Agricultural productivity is measured as the ratio of agricultural inputs to agricultural outputs. While individual products are usually measured by weight, their varying densities make measuring overall agricultural output difficult. Therefore, output is usually measured as the market value of final output, which excludes intermediate products such as corn feed used in the meat industry. This output value may be compared to many different types of inputs such as labour and land (yield). These are called partial measures of productivity. Agricultural productivity may also be measured by what is termed total factor productivity (TFP). This method of calculating agricultural productivity compares an index of agricultural inputs to an index of outputs. This measure of agricultural productivity was established to remedy the shortcomings of the partial measures of productivity; notably that it is often hard to identify the factors cause them to change. Changes in TFP are usually attributed to technological improvements.
As a region's farms become more productive, its comparative advantage in agricultural products increases, which means that it can produce these products at a lower cost than can other regions. Therefore, the region becomes more competitive on the world market, which means that it can attract more consumers since they are able to buy more of the products offered for the same amount of money.
Increases in agricultural productivity lead also to agricultural growth and can help to alleviate poverty in poor and developing countries, where agriculture often employs the greatest portion of the population. As farms become more productive, the wages earned by those who work in agriculture increase. At the same time, food prices decrease and food supplies become more stable. Labourers therefore have more money to spend on food as well as other products. This also leads to agricultural growth. People see that there is a greater opportunity earn their living by farming and are attracted to agriculture either as owners of farms themselves or as labourers. However, it is not only the people employed in agriculture who benefit from increases in agricultural productivity. Those employed in other sectors also enjoy lower food prices and a more stable food supply. At the same time, they may see their wages rise as well.
Diversity in agricultural production is one key to productivity, as it enables risk management and preserves potentials for adaptation and change. Monoculture is an example of such a nondiverse production system. In a monocultural system a farmer may produce only crops, but no livestock, or only livestock and no crop.
The benefits of raising livestock, among others, are that it provides multiple goods, such as food, wool, hides, and transportation. It also has an important value in term of social relationships (such as gifts in weddings). In case of famine, when crops are not sufficient to ensure food safety, livestock can be used as food. Livestock may also provide manure, which can be used to fertilize cultivated soils, which increases soil productivity. On the other hand, in an agricultural system based only on raising livestock, food has to be bought to other farmers, and wastes produced cannot be easily disposed of.
Production has many functions, and diversity is the foundation of such production. To ignore the complex functions provided by a farm is thought by many to turn agricultural production into a commodity.