State support to agriculture in OECD drops to record low of €182bn

Government support to agriculture in OECD countries fell to 19% of total farm receipts in 2011, according to the latest analysis from the Paris-based think-tank.

The OECD said this record low for farm supports was driven by developments in international commodity markets, rather than by explicit policy changes.

Support to producers stood at €182bn in OECD countries in 2011, confirming a longstanding trend toward falling farm support.

While the OECD’s Agricultural Policy: Monitoring and Evaluation 2012 report points to a generalised move away from support directly linked to production, it finds that this type of payment still accounts for about half of the total paid to farmers in the countries studied.

“The move toward lower farm support is a welcome trend, but we still see the need for better targeting and more cost-effective farm policy,” said OECD trade and agriculture director Ken Ash.

“Farm support should be more closely directed at increasing agricultural productivity and competitiveness. Governments should also be doing more to address environmental issues, ensure sustainable resource use and help farmers better cope with risk.”

The new report shows that support levels still vary widely across OECD countries. Over the 2009-11 period, New Zealand had the lowest level of support, at just 1% of farm income, followed by Australia (3%), and Chile (4%). The US (9%), Mexico (12%), Israel (13%), and Canada (16%) were also below the OECD average (20%).

The EU has reduced its level of support to 20% of farm income. At the other end of the scale, support to farmers remains relatively high in Iceland (47%), Korea (50%), Japan (51%), Switzerland (56%), and Norway (60%).

The report also shows that total support to agriculture as a percentage of national income is falling in the OECD area, declining from 3% of GDP on average over the 1986-88 period to less than 1% in 2009-11. This declining trend is observed in all OECD countries over the long term.

The OECD projects that current relatively high commodity prices will continue over the medium-term outlook. The organisation says these high prices will mean that markets will provide farmers the income that many governments have until now sought to provide through cash payments or artificially high prices.

“Given expectations of future demand growth and greater pressure on limited resources, there is a clear opportunity to turn farm policy toward the most pressing policy goals, like boosting innovation across the food and agriculture system,” said Mr Ash.

“Cash-strapped governments carrying out spending cuts across their budgets will have to improve the cost effectiveness of agricultural policies.”

Meanwhile, the OECD has also praised the Canadian government for dismantling the Canadian Wheat Board’s monopoly over the sale of wheat and barley grown in western Canada.

The government argued that removing the Wheat Board’s monopoly would free farmers to market their own grain. However, thousands of farmers in Canada have resisted the government’s move, arguing that the board had provided them with valuable negotiating strength in international markets.

The OECD praised the move, describing it as a positive step to enhance pro-active risk management by farmers.