“With tighter government budgets and farmers getting top prices for their crops, governments should begin to shift from payments that further support farm incomes and move to policies that have long-term benefits for the global food economy,” said OECD Director for Trade and Agriculture Ken Ash. “The time is ripe for reforming farm support.”
Support levels vary enormously among OECD countries. Over the 2008-10 period, New Zealand had the lowest level of support to farm receipts (PSE%), at just 1% of farm income, followed by Australia (3%), and Chile (4%). The United States (9%), Israel and Mexico (12%), and Canada (16%) were also below the OECD average.
The European Union has reduced its level of support to 22% of farm income, but remains above the OECD average. At the other end of the scale, support to farmers remains relatively high in Korea (47%), Iceland (48%), Japan (49%), Switzerland (56%) and Norway (60%).
Farm support in emerging countries is generally well below OECD levels, but also varies over time and across countries. For the first time, Agricultural Policy Monitoring and Evaluation 2011 reviews policy developments in emerging economies that are key players in world agricultural markets. Brazil, South Africa and Ukraine generally support agriculture at levels well below the OECD average, while support in China is approaching the OECD average. In Russia, farm support now exceeds the OECD average.
The OECD says that growing global food demand, higher prices, more volatile markets and increasing resource pressures are arguments for moving beyond “status quo” policies. Countries should focus on improving farm productivity, sustainability and long-term competitiveness, rather than policies that distort markets. Farm policy should also offer greater support to research, innovation and education.
With volatility expected to remain high and growing concerns about climate change, farmers will need comprehensive risk management systems that best address their specific needs. Governments should support the development of market-based tools while steering clear of actions that interfere with farmers’ management of normal business risk.
While high farm prices create opportunities for farmers, the OECD recognises that high and volatile food prices have particularly severe impacts on the poorest people on the planet, who spend a large proportion of their available income on food. For this group of consumers, improved safety nets can help with immediate needs, but policies that improve agricultural productivity and long-term resilience will provide the long-term solution. To this end, the OECD recognises the importance of ongoing efforts in the G20 and in other international fora to improve policy coherence and strengthen global governance of the food system.