it is cheap.
------------------
You can read more blog posts on this theme, e.g.
Jevons paradox - why efficiency is a liar wordHow increased labour efficiency drives resource consumption
------------------
You can read more blog posts on this theme, e.g.
Jevons paradox - why efficiency is a liar wordHow increased labour efficiency drives resource consumption
[1] Rundgren,
G. 2013 Garden Earth - from hunter and gatherers to global capitalism and
thereafter Regeneration.
[2] Millenium
Ecosystem Assessment 2005 Millennium Ecosystem Assessment: Ecosystems and
human well-being–synthesis World Resource Institute.
[3] Grigg,
D. 1983 The Dynamics of Agricultural Change Palgrave Macmillan.
[4] Linklater,
A 2013 ‘When Pilgrims Privatized America’ Bloomberg.net.
[5] Rundgren,
G. 2013 Garden Earth - from hunter and gatherers to global capitalism and
thereafter Regeneration.
[6] Millenium Ecosystem Assessment 2005 Millennium
Ecosystem Assessment: Ecosystems and human well-being–synthesis World
Resource Institute.
[7] Bayliss-Smith,
T. P. 1982 The Ecology of Agricultural Systems Cambridge University Press.
[8] FAO
2000 ‘The Energy and Agriculture Nexus’
Environment and Natural Resources
Working Paper No. 4. United Nations Food and Agriculture Organization.
[9] Malmaeus,
M. 2013 Tillväxt Till Varje Pris?
Notis.
[10] Schnepf,
R. 2014 US Farm Income United States Congressional Research Service.
[11] Ploeg,
J. D. van der 2009 The New Peasantries: Struggles for autonomy and
sustainability in the era of empire and globalization Earthscan.
[12] Farmdoc
2010 ‘Farmland Price Outlook: Are
farmland prices too high relative to returns and interest rates?’ 18
October 2010, University
of Illinois.
[13] Ploeg,
J. D. van der 2009 The New Peasantries: struggles for autonomy and
sustainability in the era of empire and globalization Earthscan.
[14] Capreform.eu
2013 ‘CAP Reform Uncertainty and the
Market for Entitlements’ April 3, 2013 http://capreform.eu.
[15] Rundgren,
G. 2013 Garden Earth - from hunter and gatherers to global capitalism and
thereafter Regeneration.
[16] Kijne, J. et al. 2009 Opportunities to Increase Water Productivity in Agriculture with
Special Reference to Africa and South Asia
Stockholm Environment Institute.
[17] Grace
Communications 2013 Food, Water and Energy, Know the Nexus. Grace
Communications.
[18] Meyer von Bremen, A-H. and
G. Rundgren 2012 Jorden vi äter, Swedish Society for Nature
Conservation.
[19] Mekonnen,
M.M. and Hoekstra A.Y. 2012 ‘A global assessment of the water, footprint of
farm animal products’ Ecosystems (2012) 15: 401–415.
[20] Rundgren,
G. 2013 Garden Earth - from hunter and gatherers to global capitalism and
thereafter Regeneration.
[21] Renault,
D. 2002 Value of Virtual Water in Food: Principles and virtues United
Nations Food and Agriculture Organization.
[22] Kijne,
J. et al. 2009 Opportunities to Increase
Water Productivity in Agriculture with Special Reference to Africa
and South Asia Stockholm Environment Institute.
[23] Sauber,
M. 2010 ‘Low agricultural productivity in a monetary economy’ paper to the 12th Annual conference of the AHE
Association for Heterodox Economics.
[24] Schmidhuber
J., J. Bruinsma and G. Boedeker 2009 ’Capital requirements for agriculture in
developing countries to 2050’, Paper to Expert Meeting on How to Feed the
World in 2050 United Nations Food and Agriculture Organization.
[25] Gerosa,
S. and J. Skoet 2012 ‘Milk availability, trends in production and demand and
medium-term outlook’ FAO, ESA Working paper No. 12-01.
[26] Rundgren,
G. 2013 Garden Earth - from hunter and gatherers to global capitalism and
thereafter Regeneration.
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