Ag subsidies dropping

The  OECD agricultural policy monitoring and evaluation report shows a small drop in agricultural subsidies in the past year.

In 2011 support to producers across the OECD amounted to USD 252 billion or Eur 182 billion as measured by the Producer Support estimate (PSE) This is equivalent to 19% of gross farm receipts in OECD countries, down slightly from 20% in 2010. This is the lowest level observed since OECD began measuring support in the 1980s when the PSE as a percentage of gross farm receipts was 37%.

The drop isn’t as encouraging as the numbers suggest.

In recent years the decline in producer support was largely driven by higher prices on international markets rather than policy changes.

However, the trend is down and it will improve in three years when the European Union stops subsidising its farmers.

Some countries are giving support based on such things as historical area, livestock numbers and income rather than production which distorts the market less.

Australia, Chile and New Zealand had the lowest level of support – less than 1 to 4% of gross farm receipts. In Norway, Switzerland, Japan, Korea and Iceland from a half to two-thirds of gross farm returns were from subsidies.

The analysis for New Zealand starts on page 185. It shows most of the support is sector-wide general services such as research and biosecurity which improve the economic environment for agriculture.

Hat tip: Interest.co.nz

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