Agricultural Policy Monitoring and Evaluation 2019

Chapter 2. Overall trends in agricultural support

OECD Countries

The total support to agriculture (TSE) provided in OECD countries represented USD 325 billion (EUR 286 billion) per year on average in 2016-18 of which 72%, or USD 235 billion (EUR 207 billion), was provided as support to producers individually (PSE). Producer support represented 18.5% of gross farm receipts (%PSE) in 2016-18 across the OECD area, a decline from around 30% in 2000-02 (Table 2.1).

The way support is delivered to producers has also evolved. In particular, the development in support to agriculture in the OECD area is characterised by the long-term decline of support based on commodity output (including market price support and output payments). OECD work has identified this form of support as having the strongest potential to distort agricultural production and trade, together with the payments based on the unconstrained use of variable inputs, which has slightly increased across OECD countries compared to the beginning of the millennium.

At the other end of the spectrum in the PSE classification, some countries also apply less distorting forms of support, such as payments based on parameters that are 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. Most notably, payments based on historical entitlements (generally crop area or livestock numbers of a given reference year in the past) have increased significantly in many OECD countries in the last two decades, representing close to 4% of gross farm receipts and more than a fifth of the PSE during 2016-18. Payments based on current crop area and animal numbers remain almost unchanged compared to 2000-02 and represent currently around 18% of total producer support (Table 2.1).

The expenditures financing general services to the sector (GSSE) increased (in nominal terms) in the OECD area from USD 36 billion per year in 2000-02 to USD 43 billion in 2016-18. Most of these expenditures in 2016-18 go to the financing of infrastructure (USD 18.4 billion), recording a slight increase compared to 2000-02, while the expenditures for agricultural knowledge and innovation (USD 13 billion) have increased by 60%. Expenditures for inspection and control services almost doubled, while spending for marketing and promotion activities and public stockholding declined over the same period (the reduction of spending on public stockholding being more substantial that on marketing and promotion), but all of these represented smaller shares of the GSSE expenditure (Table 2.1).

Figure 2.1. OECD: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Support to producers in the OECD area as a share of gross farm receipts (%PSE) has declined gradually over the long term. In 2016-18, support has been around 18% of gross farm receipts. The share of potentially most distorting support has decreased over time mainly due to a reduction in market price support (MPS) (Figure 2.1 and Table 2.1). Effective prices received by producers, on average, were 11% higher than world prices; large differences between commodities persist with domestic prices for rice being more than a double of the world price, prices for sunflower 30%, sugar 28%, milk 14% and beef 13% above world prices in 2016-18. In 2018, the level of producer support has increased due mainly to higher budgetary payments and, to a lesser extent, increased MPS. Overall, in the OECD area, Single Commodity Transfers (SCT) represented 54% of the total PSE during 2016-18. Rice, sugar, sunflower, milk, beef and veal had the highest share of SCT in commodity gross farm receipts, with MPS representing the main component of SCTs for most commodities (Figure 2.2). The relative expenditures for general services (GSSE), mainly on knowledge and infrastructure, have declined steadily as agriculture value added has grown more rapidly. Total support to agriculture as a share of GDP has declined significantly over time. About 70% of this support is provided to individual producers (PSE).

Figure 2.2. OECD: Transfer to specific commodities (SCT), 2016-18

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 2.1. OECD: Estimates of support to agriculture (USD)

Emerging Economies

The total support to agriculture (TSE) provided in the Emerging Economies1 represented USD 292 billion (EUR 257 billion) per year on average in 2016-18 of which 70% or USD 205 billion (EUR 180 billion) were provided as support to producers (PSE). Expressed as a share of gross farm receipts (%PSE), aggregate support to producers represented 9% in 2016-18 on average across the Emerging Economies, a substantial increase from 3.7% in 2002-02 (Table 2.2). While the aggregate %PSE remains well below that of the OECD area, this is partly related to the large negative MPS in a few countries, worth USD 83 billion (EUR 72 billion) per year. This means that support to producers and the sector in other countries has been correspondingly higher than suggested by aggregate indicators.

