In the report, a variety of factors that influence the conversion, or preservation, of farmland in OECD countries is considered. The stock of farmland shows slow declines in all countries, but this decline is considerably slower than might be expected given pressures for conversion of farmland to urban uses near cities, and persistent low levels of return available to farmers operating in more remote areas that are less favorable for agriculture. This suggests that while market forces are important in defining land use, there are other forces at work as well. Notably, these are: agricultural policy that alters the returns from agricultural activity, environmental policy that imposes restrictions on the way farmland is used to ensure that the natural environment is protected, and land use policy that determines which types of land use will be allowed by society on specific parcels.
The combination of market forces and policies shape the use of farmland in all countries. The particular patterns of land use depend on the specific mix of economic factors and policy in place in each country. In the case of economic forces the most important pressures are population growth, levels of income and wealth, and the cost of transport. From a policy perspective the important issues are social demands for support for farmers, protection of the environment and the desirability of maintaining a compact urban form.
The central idea of the report is that agriculture is fundamentally a spatially specific activity. Both the returns from agriculture and the opportunity costs of keeping land in agriculture vary across space. To examine these differences a typology of three agricultural land categories is developed. The first is the urban fringe or peri-urban zone found at the edge of a city. In this zone urban activity has a strong influence on land uses and on the nature of farming, even in those countries where there are strong restrictions on converting farmland to other uses. The second, or agricultural core zone, comprises the majority of agricultural land in most countries. In this zone farmland has very low opportunity costs and the chance of market forces causing significant changes in land use are low. Returns from farming are high enough to keep the land in agriculture and there is little urbanization pressure. The third zone is the far, or extensive, margin. In this zone agriculture is a marginally profitable activity and declines in the return from farming cause production to end. If the urban fringe faces pressure to convert farmland to a higher value use, the issue at the far margin is whether agriculture can be sustained. If it cannot, then land will revert to a less intensively managed use, such as forests or native ground cover.
Given the typology, conversion of farmland is fundamentally a problem only at the urban fringe and the far margin. By definition in the agricultural zone, while the particular use of land in terms of the agricultural commodity produced may change or the operator of the farm may change, the land itself will remain in farming. However while the majority of farmland may, in most countries, be in this agricultural zone, there is great interest in what happens to farmland at both the urban fringe and at the far margin. Depending on the specific country these two zones can account for a large number of farms and a considerable share of farmland. Moreover these two zones produce a disproportionately large share of the non-commodity outputs of agriculture.