Sustainable agriculture: the growing importance of making the production process more sustainable

The growth in agriculture is a tale of universal forces – demographics, globalization, urbanization, sustainability and food safety - have been the main drivers of change. The global food system has an estimated market value of USD10-14trn, accounting for 16-20% of global GDP. Over 30% of the world’s greenhouse gas (GHG) emissions come from global food sectors. Unless this is tackled, these emissions will continue to increase as the world population is expected to increase from 8bn people to 10bn by 2050 (UN).

To feed everyone, the food supply would need to increase by 70% over this period. If not reached, this would have a direct negative impact on society considering events like the natural disasters that have taken place recently, including the Valencia flooding and the most recent wildfires in California, widely accepted to be direct consequences of global warming. 2024 was the first calendar year to pass the symbolic threshold of 1.5C in global warming, and was the world's hottest on record. Investing in sustainable agriculture clearly provides solutions for climate change, population growth, urbanization, water scarcity and the challenges related to food systems.

What are the reasons for the growing importance of making agriculture more sustainable?

More specifically, agriculture already utilizes 50% of habitable land, 70% of the world’s fresh water supply and accounts for 25% of GHG emissions. The main challenge is for the world to use less fresh water and agricultural land, fewer pesticides, and heavy machinery. Companies should be using innovation (technology) to make it more efficient for farmers in agriculture. Improved productivity in the fields means more profit for farmers, a more robust supply chain and lower prices for consumers. There are a few sectors that will help agriculture in this transition, namely: crops science, precision farming (use of technology for increased efficiency such as drones and autonomous tractors), meat alternatives (plant-based proteins), engineered microbes, vertical farms and fisheries and aquaculture.

For example, crop production accounts for 7% of the world’s greenhouse gas emissions. Farmers face a challenging operational environment, driven by issues such as climate change, soil health degradation, pests and diseases, labour shortages and market volatility. Each of these can substantially impact crop yields and profitability. This has created an urgent need for new techniques, as there is a big risk to food production globally. Innovations to decarbonize crop farming include developing new types of crops through gene editing.

What can make agriculture more innovative, sustainable and efficient?

There are other areas like precision agriculture and plant-based proteins. From an economics perspective, precision agriculture improves yield and productivity almost immediately through Artificial Intelligence and technology. It has been proven that it can increase crop yields and drastically reduce input costs (which are 40% of a farmer's cost structure).

In terms of the alternative proteins market, beef consumption is an industry that causes more damage to the environment than cars, is on the rise, and represents a clear challenge to the world’s ability to meet climate target goals. Meat and dairy accounts for 15% of greenhouse gas emissions, and livestock has the potential to reduce its emissions by 30%. So, these topics are becoming very important to make farming more sustainable.

The Global Markets Strategy team - thanks to Carlos López and Volodymyr Kmetyk - has published the Sustainable Agriculture report "Old MacDonald Had a Farm…", which highlights the main challenges, perspectives and future scenarios in this area. At BBVA CIB we are committed to supporting our clients in their green transition and we trust that sustainable investment will experience a gradual recovery in the coming months.