The share of transfers based on output (accounting for both positive and negative MPS and output-based payments) and input use in total producer support has increased. The transfers based on output have been identified as having the strongest potential to distort agricultural production and trade, together with the payments based on the unconstrained use of variable inputs. The average share of gross producer transfers (whether positive or negative, in absolute terms) arising from those potentially most production and trade distorting measures has slightly declined in the Emerging Economies, but at around 80% stays well above the OECD average.

Among the 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. Across the Emerging Economies, the payments based on areas and animal numbers were almost non-existent in 2000-02 but reached close to 16% of aggregate support to producers in 2016-18. All other forms of support to producers remain marginal (Table 2.2).

The expenditures financing general services to the sector (GSSE) in the Emerging Economies reached an annual average of USD 63 billion (EUR 55 billion) in 2016-18. Most of these expenditures went to the financing of infrastructure projects (USD 26 billion) and public stockholding (USD 19 billion), the remaining expenditures went to finance mainly agricultural knowledge and innovation (USD 13 billion) (Table 2.2).

Figure 2.3. Emerging Economies: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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In contrast to the OECD area, the support to producers in Emerging Economies has increased over the long term. In 2016-18, aggregate producer support has been around 9% of gross farm receipts, still well below the OECD average, but including both implicit taxes on producers through negative MPS, worth ‑3.6% of gross farm receipts, and transfers to producers worth 12.6% of gross farm receipts. The share of gross producer transfers (whether positive or negative, i.e. expressed in absolute terms) arising from potentially most distorting measures (support based on output and variable input use – without input constraints) has gone down only slightly and stays around 80% on average in 2016-18 (Figure 2.3). Effective prices received by producers, on average, were 5% higher than world prices. This average figure hides large differences across countries and commodities as domestic prices stand below world market levels in a range of markets. In 2018, the level of support has increased mainly due to higher MPS as budgetary payments were almost unchanged. Overall, Single Commodity Transfers (SCT) on average represented above 60% of the total PSE during 2016-18. Rapeseed, sugar, wheat maize and rice, had the highest share of SCT in commodity gross farm receipts, while SCTs were negative for barley, oats, oilseeds and milk. Aggregate MPS is the main component of the SCTs in most cases (Figure 2.4). On average, the expenditures for general services (GSSE), relative to agriculture value added were below the OECD average. Aggregate total support to agriculture as a share of GDP has increased over time, mainly driven by the increase of producer support, which was about 84% of the total support.

Figure 2.4. Emerging Economies: Transfer to specific commodities (SCT), 2016-18

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 2.2. Emerging Economies: Estimates of support to agriculture (USD)

Box 2.1. The effect of adding Argentina and India in the Emerging Economies aggregate

This edition of the OECD Agricultural Policy Monitoring and Evaluation has expanded its coverage by adding Argentina and India. Country coverage has been extended frequently in the past, but the addition of Argentina and India is particular as both countries implicitly tax their producers through significant levels of negative market price support, in contrast to most of the other countries covered. This particularity is amplified by the fact that these countries are large agricultural producers, and their estimated levels of support therefore has an important weight in the aggregate indicators.

Adding Argentina and India reduces the aggregate Total Support Estimate (relative to GDP: %TSE) for the Emerging Economies by some 0.5 percentage points on average between 2000 and 2018, with a smaller effect of about 0.2 percentage points for the 2016-18 period. In 2016-18, the TSE for the Emerging Economies is estimated at 1.4% of the combined GDP of these 12 countries; without Argentina and India, it would account for more than 1.6% of the remaining Emerging Economies’ GDP (Figure 2.5). The effect is even more visible for the aggregate Producer Support Estimate (relative to gross farm receipts: %PSE), which, for the Emerging Economies is reduced by more than 4.5 percentage points on average since 2000. During 2016-18, the percentage PSE, now estimated at 9.0% of gross farm receipts, would stand at 13.2% without these two countries.

Figure 2.5. The impact of adding Argentina and India to this report: Main indicators for the Emerging Economies aggregate, 2000 to 2018

Notes: 1. The 12 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.

