High food prices push subsidies down
Saturday, 27 October 2007
Frances Williams
High world food prices helped cut subsidy payments to farmers in industrialised countries last year, but government support still accounted for over a quarter of farm incomes, the Organisation for Economic Co-operation and Development (OECD) said this week.
In its latest report on agricultural policies in the 30 OECD member nations, the Paris-based organisation puts the value of farm subsidies in 2006 at nearly $268bn (euro189bn, £132bn), equivalent to 27 per cent of total farm receipts. This compares with $281bn (29 per cent) in 2005.
Stefan Tangermann, the OECD's director of trade and agriculture, said producer prices in the OECD area were 25 per cent above world levels due to various kinds of subsidies, equivalent to a 25 per cent levy on all agricultural products.
Subsidies range from minimum price guarantees, to payments per hectare planted, to cheap loans.
Although governments have reduced overall farm subsidies over the past two decades, from 39 per cent of receipts in the mid-1980s, the report says most are still the highly trade-distorting kind that reward agricultural output.
The OECD figures will reinforce demands by developing nations in the troubled Doha global trade round for swingeing cuts in subsidies to rich-country farmers, which they blame for unfairly boosting production and driving down world prices to the detriment of more competitive producers in poorer nations.
Support levels by country varied from just 1.0 per cent of farm incomes in New Zealand to nearly two-thirds in Iceland, Norway, Switzerland and South Korea, according to the report.
Among the major economies, Japan's farmers were the most cosseted, receiving over half their incomes by way of state support, compared with a third for farmers in the European Union and 11 per cent for US producers.
The EU was nevertheless by far the biggest spender, paying out $138bn, or half the OECD total.
However, Mr Tangermann said EU farm reforms that involved "decoupling" subsidies from production were beginning to have an impact, as were lower guaranteed prices for sugar and dairy products.
In the US, by contrast, the recent declines in farm subsidies reflected rising world commodity prices rather than policy reforms, suggesting the trend could swiftly reverse.
According to Mr Tangermann, in the mid-1990s US subsidies fell to 11 per cent of farm incomes, the same as their current level, during another period of high commodity prices, but more than doubled in the second half of the decade as world prices tumbled.
................................
Under syndication
arrangement with FE
High world food prices helped cut subsidy payments to farmers in industrialised countries last year, but government support still accounted for over a quarter of farm incomes, the Organisation for Economic Co-operation and Development (OECD) said this week.
In its latest report on agricultural policies in the 30 OECD member nations, the Paris-based organisation puts the value of farm subsidies in 2006 at nearly $268bn (euro189bn, £132bn), equivalent to 27 per cent of total farm receipts. This compares with $281bn (29 per cent) in 2005.
Stefan Tangermann, the OECD's director of trade and agriculture, said producer prices in the OECD area were 25 per cent above world levels due to various kinds of subsidies, equivalent to a 25 per cent levy on all agricultural products.
Subsidies range from minimum price guarantees, to payments per hectare planted, to cheap loans.
Although governments have reduced overall farm subsidies over the past two decades, from 39 per cent of receipts in the mid-1980s, the report says most are still the highly trade-distorting kind that reward agricultural output.
The OECD figures will reinforce demands by developing nations in the troubled Doha global trade round for swingeing cuts in subsidies to rich-country farmers, which they blame for unfairly boosting production and driving down world prices to the detriment of more competitive producers in poorer nations.
Support levels by country varied from just 1.0 per cent of farm incomes in New Zealand to nearly two-thirds in Iceland, Norway, Switzerland and South Korea, according to the report.
Among the major economies, Japan's farmers were the most cosseted, receiving over half their incomes by way of state support, compared with a third for farmers in the European Union and 11 per cent for US producers.
The EU was nevertheless by far the biggest spender, paying out $138bn, or half the OECD total.
However, Mr Tangermann said EU farm reforms that involved "decoupling" subsidies from production were beginning to have an impact, as were lower guaranteed prices for sugar and dairy products.
In the US, by contrast, the recent declines in farm subsidies reflected rising world commodity prices rather than policy reforms, suggesting the trend could swiftly reverse.
According to Mr Tangermann, in the mid-1990s US subsidies fell to 11 per cent of farm incomes, the same as their current level, during another period of high commodity prices, but more than doubled in the second half of the decade as world prices tumbled.
................................
Under syndication
arrangement with FE