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ISSN 2709 ISSN 2709 ISSN
FAOSTAT ANALYTICAL BRIEF 7
Agricultural investments and capital stock
Agricultural investment and capital stock
FAOSTAT analytical brief 7
HIGHLIGHTS
Globally, between 2010 and 2017, Gross Fixed Capital Formation in agriculture increased by about 29 percent, from $477 to US Dollars 617 billion in constant 2010 USD. Aggregate physical investments are growing overtime globally, but growth rates and trends differ across regions and countries. Agricultural investment rates grow faster in high-medium income countries, the agricultural sector is less capital-intense in low income countries.
FAOSTAT AGRICULTURAL INVESTMENT AND CAPITAL STOCK
GLOBAL AND REGIONAL TRENDS IN AGRICULTURE GROSS FIXED CAPITAL FORMATION AND NET CAPITAL STOCK
Annual flows of physical investment in the agriculture sector almost doubled in Asia and the Pacific over that period (+44.5 percent) and increased remarkably in Africa (+30 percent) and the Japan, Australia and New Zealand (28.6 percent). Slower increases are recorded in the remaining regions, with agricultural investment flows increasing by about 15 percent in Latin America and the Caribbean, 13 percent in Northern America and 9 percent in Europe (Figures 1 and 2). The agricultural investment ratio improved in the 2010–2017 period, increasing by about 16 percent, following a growing trend (Table 1). At the regional level, investment ratios present a global upward trend, with the exception of Japan, Australia and New Zealand. In Africa, the Agricultural Investment Ratio (AIR) raised from 9 percent to 10 percent, while in Asia and the Pacific and in Latin America and the Caribbean it remained stable. More sustained growth is recorded in Northern America, from 20 percent to 22 percent, and Europe. In the Japan, Australia and New Zealand, instead, the AIR fell slightly, from 31 percent to 27 percent.
Figure 1. Gross fixed capital formation in agriculture – Regional aggregation
350
300
250
200
150
100 Billions, 2010 constant USD USD constant 2010 Billions,
50
0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Africa Asia & Pacific Europe Latin America & Caribbean Northern America Other Developed
Source: FAO, 2020. Figure 2. Net capital stock – Regional aggregation
3000
2500
2000
1500
1000
USD constant 2010 Billions,
500
0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Africa Asia & Pacific Europe Latin America & Caribbean Northern America Other Developed
Source: FAO, 2020.
Agricultural investment and capital stock
FAOSTAT analytical brief 7
Table 1. Average of the annual Agricultural Investment Ratio – Regional aggregation
Annual average AIR 1995-2001 2002-2009 2010-2017 1995-2017
Africa 0.10 0.09 0.10 0.10 Asia & Pacific 0.10 0.10 0.11 0.10
Europe 0.29 0.32 0.35 0.32
Latin America & Caribbean 0.11 0.10 0.11 0.11 Northern America 0.21 0.20 0.22 0.21
Other Developed 0.31 0.31 0.27 0.30
Global 0.14 0.15 0.16 0.15
Source: FAO, 2020.
Despite lower average growth rates in physical investment flows compared to Asia, developed economies continue to present higher investment ratios, resulting in more capital-intensive agriculture sectors than the low-income countries. The value added to net capital stock (VA-to-NCS) ratio in agriculture, by capturing how many units of value added in agriculture is generated from each unit of capital stock, indicates a level below one in Organisation for Economic Co-operation and Development (OECD) countries, meaning that the agricultural production is heavily mechanized (Figure 3). A rightward shift of the boxplots is observed, instead, for low- and lower middle-income countries with a VA-to-NCS ratio above one for many of them, indicating a less capital-intense agricultural sector (Figure 4).
Figure 3. Index of value added to net capital stock ratio for OECD countries
Source: FAO, 2020.
Agricultural investment and capital stock
FAOSTAT analytical brief 7
Figure 4. Index of value added to net capital stock ratio for low income countries
Source: FAO, 2020.
