This chapter presents a cross-cutting analysis of agriculture policy trends based on information and support estimates gathered for 54 countries covered in OECD’s Agricultural Policy Monitoring and Evaluation 2023. It provides an overview of recent economic and market developments that influence the context for the implementation of agricultural policies. It then outlines the implications on policies of Russia’s aggression against Ukraine and of inflationary pressures more generally, with an overview of policy responses by governments to help agricultural producers and consumers cope with these challenges. The third section presents developments in other agricultural policies in 2022-23, as well as an analysis of developments in the level and structure of support to agriculture. Key recommendations for reforms to better address public objectives conclude this chapter.
Agricultural Policy Monitoring and Evaluation 2023
2. Developments in agricultural policy and support
Abstract
For the past several years, agricultural have been shaped by multiple crises. Policy makers were forced to respond first to the pandemic caused by the coronavirus SARS-CoV-2 (henceforth referred to as the COVID-19 pandemic), which initially disrupted production and later snarled supply chains. As the effects of the pandemic faded, Russia’s1 illegal and unjustified invasion of Ukraine in February 2022 roiled markets for specific agricultural inputs and outputs.
Alongside these acute consequences of war and pandemic, the effects of climate change were felt in the increased prevalence of natural disasters such as floods, drought and storms in many of the countries in this report. African Swine Fever and Avian Flu are two reoccurring biosecurity threats that also strongly affected global markets in 2022.
All of this taken together has put the stability and resilience of the sector, the predictability of trade, food security, and the stability of markets on the top of the policy agenda. These issues added to (and competed with) existing priorities to improve the sustainability of food systems and mitigate their effects on climate change. As this chapter will describe, policymakers took action to try to help the sector absorb and recover from these events in the short run and undertook steps to address the impacts of future shocks. Temporary export bans, tariff reductions (or increases) and other measures were used with the intention of securing domestic food supplies and managing market disruptions. Overall, these and other actions taken by policy makers increased total support to producers.
Agriculture policy in 2022 was also made in the context of a global economy weighed by value chain disruptions and high energy prices. GDP growth both globally and in the OECD area dropped by close to half in 2022, as did real global trade. These rates remained above those observed prior to the pandemic, but fell short of earlier expectations after the contractions in 2020. Moreover, average inflation in the OECD area climbed to more than 9%.
This chapter first presents the general economic and market context in which agricultural policies evolved over 2022. The second section provides an overview of policies responding to the Russian war of aggression in Ukraine and its consequences for agricultural input and output markets. This is complemented by a discussion of other agricultural policy developments in 2022 and early 2023, while a fourth section presents and analyses developments in agricultural support. The chapter concludes by providing an overall assessment of the use of support against the main policy objectives for the agricultural sector.
Key economic and market developments
Conditions in agricultural markets are strongly influenced by macro-economic factors such as economic growth (measured by gross domestic product, GDP), which drives demand for agricultural and food products, as well as by prices for crude oil, natural gas and other energy sources that underpin many production inputs in agriculture, notably fuel, chemicals and fertiliser. Energy prices also affect the demand for cereals, sugar crops and oilseeds through the market for biofuels produced from these feedstocks.
Global GDP, which had begun to recover from its 3% contraction following the COVID-19 pandemic and grew by almost 6% in 2021, saw its growth reduced to just over 3% in 2022 (Table 2.1). Across the OECD, deceleration was most significant in fast-growing economies, including Chile (2.5%, down from 11.9% in 2021), Estonia (-1.7% compared to +8%) and Türkiye (5.6% after 11.4%). Across the euro area, growth remained comparatively robust at 3.5%, down from 5.2% in 2021. While output exceeded pre-pandemic levels in most countries, GDP remained below 2019 levels in Spain, Japan, Mexico and the United Kingdom.
Labour markets were a bright spot in the overall economic picture. Unemployment rates that had peaked in 2020 fell over the course of 2021 and 2022 to average 5% across the OECD area, the lowest in more than 40 years. At the same time, shortages of qualified workers have sometimes dampened economic growth.
