More ambitious policies needed to address changes facing agriculture

Governments need to implement more ambitious policies to address the global challenges facing agriculture, notably a shift away from direct support to farmers towards greater assistance for innovation systems that will improve productivity and sustainability, according to a new OECD report.

Agricultural Policy Monitoring and Evaluation 2016 finds that support to producers in OECD countries has roughly halved in intensity over the past 30 years, and now amounts to 17% of gross farm receipts. Average support levels in the emerging economies have increased from very low or even negative levels, to approach the average level of OECD countries.

The averages mask widely divergent levels of support across the countries:

Australia, Brazil, Canada, Chile, Colombia, Israel, Kazakhstan, Mexico, New Zealand, South Africa, Ukraine, the United States, and Viet Nam have support levels below - in some cases well below - the OECD average.

Support levels in the European Union (as a whole), the Russian Federation and Turkey are roughly at the OECD average, while China is just slightly higher.

Support levels in Indonesia are much higher, but still well below the highest levels of support provided by Iceland, Japan, Korea, Norway and Switzerland.

Together, the 50 countries covered in this year's report provided an annual average of USD 585 billion (EUR 469 billion) of support to their agricultural producers in the years 2013-15, and an additional USD 87 billion (EUR 69 billion) on general services supporting the sector.

The report shows that gradual progress has been made across the OECD in moving away from potentially distortionary policy instruments such as price support and input subsidies towards policies that do not directly influence farm production decisions. This has occurred to different degrees and at different speeds, with changes particularly slow in the group of countries with the highest levels of support and protection.

In parallel, some emerging economies are shown to be moving in the opposite direction, increasing the use of price and production-linked support policies. On average, 68% of support to farmers in countries studied was provided in the form of market price support, payments based on output or on input use without constraints. These measures distort production decisions and can significantly distort markets and trade.

The OECD points out the need for a reorientation of current food and agriculture policies, with a particular shift in the focus of farm policies to address the emerging opportunities and challenges confronting the sector: improving productivity growth, sustainable use of natural resources and resilience of farm households.

Investments in people - education, skills, and in some cases health services - as well as those in strategic physical infrastructure and agricultural innovation systems that are responsive to the needs of producers and consumers are required. Less public expenditure should be spent on direct support to farms, especially in the forms of support that are the most production and trade distortive, like market price support, payments based on output and input use, the OECD said.

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