Agrifood Systems Imposing Hidden Costs of $10 Trillion Annually

The hidden costs of current agrifood systems, amounts to at least $10 trillion annually, nearly 10 percent of global GDP. This analysis covers 154 countries and exposes the substantial burdens placed on health, the environment, and society, said an analysis by the Food and Agriculture Organization of the United Nations (FAO).

MAJOR CONTRIBUTORS TO HIDDEN COSTS

Over 70% of the hidden costs are attributed to unhealthy diets, predominantly featuring ultra-processed foods, fats, and sugars, said the 2023 edition of The State of Food and Agriculture (SOFA).  These diets lead to obesity and non-communicable diseases, causing labour productivity losses, particularly in high- and upper-middle-income countries.

Environmental factors account for one-fifth of the total costs, stemming from greenhouse gas and nitrogen emissions, land-use changes, and water usage. This issue affects all countries, but the actual scale may be underestimated due to data limitations.

IMPACT ON COUNTRIES

Low-income countries bear the highest proportion of hidden costs, representing over a quarter of their GDP. In contrast, middle-income countries carry less than 12%, and high-income countries under 8% of their GDP as hidden costs. For low-income countries, the most significant hidden costs relate to poverty and undernourishment.

CALL FOR TRUE COST ACCOUNTING

The report advocates for more thorough analysis of the hidden costs of agrifood systems through true cost accounting. The goal is to gain a more accurate understanding of these costs and take measures to mitigate the resulting damages.

This FAO report stands out as the first to break down these costs by national levels and ensure comparability across cost categories and countries.

FAO plans to dedicate two consecutive editions of The State of Food and Agriculture to this theme. The current report offers initial estimates, with the next edition focusing on in-depth assessments to identify effective mitigation strategies.

Governments are urged to use true cost accounting to reshape agrifood systems, addressing issues like the climate crisis, poverty, inequality, and food security. Innovations in research, data, and investments in data collection and capacity building will be essential to scaling the application of true cost accounting for transparent and consistent decision-making.

FAO Director-General, QU Dongyu, emphasizes the importance of recognizing these true costs and inspires collective commitment to transform agrifood systems for the betterment of all in the face of global challenges.

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