Prices rose strongly over the same period and inflation reached an average 9.3% in 2022, a level not seen for more than 30 years. Energy and food prices strongly contributed to such high inflation rates (see below).
Emerging economies were also affected. Growth in the countries covered by this report fell significantly relative to their rebounds in 2021, but in most cases remained close to or above average growth rates seen prior to the pandemic. The stark and obvious exception is Ukraine, where the war has wiped out close to 30% of its economic output.
Global trade grew by 5% year on year, a deceleration relative to the 10% growth in 2021 but still slightly higher than average pre-pandemic growth rates.
Table 2.1. Key economic indicators
1. Per cent; last three columns show the change over a year earlier.
2. Moving nominal GDP weights, using purchasing power parities.
3. Fiscal year.
4. Per cent of labour force.
5. Personal consumption expenditures deflator.
Source: OECD (2023), Economic Outlook N°113 - June 2023, OECD Statistics Database, https://stats.oecd.org/Index.aspx?lang=en&SubSessionId=943670ea-b9e0-4eb4-9447-2347c99584f5&themetreeid=4.
Inflation was driven notably by prices for energy and food. Energy prices, which had doubled already in 2021 relative to the comparatively low levels in 2020, rose by a further 64% year on year in 2022 and began to fall only in the last third of the year (Figure 2.1). Sanctions against Russia following its war against Ukraine, Russia’s decision to suspend gas deliveries to EU Member States and the continued relatively robust economic growth have contributed to lower supplies and growing demand for primary energy sources. Average prices for natural gas doubled again in 2022, after a 253% increase in 2021. Crude oil also increased by almost 50% year on year. Prices for both declined in early 2023, approaching their pre-pandemic levels.
Fertiliser prices, which had almost doubled in 2021, rose further after Russia’s invasion of Ukraine and averaged 74% higher in 2022 than in 2021, peaking only in November 2022, before slowly retreating. The run-up in fertiliser prices was driven not only by higher energy prices but also by the high pre-war market share of exports from Russia, Belarus and Ukraine. Potash prices rose by 166% year on year, as Russia and Belarus alone had accounted for more than a third of global potash exports in 2018-20.
Food prices had been on the rise before the war, driven by stronger demand due to the rebounding economic activities post-COVID-19, harvest shortfalls in some major producing countries and higher input costs. On average, food prices further increased by 14% in 2022, as lower exports from Ukraine and Russia reduced supply and increased uncertainties on markets already affected by rising energy and fertiliser costs. This increase, while significant, remains lower than the increase observed in 2021 and significantly less pronounced than those for energy or fertilisers, although the extent of price increases differed by commodity (FAO, 2022[1]).
The growth rate of meat production slowed from over 4% in 2021 to 1% in 2022. Higher pig meat production in the People’s Republic of China (hereafter “China”) was a factor for continued growth, as the sector continues to recover from the African Swine Fever (ASF) disease. Production levels in North and South America remained relatively stable, while Europe and Oceania observed a decline in meat output. Rising input costs, the prevalence of animal diseases, and unfavourable weather conditions adversely affected producer margins and disrupted meat production in various parts of the world. This, together with growing import demand, has led to average meat prices rising by more than 10% in 2022, although prices started to decline in the second half of the year as import demand slowed, and in December were only slightly higher than a year earlier.
World milk production grew by just 0.6% in 2022. Output increased notably in India, Pakistan and China, offset by contractions in Ukraine due to the ongoing war, and in several other countries due to extreme weather events, shortages in labour supply and higher input costs. World dairy prices further increased and peaked in June before declining due to lower import demand. On average, dairy prices in 2022 were almost 20% higher than in 2021.
Recovering demand for vegetable oils and rising feed demand for oilseed meals notably in China were met by a 7% increase in oilseed production in 2022/23 compared to the previous season.2 Record world soybean production was driven mainly by strong output growth in Brazil, while rapeseed production growth factors included its recovery from the very low preceding harvest in Canada and increased output also in Australia and the European Union, among others. In contrast, lower global sunflower seed production is caused mainly by disrupted production in Ukraine. World oilseed prices, already high in 2021, increased sharply in early 2022, peaking at record levels in March before declining by more than 40% towards the end of the year. On average, oilseed prices in 2022 were 13% higher than in 2021 as stock-to-use ratios remained low compared to historical levels. Prices for vegetable oils and for meals and cakes rose slightly more strongly, by 14% and 15% respectively.