TECHNICAL COMPUTATION PROCEDURE
The FAO Capital Stock Database reports on aggregate physical investment flows and capital stock in agriculture, forestry and fishing for 190 countries and territories from 1995 to 2017. Variables contained in the database are Gross Fixed Capital Formation (GFCF), Net (or Wealth) Capital Stock (NCS) and Consumption of Fixed Capital (CFC), measured according to the methodological and computational concepts of the System of National Accounts (SNA) 2008. Whenever available, the database integrates official national accounts data harvested from United Nations Statistics Division (UNSD) and/ or the OECD. Only a subset of the member countries reports official data on all required variables for the reference period of the dataset. When information is not available, or is only partially available from official sources, missing data are estimated. Agricultural investment flows are computed from time series of agricultural investment-to-value-added ratios, available from previous research programmes held at the World Bank and at the Food and Agriculture Organization of the United Nations (FAO). The time series on agricultural capital stock result from the application of the perpetual inventory method (PIM) to agricultural investment flows. Time series showing missing data are integrated with exogenous information. According to the System of National Accounts 2008 (SNA, 2008), capital stock is defined as the value of all fixed assets in use, where fixed assets are described as produced assets (i.e., excluding land) that are used repeatedly in the agricultural production process for more than one year. Capital stock series can be assessed as net or gross. Gross capital stock measures the value of all the
fixed assets in use based on at the price of new assets, regardless of the age. That is, gross stocks ignore the depreciation of fixed assets, and consider past investments as new, taking into account only the retirement. Net capital stocks, instead, correspond to the value of gross capital stock minus depreciation; that is, the cumulative value of consumption of fixed capital. The decline in the value of fixed assets occurs due to physical and economic deterioration, where the latter includes obsolescence. Based on these criteria, estimates of agricultural net capital stocks are obtained through the PIM.
The PIM produces allows estimating agricultural capital stock and consumption of agricultural fixed capital starting from a time series of agricultural gross fixed capital formation. In particular, agricultural net capital stock is modelled as a sum of the past investments in agricultural fixed assets that are still in use after correcting for depreciation. The agricultural net capital stock for country i
at the end of period t, NCSi,t, can be written as a function of agricultural net capital stocks at the
end of previous period, NCSi,t-1, of agricultural gross investment in the current period, GFCFi,t, and
of consumption of agricultural fixed capital, CFCi,t:
푁퐶푆푖,푡 = 푁퐶푆푖,푡−1 + 퐺퐹퐶퐹푖,푡 − 퐶퐹퐶푖,푡
When GFCF is missing, estimation procedures are applied to gauge it from the Agricultural Investment Ratio (AIR), which is defined as
퐺퐹퐶퐹푖,푡 퐴퐼푅푖,푡 = 푉퐴푖,푡
where VAi,t is the agricultural value added for country i in year t. Therefore, the AIR represents GFCF as a share of VA in agriculture, which indicates how much of the total factor income is reinvested in new fixed assets.
A thorough description of the methodology employed to obtain the Capital Stock data published in FAOSTAT is available from the FAO ESS working paper (Vander Donckt and Chan, 2019).
SYNTHESIS OF THE FAO ACS DATABASE CONTENT
Agriculture Gross Fixed Capital Formation (GFCFAFF) Variables Agriculture Net Capital Stock (NCSAFF)
Agriculture Consumption of Fixed Capital (CFCAFF)
Units of Measure Current LCU and USD Constant LCU and USD (2010 base year) Time Coverage 1995–2017
Geographical coverage 190 countries and territories
Note: AFF stays for Agriculture, Forest and Fishery.
Agricultural investment and capital stock
FAOSTAT analytical brief 7
REFERENCES
The System of National Accounts (2008), https://unstats.un.org/unsd/nationalaccount/sna2008.asp
Vander Donckt, M. & Chan, P. 2019. The new FAO global database on agriculture investment and capital stock, FAO Statistics Working Paper Series / 19-16. FAO. Rome.
This analytical brief was prepared by Xinman Liu, Michele Vollaro and Marie VanderDonckt of the FAO Statistics Division, with the supervision of Piero Conforti. Suggested citation: FAO. 2020. Agricultural investment and capital stock. FAOSTAT Analytical Brief Series No. 7, Rome. Cover photo: ©FAO/Ezequiel Becerra
CONTACTS Statistics - Economic and Social Development E-mail: [email protected] Website: www.fao.org/economic/ess/ess-economic/capitalstock/en Food and Agriculture Organization of the United Nations Viale delle Terme di Caracalla 00153 Rome, Italy
CB1080EN/1/09.20