More action needed to move away from market-distorting farm support, says OECD
OECD Agricultural Policy Monitoring and Evaluation 2014 finds that support to producers in 2013 amounted to 18% of gross farm receipts, down slightly from 2012 and compared with around 30% two decades ago
Government support for agriculture in OECD countries remained on a downward trend in 2013, yet much of this support is still in a form that distorts markets, according to the OECD’s latest agricultural policy monitoring report.
OECD Agricultural Policy Monitoring and Evaluation 2014 finds that support to producers in 2013 amounted to 18% of gross farm receipts, down slightly from 2012 and compared with around 30% two decades ago. Half of the USD 258 billion (EUR 194 billion) total in 2013 refers to instruments that distort production and trade, however.
The report calls on governments to do more to break links between farm support and production and ensure the focus is on improving agricultural productivity and sustainability.
“High prices and high incomes in the farm sector have created the right conditions for deeper reform of agricultural policies, and much more needs to be done beyond fine-tuning,” said OECD Secretary-General Angel Gurría. “This means that production and trade-distorting support could inch back up in some countries if agricultural prices were to fall.”
The report highlights the big differences among OECD countries in the level and composition of farm support and finds unequal progress in reform. Despite an overall trend of lower support and a shift to de-linking it from production, some countries still rely heavily on market interventions that can affect prices.
While Australia, Chile and New Zealand limit themselves to safety net measures, disaster relief and R&D, transferring less than 3% worth of gross farm receipts in support, Iceland, Japan, Korea, Norway and Switzerland all have Producer Support Estimates above 40% of gross receipts.
The report makes the following recommendations:
· More market intervention mechanisms should be dismantled in favour of support that is less connected to production and more targeted to specific needs, in line with stated policy priorities of increasing productivity and sustainability.
· Governments should make their farm policies more coherent with macroeconomic, trade, structural, social and environmental policies. They should reduce impediments to structural adjustments to attract financial and human resources to the sector.
· Countries should consolidate past farm support reforms and avoid any recoupling of support with production, which can lead to higher costs and market disruption. Future reforms could usefully include relaxing or ending production quotas.
· Funds freed up by more efficient farm support practices should be invested in education, infrastructure and research in the sector. Governments should be bolder about prioritising the environment and the sustainable use of natural resources.
· Payments to mitigate income risks should not crowd out market-based risk management tools and farmers’ own management of normal business risks.