OECD:
"Ag policy should shift away from price support"
Agricultural Policy Monitoring and Evaluation finds that the 52 countries studied – representing all OECD and EU countries, and 11 key emerging economies – provided on average USD 519 billion (EUR 442 billion) annually to support agricultural producers during the 2014-16 period. Sixty percent of this support is provided by maintaining prices on domestic markets higher than those on international markets.
Government farm supports as a whole represented 16% of producer receipts in the countries studied, compared with 21% twenty years ago. The reductions in support levels reported in some OECD countries contrast with increased support levels in some emerging economies.
Support for general services to agriculture – including investments in people as well as innovation, knowledge and information systems, physical infrastructure, and in biosecurity services – was USD 90 billion (EUR 77 billion) in 2014-16. These services help create an enabling environment that allows agricultural and food production to be responsive, sustainable and resilient to external shocks, and are preferable to price support.
“Supporting market prices harms consumers, particularly the poorest, and reduces the food industry’s competitiveness,” said Ken Ash, Director of the OECD Trade and Agriculture Directorate. “Governments need to focus on agricultural policies, and particularly investments, that better align with their economy-wide goals.”
The OECD underlines the need to reduce the use of output payments and input subsidies, which are generally an inefficient use of government funds, fail to achieve desired policy objectives and often inadvertently contribute to the unsustainable use of resources. These policies should be replaced with those better tailored to achieving resilience, competitiveness and sustainability to forthcoming climate change.
While direct payments to farmers are increasingly being used to support farm incomes, the report shows that the funds are often not well targeted to those most in need. Rather than boosting such payments, countries should address the factors behind persistently low farm incomes.
While direct payments are increasingly used to encourage farmers to produce non-market goods or services, the OECD suggests that governments take steps to better target this form of support.
The report calls for greater efforts to develop risk management tools that distinguish among normal business risks, risks amenable to market solutions and the catastrophic risks that require public engagement.
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