No Free Lunch: Accounting for the True Costs of Industrial Food Production


Pollution costs a lot. A view of northern Gulf of Mexico sediment, mainly from agricultural runoff, that creates the massive annual dead zone.

Everyone loves a free lunch – but the problem is that free lunch almost always has hidden costs. Industrial agriculture is an example of this wishful free-lunch thinking, as revealed in a new report co-written by the UN Food and Agriculture Organization (FAO) and research firm, Trucost. The report, “Natural Capital Impacts in Agriculture: Supporting Better Business Decisions-Making,” quantifies the real but hidden costs that industrial crop and livestock production have on the environment.

Cheap food prices from cheap production methods is the so-called “free lunch” we’ve accepted with the current industrialized food system—even as the environment suffers.

Cheap food prices from cheap production methods is the so-called “free lunch” we’ve accepted with the current industrialized food system—even as the environment suffers. The industrialized food system continues to push ahead with a focus on higher crop yields and more animal products, ostensibly with the goal to produce enough to feed a projected nine billion people by 2050, but the costs to human and ecosystem health often go unaccounted for in the process. Freely taking from the environment is also a counterproductive business proposition because agriculture depends on it to thrive.

The notion of accounting for natural capital – like the renewable (e.g., water) and nonrenewable (e.g., fossil fuels) goods and services ecosystems provide to society – is central to the FAO-Trucost report. When the real costs of expensive and typically unaccounted for externalities like greenhouse gas emissions from deforestation and fossil fuel use are factored in – land clearing for farm fields and heavy use of fossil fuel-based synthetic fertilizers, for example – what some might consider “easier” and “cheaper” are really not. As the report notes:

In many countries, there is a worrying disconnect between the retail price of food and the true cost of its production. As a consequence, food produced at great environmental cost in the form of greenhouse gas emissions, water pollution, air pollution, and habitat destruction, can appear to be cheaper than more sustainably produced alternatives. (p. 5 )

The report used a lifecycle analysis methodology to look at four commodity crops – corn, rice, soybeans and wheat – as well as four livestock commodities – beef, milk (cattle), pork and poultry – through case studies. The assessments conclude that natural capital costs must be factored into agricultural business decision-making, including operations on the farm and for processing facilities. Some of the report’s main findings include:

  • Natural capital costs related to crop production come to about $1.15 trillion, over 170 percent of its production value.
  • Natural capital costs related to livestock production come to over $1.18 trillion, 134 percent of its production value.
  • The highest combined natural capital costs (operational and supply chain) are attached to beef production, with Brazil costing the most at $596 million and the United States second at $280 million. Chinese pork production has a high natural capital cost of $327 million.
  • On average, 64 percent of the environmental impacts of livestock production are attributed to on-farm operations like land clearing for beef pastures in Brazil. At $473 million, this is the highest single natural capital cost of all impacts in the report.
  • On average, 77 percent of the environmental impacts of crop production are attributed to on-farm operations. The highest natural capital costs of crop production are attributed to corn farming in China, followed by rice farming in China and India.
  • Environmental costs from supply chains can be substantial, especially when it comes to growing crops for animal feed, such as for pork production in China.
  • The overuse of fertilizers and can have big environmental costs, such as in the case of water pollution.

It doesn’t have to be this way. The report shows that by understanding the real costs of industrial agriculture, there are more sustainable ways forward – like organic farming, targeted use of manure and fertilizers, the use of mulching and smart intensification of crops like rice. Rather than remaining accustomed to cheap food that actually costs a lot, producers and consumers need to take into account the heavy costs our current food system takes on the environment. The best way forward is with more sustainable food production – because just like we were always told: there’s no such thing as a free lunch.

Watch the Food Tank hosted "Real Cost of Food" panel discussion about the importance of true cost accounting for agriculture.


Photo credit: "Northern Gulf of Mexico" by NASA Goddard Space Flight Center.