Agricultural production is a function of the availability of resources, e.g. land, livestock, capital, and labor, as well as climate factors and technology. Technology is most directly seen in the changing productivity of land in terms of crop yields, and in the production of meat relative to the input level of feed grain. The model also accounts for lost production (such as spoilage in the fields or in the food supply chain), which is determined by average income.
Agricultural demand depends on average incomes, prices, and a number of other factors. For example, changing diets can affect the demand for meat, which in turn affects the demand for feed crops. The industrial demand for crops, some of which is directed to the production of biofuels, is also affected by energy prices.
Production and demand, along with existing and desired stocks and historical trade patterns determine the trade in agricultural products. The differences in the supply of crops, meat, and fish (production after accounting for losses and trade) and the demand for these commodities are reflected in shifts in agricultural stocks. Stock shortages feed forward to actual consumption, which is addressed in the population model of IFs. Stocks, particularly changes in stocks, are a key driver of changes in crop prices. Crop prices are also influenced by the returns to agricultural investment and therefore to the basic underlying cost structure. Meat prices are tie to, and track crop prices, while changes in fish prices are driven by changes in fish stocks.
Stocks and stock changes also play a role, along with general economic and agricultural demand growth, in driving the demand for agricultural investment. The actual levels of investment are finalized in the economic model of IFs and subject to constraints there. The investment can be of two types – investment for expanding and maintaining cropland (extensification) and investment for increasing crop yields per unit area (intensification). The expected relative rates of return determine the split.
The final key dynamics addressed in the agriculture model relate to land, livestock, and water. The latter of these is very straightforward, driven only by crop production. Changes in livestock are determined by changes in the amount of available grazing land, changes in the demand for meat, and the ability of countries to meet this demand as reflected in changing stocks.
In the IFs model, land is divided into 5 categories: crop land, grazing land, forest land, ’other’ land, and urban or built-up land. First, changes in urban land are driven by changes in average income and population, and draws from all other land types. Second, the investment in cropland development is the primary driver of changes in cropland, with shifts being compensated by changes in forest and "other" land. Third, changes in grazing land are a function of average income, with shifts again being compensated by changes in forest and "other" land. Finally, conservation policies can influence the amount of forest land, with any necessary adjustments coming from crop and grazing land.