Global farm support drops to lowest level since 1986

Nevertheless, the value of government support aggregated to $252 billion in 2011, “still a sizeable amount of money in absolute terms,” Frank van Tongeren, agriculture and trade policy leader at OECD headquarters in Paris, told a Farm Foundation Forum today in Washington.

OECD’s annual report Agricultural Policy: Monitoring and Evaluation 2012, points out in 282 pages that the lower reliance on government support was due to higher market income rather than any shift in government policy. For many years, OECD has been a leading cheerleader for reductions in supports that distort markets and trade.

While it notes general movement away from support directly linked to production, toward more decoupled support systems, OECD says that production and trade-distorting support amounts to nearly half of the total. In a prepared statement, OECD Trade and Agriculture Director Ken Ash calls for farm support to be aimed more at increasing agricultural and competitiveness.

The report shows that support levels vary widely across OECD countries with New Zealand offering the lowest level of support to farmers at only 1% of farm income, followed by Australia (3%), Chile (4%) and the United States (9%). Others below the 20 percent average for all OECD countries: Mexico (12%), Israel (13%) and Canada (16%).

The European Union support level – which is often cited in American farm circles as the rationale for continued farm support here – has reduced its level of support to 20 percent of farm income, average for the OECD as a whole. EU supports also increasingly are decoupled, based on history with no current production required, the group observed.

At the other end of the scale, support to farmers is highest in the Nordic countries and East Asia – Iceland (47%), Korea (50%), Japan (51%), Switzerland (56%) and Norway (60%). Those countries also have the most trade-distorting forms of support, said van Tongeren.

With relatively high commodity prices over the medium-term, “markets will provide farmers the income that many governments have until now sought to provide through cash payments or artificially high prices,” the report says. OECD sees the current situation as “a clear opportunity to turn farm policy toward the most pressing policy goals, like boosting innovation across the food and agriculture system.” Van Tongeren calls it “a good moment to relieve border policies that contribute to international price volatility by trying to isolate domestic markets” and an opportunity to “increase investments in public goods with long term benefits such as innovation and productivity growth and sustainability.”