Saturday, December 2, 2023

Global ag subsidies off the charts

Neal Wallace
OECD warns of market distortion as large economies shell out record levels on tariffs, payments and other measures.
Federated Farmers’ grains vice-chair Andrew Darling says it’s pleasing to see farmer confidence in milling wheat rally, especially given the industry’s ambitions for New Zealand to be more self-sufficient in this crop.
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Global subsidies for agriculture have reached record levels as governments try to shield consumers and producers from high inflation and international crises.

A new OECD report calculates that the organisation’s 54 members paid $1.4 trillion (US$851 billion) in agricultural subsidies each year from 2020-22, a 2.5-fold increase compared to two decades ago.

The report calculated that just under half of the support was in measures that had the greatest potential for market distortions, such as border tariffs and subsidy payments based on output.

That support is concentrated in a few large economies, with China responsible for 36%, India 15%, the United States 14% and the European Union 13% of the total support provided.

The report found that individual producers received $1 trillion a year over the 2020-22 period, up from $877bn prior to the covid-19 pandemic.

“More than half of it, $556bn a year, was paid by consumers through border tariffs and other policies which push domestic prices above reference prices.

“The remainder, $496bn, was paid by taxpayers through budgetary transfers such as subsidies on the use of fertilisers and electricity as well as payments based on output or land area.”

These support structures distort international markets, discourage changes to production systems and can be environmentally harmful to water quality, biodiversity and can increase resource use and greenhouse gas emissions. 

The OECD has produced a policy agenda for improving the resilience of agriculture and food systems while also providing adequate, affordable, safe and nutritious food.

It seeks the phasing out of measures that hinder adjustments to production such as price support and other policies targeting specific commodities that increase the rigidity of food systems.

It wants governments to prioritise agriculture risk management and target investment to assist climate-change adaptation and resilience.

It also wants governments to enhance knowledge and innovation to enable productivity growth and incentivise the supply of public goods, biodiversity conservation and other ecosystems.

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