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Urban agriculture: what economic model?

7 minutes of reading

Under lockdowns, many French people started to cultivate their own garden, including in cities or on the outskirts of cities, confirming the success of certain forms of urban agriculture. Major cities are becoming visibly greener, but does urban agriculture have an economic model that will ensure it has a stable future?

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Urban agriculture, which raises awareness and brings nature into the city, obviously takes various forms. It can be professional or not, collective or individual, outdoor or indoor. It concerns all types of plants, but also the presence of animals in the city.

Income from production makes it difficult to achieve sustainability of business models

Productive but limited yields

Combining urban agriculture and productivity seems quite possible. Researcher Raquel Moreno-Peñaranda often cites the example of Japan, where urban fields are the most productive form of agriculture in terms of the economic value of production – 3% higher than the national average. She adds that in 2010, Japanese urban agriculture accounted for almost a third of the country’s agricultural production![1]

The Food and Agriculture Organization of the United Nations (FAO) supports this by stating that urban vegetable gardens can be up to 15 times more productive than farms in rural areas, due to the easier and more optimised monitoring of small plots. Urban agriculture also reduces transport, packaging and storage costs through more direct access to the consumer.

Some researchers argue that urban agriculture will become essential by 2050 to feed a world population that is 80% urban. Nevertheless, the global production potential of urban agriculture, estimated at between 100 and 180 million tonnes per year[2], remains quite marginal compared to current global production volumes of 6,500 million tonnes per year. According to the FAO, urban agriculture will not contribute significantly to the global food supply. Nevertheless, it could eventually form a solution to satisfy up to 10% of the need for certain crops, such as pulses and root vegetables.

Some cities, such as Paris, Sheffield in England and Kathmandu, are trying to assess their urban agriculture potential, but the variety of types of urban agriculture makes the exercise difficult. The APUR considers that with an average of 50 m² of market gardening to feed one person, 11,000 hectares would have to be cultivated in Paris to ensure self-sufficiency in fruit and vegetables, yet Paris has around 30 hectares of urban agriculture in 2020.

Economic models based on the sale of production are often fragile

Despite the productive potential of urban agriculture, economic models based solely on the profitability of production are often fragile, for several reasons.

Firstly, limited production volumes allow few economies of scale, and investment costs are high. In addition, the weak global production outlook is holding back certain innovation or industrialisation initiatives that could allow a reduction in the price of investments. The latter are therefore currently very expensive and make it difficult to develop sustainable business models. This is all the more complex as the propensity of urban dwellers to pay more for local produce is still quite low.

Moreover, urban agriculture projects often compete with other development projects, which hinders their widespread introduction. Projects for the installation of photovoltaic panels, for example, often conflict with rooftop farming projects. So competition for the use of urban space does not facilitate the development of urban agriculture.

There are however some inspiring examples such as the 7-hectare urban farm at La Chapelle International in Paris, which has relied on a mix of activities rather than simply selling its produce to develop a viable economic model. Indeed, it is the programmatic mix of the space, combining production and events, that makes their model sustainable.

New business models

The positive externalities of urban agriculture encourage the development of hybrid models

While the ability to feed city dwellers may not be the basis of urban agriculture business models, the additional benefits it offers are driving the emergence of alternative models.

Urban agriculture obviously provides direct economic benefits such as job creation and property development. In 2018, the FAO counted 800 million people involved in urban and peri-urban agriculture worldwide. But urban agriculture also provides environmental benefits such as the restoration of biodiversity, soil, air cooling and the de-pollution of urban areas. These non-monetary benefits push some actors, such as municipalities, to invest in projects that go beyond the logic of economic profitability. There are also benefits in terms of food safety, an issue that was highlighted by the onslaught of supermarkets at the start of lockdown. The return to short circuits reduces food dependency and increases the resilience of territories.

Urban agriculture, by fostering local communities and contributing to neighbourhood life, is also a source of social benefits. These are accompanied by the psychological benefits of being in contact with nature or producing your own fruit and vegetables. They underpin the creation of solidarity-based urban agriculture projects whose primary aim is awareness-raising and integration, not just productivity.

Urban agriculture supported by cities and businesses

Paris, Michigan, Detroit, Montreal, Toronto, Rosario in Argentina, Ouagadougou or Bobo-Dioulasso in Burkina Faso are examples of cities that encourage urban agriculture through facilitating public policies. In some African countries in particular, policies are encouraging this popular practice as a way to combat urban poverty.

But it is not only the territories that promote urban agriculture. Companies are also taking up a position on the subject. Their projects for urban rooftop farms and shared gardens are often unprofitable, but aim to strengthen their attractiveness or to create links around a corporate culture. For some food companies, these initiatives also aim to create a new relationship of trust with consumers.

To summarise:

Certain obstacles to the development of urban agriculture, such as low production volumes, the reluctance of certain planners and the question of health risks linked to urban agriculture, still seem to weaken economic models based solely on the sale of production. At the same time, the growth of alternative models, taking into account the environmental and social benefits of urban agriculture, is confirmed with the support of public authorities and the involvement of companies and associations.

It is therefore becoming necessary to find a balance between social and environmental benefits and economic viability of the models. The objective of farm profitability must not be achieved at the expense of environmental benefits. But the simple pursuit of social and environmental benefits, without the objective of economic profitability, will only allow a limited development of urban agriculture.

[1] https://unu.edu/publications/articles/japan-s-urban-agriculture-what-does-the-future-hold.html

[2] according to a study by researchers from China’s Tsinghua University and the US universities of Berkeley and Arizona