This post was written by Jim Oehmke and is the third installment of "Policy Insights", a video-centric blog series focusing on elements of agricultural transformation and policy. Read the first post of the series here and the second post here.

I’d like to continue the discussion of agricultural transformation by focusing on what drives such transformation and adds value for both rural and urban populations.

The point of departure is again the Green Revolution, which was driven by technical progress embodied in improved staple crop varieties. This approach, however, is no longer sufficient.

Today, real prices of staple crops are about one-third of what they were prior to the Green Revolution. That means that the same doubling or tripling of yields that we saw in the Green Revolution today leads to only one-third of the increase in farm incomes. The cost of raw agricultural commodities is only a small fraction of the consumer cost of food today. In South Africa, the cost of wheat represents about 12-18 percent of the cost of a loaf of bread. So, wheat production technologies that double wheat productivity may save consumers 6-9 percent of what they spend on bread, which probably isn’t enough to make them food-secure.

The Green Revolution enabled, and was helped by, rural to urban migration with migrants gaining higher-wage jobs. Both population demographics and deindustrialization –– the loss of manufacturing jobs due to mechanization –– mean that migration today is only a partial solution.  

Changing weather conditions will limit crop options in many parts of the world. Actions to reduce air pollution restrict the opportunities for fossil fuel-intensive modernization of agriculture but open new potential opportunities. Alternative energy production on rural lands can help provide some smallholders with a sustainable and consistent income as part of a diversified livelihoods strategy as well as support green urban growth.

What path will lead us to the best opportunities for moving forward? A path of diversified investment, policy change and inclusive action that includes: 

• Investment to improve on-farm productivity and add value
• Investment to improve value-chain efficiency
• Policies and actions that enable consumers to access affordable and nutritious foods through markets
• Investment and policies enabling sustainable rural job creation in addition to successful migration to urban employment 
• Policies and investments that add value in rural communities by providing a broader set of rural goods and services to support urban growth

There are good opportunities for supporting agricultural transformations. We must keep in mind the needs of both rural and urban populations.