1. The 10 Emerging Economies include Brazil, China, Colombia, Costa Rica, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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All countries

The total support to agriculture (TSE) provided in all countries covered in this report represented USD 623 billion (EUR 548 billion) per year on average in 2016-18 of which around 70% or USD 445 billion (EUR 392 billion) were provided as support to producers (PSE). Given the significant negative elements in market price support that are estimated for some of the emerging economies, gross transfers are significantly larger than that. Expressed as a share on gross farm receipts (%PSE), aggregate support to producers represented 12.4% in 2016-18 on average for all countries covered, a reduction from 19.4% in 2000-02 (Table 2.3).

The changes of the structure of support related to all countries in the report, in the period from 2000-02 to 2016-18, were relatively moderate. The share of the potentially most distorting forms of transfers (based on output or based on unconstrained use of variable inputs) has 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 are shrinking but those based on unconstrained input use have increased.

Among the remaining forms of support to producers, the most important are payments based on areas planted and animal numbers (17% of all producer support), and payments 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, has increased significantly and today represents 13% of all producer support (Table 2.3).

Across all countries covered in this report, the expenditures financing general services to the sector (GSSE) reached an annual average of USD 105 billion (EUR 92 billion) in 2016-18. Most of these expenditures went to the financing of infrastructure projects (USD 45 billion), agricultural knowledge and innovation (USD 26 billion) and public stockholding (USD 20 billion) (Table 2.3).

Figure 2.6. All countries: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Support to producers (%PSE), when measured for all countries in the report, has declined between 2000-02 and 2016-18 and is currently around 12% of gross farm receipts. The share of gross producer transfers (whether positive or negative, i.e. expressed in absolute terms) arising from potentially most distorting measures (support based on output and variable input use – without input constraints) remains almost unchanged and stays around 70% in 2016-18 (Figure 2.6). Effective prices received by producers, on average, were 7% higher than world prices; larger price gaps are recorded for rice and sugar. In 2018, the level of support has increased mainly due to higher MPS, and to a lesser extent to a rise of total budgetary payments. Overall, Single Commodity Transfers (SCT) represented above 60% of the total PSE during 2016-18. Rice and sugar had the highest share of SCT in commodity gross farm receipts (Figure 2.7). MPS is the main component of the SCTs in most cases. On average, the relative expenditures for general services (GSSE), mainly on infrastructure, knowledge and public stockholding, have declined as agriculture value added has grown more rapidly. Total support to agriculture as a share of GDP has declined slightly over time, mainly driven by the smaller relative size of the sector within the overall economies.

Figure 2.7. All countries: Transfer to specific commodities (SCT), 2016-18

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 2.3. All countries: Estimates of support to agriculture (USD)

Box 2.2. The effect of adding Argentina and India in the All Countries aggregate

The addition of Argentina and India also affects the aggregate indicators across all countries in the report, albeit by less than the aggregates for the Emerging Economies. The percentage TSE is affected by less than 0.1 percentage point on average since 2000, and by a mere 0.03 percentage points during 2016-18 (0.88% for the 12 Emerging Economies covered, compared to 0.91% for the group excluding these two countries) (Figure 2.8).

The effect is, however, more noticeable for the percentage PSE which, on average for the 2000-18 period, would be almost 4 percentage points higher without Argentina and India. While the average percent PSE for All Countries covered is estimated at 12.4% of gross farm receipts during 2016-18, without these two countries it would be at 15.4% instead (Figure 2.8).

Figure 2.8. The impact of adding Argentina and India to this report: Main indicators for the All countries aggregate, 2000 to 2018

Notes: 1. The All countries total includes all OECD countries, non-OECD EU Member States, and the 12 Emerging Economies.

1. The All countries (without Argentina and India) total includes all OECD countries, non-OECD EU Member States, and the 10 Emerging Economies.

Source: OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Note

← 1.  The Emerging Economies included in this report include Argentina, Brazil, the People’s Republic of China, Colombia, Costa Rica, India, Kazakhstan, Philippines, Russian Federation, South Africa, Ukraine and Viet Nam. The addition of Argentina and India to this report has a major impact on the aggregate support estimates compared to those reported in the 2018 edition: given the negative support found for these two countries, current aggregate estimates for the Emerging Economies and All Countries covered in this report are significantly smaller than those reported in the 2018 report. For more details, see Boxes 2.1 and 2.2.