#181. Productivity and Agricultural Yields

Posted on | The Agurban
Productivity and Agricultural Yields

One of the long-term drivers of commodity prices is productivity gains driven by technological progress. From the late 1700’s until 1950, land use devoted to agriculture increased fivefold, in line with increases in population. But, since 1950, the percentage of the world’s land area used for farming has increased modestly, while the world’s population has more than doubled, from 2.5 billion to 6.6 billion. Today’s agriculture technology means one person is fed by 2,000 square meters (1/2 acre) of farmland annually, whereas in the 1700-1800’s, it took 20,000 square meters (5 acres).

The most important transformation on the path to development was the tractor. The US used about 269 tractors per 100 hectares of farmland, while China uses just 96. This is changing, however, as China continues its process of industrialization and further narrows the gap. In 1961, China had only 5 tractors per 100 hectares. 

A more mechanized production process means more output. In the US, value-added per worker (how much output they produce) was $39,000 in 2006, up from $13,000 in 1971. Compare this with Chinese agricultural value-added per worker of $162 in 1971 to $401 in 2006. Developing nations, such as China, have plenty of room to grow in terms of agricultural productivity. 

Agricultural technology is not just about machines. The newest innovation is genetically modified organisms (GMOs). While controversial top some, the process allows scientists to manipulate the genetic structure of plant organisms, which boosts yield and helps reduce the use of pesticides. Just like with the revolution that transformed the personal computer from a room-sized monstrosity into a ubiquitous household technology, agricultural product innovations are poised to take off. 
The world population is expected to surpass 8 billion by 2025. Will producers be able to meet the food demands of the growing population? More than likely, yes. Agricultural production will depend more on technological innovation and intellectual property rights than on land use.