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FAO’s report exposes the alarming true cost of global agrifood systems

14 December 20233 min reading

A new Food and Agriculture Organization (FAO) report attempts to capture the “true cost” of global agrifood systems by analyzing the substantial hidden costs associated with the sector. According to its findings, these costs add up to approximately USD 12.7 trillion annually (2020 purchasing power parity, US$), or about USD 35 billion per day, equivalent to about 10 percent of global gross domestic product (GDP) in 2020.

The State of Food and Agriculture 2023 looks into the true cost of food for sustainable agrifood systems. The report introduces the concept of hidden environmental, health and social costs and benefits of agrifood systems and proposes an approach – true cost accounting (TCA) – to assess them. It provides a first attempt at national-level assessments for 154 countries. 

The report estimates the expected value of the global hidden costs of agrifood systems in 2020 – from greenhouse gas and nitrogen emissions, water use, land-use change, unhealthy dietary patterns, undernourishment and poverty – at 12.7 trillion 2020 PPP dollars. This value is almost 10 percent of global GDP PPP in 2020. Per day, these costs are equivalent to 35 billion 2020 PPP dollars. These results point to the alarming environmental, social and health consequences our agrifood systems impose on society and call for urgent transformation towards sustainability across all dimensions. 

Globally, 73 percent of the quantified hidden costs in 2020 were associated with dietary patterns that led to obesity and non-communicable diseases (NCDs), causing labour productivity losses. The quantified environmental hidden costs from agriculture, accounting for more than 20 percent of quantified hidden costs, are equivalent to almost one-third of agricultural value added. 

On the social side, it is estimated that the incomes of the moderately poor working in agrifood systems need to increase by, on average, 57 percent in low-income countries and 27 percent in lower-middle-income countries, to ensure they are above the moderate poverty line, thus reducing food insecurity and undernourishment.

Finding that unhealthy dietary patterns are the main contributor to global hidden costs should not steer attention away from the environmental and social hidden costs. Rather, it emphasizes the importance of repurposing support to transform agrifood systems to deliver healthy and environmentally sustainable diets to all.

The quantified hidden costs pose a greater burden relative to national income in low-income countries, where they are equivalent, on average, to 27 percent of GDP (in large part due to poverty and undernourishment), compared with 11 percent in middle-income countries and 8 percent in high-income countries. Addressing poverty and undernourishment remains a priority in low-income countries.

These preliminary results suggest there is considerable variation from country to country in the relative importance of environmental, social and health hidden costs, underscoring the need to produce national estimates of hidden costs and improve them with country-specific information, so they can be a useful input in decision- and policymaking processes.

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