Policies should focus on farm income: OECD

Govt farm supports as a whole has fallen to 16% of producer receipts, it reported

Organisation for Economic Co- operation and Development (OECD) has advised countries to shift their farm policies from direct price support to programmes that help in raising productivity and also address the issue of low farm income.

It asked the governments to address the factors behind low farm incomes instead of providing direct payments to farmers to support agriculture incomes.

OECD has released its new report 'Agricultural Policy Monitoring and Evaluation'.

"Countries should continue shifting farm policy away from direct support for the market price of agricultural products toward programmes that promote sustainable productivity growth and improve resilience to climate change and market-related shocks," OECD said in a statement.

As per the report, OECD said the 52 countries studied - representing all OECD and EU countries, and 11 key emerging economies - provided an average $519 billion annually to support agricultural producers during 2014-16.

It noted that 60 per cent of this support is provided by maintaining prices on domestic markets higher than those on global markets.

However, the OECD said that the government farm supports as a whole has fallen to 16 per cent of producer receipts in the countries studied in this report, compared with 21 per cent twenty years ago.

The reductions in support levels reported in some OECD countries in contrast with increased support levels in some emerging economies.

The support for general services to agriculture - that includes investments in people as well as innovation, knowledge and information systems, physical infrastructure, and in bio-security services - was $90 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.

The governments need to focus on farm policies, and particularly investments, that better align with their economy-wide goals, he said.

The OECD underlined 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".

It advised that 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," the statement said.

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.