The growing global demand for food, feed and bio-fuel is well established, with population growth, and even more importantly income growth, increasing the quantity and changing the composition of agricultural commodity demand. Increasing output by bringing more land into production and using more water is technically feasible, but there are competing uses for these finite resources; water use is particularly constrained, with some forecasts suggesting that more food will need to be produced in the future with significantly less water than used today. And of course the impacts of climate change, while highly uncertain, likely imply important changes in water availability and perhaps even shifts in production zones.

In a context of limited resources and high input costs, ensuring stronger productivity growth in the agri-food sector is essential to successfully respond to increased and more diversified demands for food and non-food use of agricultural products. Productivity growth has been the subject of renewed attention as recent developments in agricultural markets have reinforced concerns on global food security, sustainability, and on the challenges resulting from climate change. Productivity growth also reflects relative developments in agricultural competitiveness across firms, sectors and countries.

This chapter outlines the importance of productivity growth for the sustained competitiveness of the agri-food sector and the role of agricultural research and development in fostering the innovations conducive to higher productivity growth. It briefly describes the content of the report and raises the main questions it attempts to respond to.

This chapter provides definitions for the concepts used in the report: competitiveness, productivity, total factor productivity and its components, efficiency and innovation. It explains how they can be measured and how they relate to each other. In the report, productivity is considered as an indicator of competitiveness.

In the last decade, agricultural productivity growth has decreased in many high level countries, but it is strong in Brazil, China and South Africa, as well as in major transition economies. Situations are contrasted in developing countries and overall, there is no widespread evidence that Total Factor Productivity (TFP) growth is slowing. Rates of TFP growth at European Union level are variable by member state, as is the contribution of technical efficiency and technological progress. In OECD countries, labour productivity increased faster than land productivity as farm labour declined faster than farm land. At the global level, the growth rate of crop yields has declined in the last 15 years compared to previous periods, but at a different pace across commodity. Evidence on competitiveness in the agricultural and agri-food sector based on trade or cost-related measures is relatively scarce.

Expenditure on research and development (R&D) is often used as an indicator of efforts in this area. This chapter describes trends in public and private expenditures on agricultural R&D, using OECD and ASTI databases. Most expenditures on agricultural R&D are made by the public sector, but the share of private expenditures is increasing in some OECD countries. Public R&D expenditure as a percentage of agricultural GDP ranges from less than 0.3% to over 4% among OECD countries. It is also very diverse in developing countries.

A number of studies on agricultural productivity and competitiveness have tried to identify their main determinants. This chapter discusses the results they found regarding the impact of farm size, factor intensity, farm specialisation, human capital, consumer demand, the natural environment, investments in general infrastructures, regulations, and agricultural policies. The impact of R&D on productivity growth is discussed on the basis of the analysis contained in OECD Agricultural Working Paper No. 31 on the impact of R&D investments on productivity growth in agriculture. Estimation issues are first discussed and the importance of a good specification of the lags between investments and their observed benefits is outlined. According to the meta-analysis of over 1 000 estimates of returns to agricultural R&D reported in the Working Paper, the rate of return appears to be quite large, ranging between 20% and 80% per annum in most cases

This chapter outlines where more work and data would be needed to better understand agricultural productivity growth and competitiveness in the agricultural and agri-food sector, and the role of R&D. It suggests an “innovation systems” approach would help understand better how innovation translates into productivity growth.