3. Overall trends in agricultural support

Total support to agriculture (TSE) in OECD countries1 represented USD 345 billion (EUR 301 billion) per year on average in 2019-21 of which 73%, or USD 247 billion (EUR 216 billion), was provided as support to producers individually (PSE). Producer support represented 17.3% of gross farm receipts (%PSE) in 2019-21 across the OECD area, a decline from around 28% in 2000-02 and more than 35% in 1986-88 (Table 3.1).

The way support is delivered to producers also evolved. In particular, the long-term decline of support based on commodity output (including market price support and output payments) characterises the evolution of support to agriculture in the OECD area. OECD work identifies this as having the strongest potential to distort agricultural production and trade together with payments based on the unconstrained use of variable inputs, which slightly increased across OECD countries compared to the beginning of the millennium. For these support measures, a particularly high risk of negative impacts on the environment has also been found. Rice is by far the commodity that receives the highest level of support in the OECD area, followed by sugar, sunflower seed and beef (Figure 3.2). Market price support represents the largest share of this support, and is driven by a range of domestic and trade policies. For a number of commodities, in particular maize, sorghum, soybeans and sheep meat, support is also provided through other types of transfers, including payments less directly coupled to production.

At the other end of the spectrum in the PSE classification, a number of countries apply significantly less-distorting forms of support, such as payments based on parameters not linked to current production, or based on non-commodity criteria such as land set-aside, or payments for specific environmental or animal welfare outcomes (Chapter 2, Figure 2.14). Most notably, payments based on historical entitlements (generally crop area or livestock numbers of a given reference period in the past) increased in the last two decades, representing some 4% of gross farm receipts (GFR) and about 22% of the PSE during 2019-21. The share of payments based on current crop area, animal numbers, receipts or income has fallen compared to 2000-02; these payments now also represent around 22% of total producer support (Table 3.1).

Expenditures financing general services to the sector (GSSE) increased (in nominal terms) in the OECD area from USD 37 billion per year in 2000-02 to USD 45 billion in 2019-21 (expressed in Euros, they slightly declined from EUR 40 billion to EUR 39 billion). However, relative to the size of the sector, expenditures for general services declined from 5.4% of agricultural value of production to 3.5%, suggesting that these expenditures did not keep pace with sector growth. In 2019-21, most of this went to infrastructure (USD 17 billion), a slight increase compared to 2000-02, and agricultural knowledge and innovation (USD 14 billion), an increase of 79% in nominal terms and almost in line with the sector’s growth. Expenditures for inspection and control services more than doubled, while spending for marketing and promotion remained around the same and public stockholding declined substantially over the same period. But all of these represented smaller shares of the GSSE expenditure (Table 3.1). Total support to agriculture as a share of GDP declined significantly over time.

Agricultural policies in the 11 emerging economies2 covered by this report generated positive transfers to the sector averaging USD 464 billion (EUR 403 billion) per year in 2019-21 of which USD 357 billion (EUR 310 billion) went to individual producers. At the same time, however, policies in a few countries, such as Argentina, India and Viet Nam, suppressed domestic prices for certain products, generating an implicit tax in the form of negative market price support (MPS) averaging USD 117 billion (EUR 101 billion) per year in the same period.

As a consequence, net TSE represented USD 347 billion (EUR 302 billion) per year, while net PSE averaged USD 240 billion (EUR 209 billion) per year during 2019-21. Aggregate support to producers across emerging economies represented on average 8.8% of gross farm receipts in 2019-21: positive transfers to producers worth 13.1% of GFR, and an implicit tax worth -4.3% of GFR. This %PSE represents a substantial increase from 3.8% in 2000-02 (Table 3.2).

The share of transfers based on output (accounting for both positive and negative MPS and output-based payments) and unconstrained variable input use in gross producer support still averaged 83% in 2019-21 – a modest decline from the 89% observed at the beginning of the century. In emerging economies, maize, sugar and rapeseed were the most supported commodities (with transfers amounting to between 23% and 30% of commodity gross farm receipts) while oats and milk were the most taxed in 2019-21. Almost all of these transfers to specific commodities operate through market price support, and are a result of domestic or trade policies such as minimum support prices or import tariffs (in the case of positive transfers) or export taxation and other restrictions (in the case of negative transfers).

Among remaining forms of producer support, the most important are payments based on other input use (mainly fixed capital formation) and payments to areas planted and animal numbers. Payments based on areas and animal numbers were almost non-existent across emerging economies in 2000-02 but reached more than 13% of aggregate net support to producers in 2019-21. In turn, the relative importance of support for investments, (often related to irrigation) declined over time, now representing less than 8% of the PSE. All other forms of support to producers remain marginal (Table 3.2).

Expenditure on GSSE in emerging economies reached an annual average of USD 60 billion (EUR 52 billion) in 2019-21. Most of this went to infrastructure projects (USD 28 billion), often related to irrigation, and public stockholding (USD 16 billion). The remaining expenditure mainly went to finance agricultural knowledge and innovation (USD 11 billion) (Table 3.2). Relative to agricultural value of production, average expenditures for general services declined somewhat and remain lower than the OECD average. Aggregate total support to agriculture as a share of GDP slightly increased to 1.4% in 2019-21, and is mainly driven by producer support, at close to 70% of the total support.

The total support to agriculture provided in all countries covered in this report represented USD 700 billion (EUR 540 billion) per year on average in 2019-21, of which around 71% or USD 494 billion (EUR 383 billion) were provided as support to producers. Gross transfers to the sector are significantly larger than that, given the negative market price support estimated for some emerging economies: in total, USD 817 billion (EUR 631 billion) were transferred to the sector across the 54 countries covered, while at the same time negative MPS in some countries amounted to USD 117 billion (EUR 91 billion). Expressed as a share of gross farm receipts, aggregate support to producers represented 11.8% in 2019-21 on average for all countries covered, a reduction from 18.2% in 2000-02 (Table 3.3).

Changes between 2000-02 and 2019-21 to the structure of support in all countries in the report were relatively moderate. The share of potentially most-distorting transfers (based on output or based on unconstrained use of variable inputs) declined slightly, but these policies continue to represent around 70% of gross producer transfers across all countries (whether positive or negative, in absolute terms). Transfers based on output became less prominent while those based on unconstrained input use increased. Overall, across all countries covered, sugar is most strongly supported commodity, followed by maize and rice. Several livestock products, particularly beef, pig meat, poultry meat and sheep meat, also receive substantial transfers.

Among the remaining forms of support to producers, the most important are payments based on area planted and animal numbers (18% of all producer support), and those based on historical parameters not requiring production. The importance of these latter payments (which are decoupled from current production and hence much less production- and trade-distorting and with less impact on the environment) increased significantly and now represents 16% of all producer support (Table 3.3).

Across all countries in this report, the expenditures financing general services to the sector (GSSE) reached an annual average of USD 106 billion (EUR 90 billion) in 2019-21, almost twice the amount in nominal terms spent at the beginning of the century. Most of this went to infrastructure projects (USD 45 billion), agricultural knowledge and innovation (USD 26 billion), and public stockholding (USD 17 billion) (Table 3.3). In spite of the growth, expenditures for general services declined in relative terms as the value of agricultural production more than tripled in nominal terms since 2000-02. Total support to agriculture as a share of GDP declined slightly over time, mainly driven by the smaller relative size of the sector within economies.

Notes

← 1. The OECD total does not include the non-OECD EU Member States.

← 2. The emerging economies in this report include Argentina, Brazil, the People’s Republic of China (hereafter “China”), India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine, and Viet Nam.

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