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Reflections on productivity measures and some results for crops and livestock in Brazil

The success of the Brazilian agriculture is attributed to the productivity of its several supply chains, which has grown at high rates over the last decades, surpassing the world average more than twice. As a result, Brazil has become one of the three agricultural powers and the third biggest food exporter.

 

Productivity can be defined as the variation of the output after effects of higher or lower use of factors of production/inputs are discounted. Differently from partial productivities of labor and capital, Total Factor Productivity (TFP) is a broad measure of productivity that allows evaluating gains of efficiency in the economy or in specific sectors, a result of the joint use of resources in the productive process. Therefore, the TFP indicates the efficiency obtained with the total resources or factors of production combined to generate goods and services, and it refers to the growth of the output related to improvements in the production process. This aspect, in turn, may occur because of the introduction of new technologies, use of higher quality resources, more efficient combination of factors and better business management.

 

Gasques, in research performed over the last decades, has indicated that the TFP is the major variable explaining the increase of the farm output. Considering the period from 1975 to 2018, the author estimated an average TFP growth rate for Brazilian agriculture of 3.36% per year. For comparison purposes, data on farming TFP in the United States indicate that, from 2007 to 2015, the annual average growth rate was 0.53% per year, and the historical rate is 1.58% per year.

 

Evaluating the TFP average growth rate of agriculture in the world from 1991 to 2009, Fuglie indicates that it is lower than 2% per year. The same author says that, between 2001 and 2009, the northeast of South America (predominantly Brazilian production) presented the highest TFP growth rate in the world, followed by the northeast of Asia (mainly China).

 

As for the agriculture, literature considers some aspects that may suggest an increase of workforce skills, which would lead to the productivity increase of labor: i) between 1996 and 2009 the schooling level of farm workers increased from 2.6 to 4 years of study; ii) agricultural census from 2006 to 2017 registered slight increases of the qualification of rural workers; iii) specific agricultural sectors are working to comply with legal determinations regarding the need to properly train workers. However, there is a long way to go as far as labor productivity is concerned, and it is believed that gains from formal and informal qualification of workers are still small. Therefore, data presented in the literature on the partial productivity of labor in agriculture, above TFP values, are certainly including the share due to the higher use of machinery and equipment, and even genetically modified seeds. For the period between 1975 and 2018, Gasques estimated an average growth rate of the capital used in agriculture and farming activities of 0.8% per year, while for labor work it was negative (-0.39% per year), and for land, +0.03% per year.

 

As for the increase in the land productivity, it occurs by the use of tracts with higher production potential. Moreover, locational rearrangements of agricultural activities, matching the demands of crops with the soil conditions of the available land, can generate more output by quantity of factor used.

 

As for agriculture, the use of technological innovations aiming to reduce production costs is a necessity of agents to keep their position in the competitive market that they are inserted. On one hand, economies of scale and scope obtained with larger properties help the process of maintain competitiveness.

 

Considering data presented in this text on growth rates of factors use, the capital used in agriculture was the main determinant for the Brazilian productivity increase. This fact occurs specifically because of the increased efficiency of the capital factor (embodied technology).

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