Global cereal production was down by almost 2% in 2022/23, as lower production of coarse grains and rice more than offset a slight increase in global wheat output. Reductions in coarse grains were mainly driven by declining maize harvests in the European Union, Ukraine and the United States, and lower sorghum production in the United States, more than offsetting higher global barley production. Production in the European Union and the United States was down also for rice, but the global decline was mainly due to weather conditions in southern Asia, while other parts of Asia and Africa saw some increased output. A 40% drop in Ukraine’s wheat output and declining production also in several other countries were more than offset by significant recovery from the previous harvest in Canada and a second record harvest in a row in Australia, among others. Overall, cereal prices increased by 18% year on year, with barley, maize and wheat prices rising particularly strongly, while rice prices on average remained largely unchanged. Prices have declined somewhat following the implementation of the Black Sea Grain Initiative,3 allowing significant amounts of grains to be exported through three key Ukrainian ports.
Sugar production increased as a result of a significant recovery in Brazil’s output, the world’s largest sugar producer and exporter, and increased production notably in Australia, China and Thailand, which more than offset declines in the European Union, India and Pakistan. Overall, global sugar production increased by more than 4% in 2022/23 and exceeded slightly increasing sugar demand, driven among others by population growth and urbanisation in Africa and growing demand from the processing industry in Asia but limited by lower economic growth. International sugar prices, which peaked in April, declined thereafter, but rebounded strongly since October 2022. On average, prices in 2022 were 5% higher than in 2021, a much less pronounced increase compared to other food commodities and dampened by the global supply surplus.
Overall, average farm receipts (including budgetary transfers from agricultural policies) across the 54 countries covered in this report, which have been rising continuously since 2016, are estimated about 5% higher4 than in 2021, mostly driven by higher international commodity prices. This increase is slightly above the average growth during the decade preceding the COVID-19 pandemic, but lower than growth in the two years of the pandemic. This suggests that on average, farm revenues have not only proved relatively resilient vis-à-vis the COVID-19 pandemic but also against the implications of the war in Ukraine. However, farmers also faced significant increases in the prices for key production inputs such as fertilisers and fuels, meaning that production margins and incomes have likely developed less favourably than revenues.
Policy responses to the war in Ukraine and to inflationary pressures more generally
As supply chains were recovering from the COVID-19 pandemic, inflationary pressures and the outbreak of war had profound impacts on global agro-food systems in 2022. World prices for grains and oilseeds rose as tensions escalated and spiked following the outbreak of war (OECD/FAO, 2023[2]). These effects were particularly important for commodities such as wheat, barley, maize and sunflower oil for which Ukraine is among the largest global exporters (more context on Ukraine’s importance to global agricultural markets is provided in Box 2.1). Input costs such as for fertiliser and energy also rose due to reduced global supply. Russian exports of natural gas declined following the outbreak of war, and supply concerns prompted some producing countries to restrict exports of fertiliser to ensure domestic availability.
Policy responses to these global challenges were introduced by most countries covered in this report in 2022. These included direct support measures to farmers, consumers, and food processors; measures dealing with fertiliser supplies and prices; measures to facilitate imports and restrict exports of critical materials. Countries also introduced measures to improve the prospects for Ukrainian agriculture.
Box 2.1. Impacts of the war on Ukraine's agricultural sector
On 24 February 2022, Russia started its large-scale invasion of Ukraine which marked the beginning of the largest military conflict in Europe since World War II. The war has caused significant damage to Ukraine’s economy which shrank by close to 30% in 2022.
Agriculture accounted for more than 10% of total GDP and almost 15% of employment in Ukraine prior to the war, but production and trade have fallen considerably since. The impacts on the sector include damage to infrastructure and material, labour shortages, loss of productive land, direct loss of production, shortage and high costs of agricultural inputs, and reduced export capacity, among others.
More than USD 6.6 billion in agriculture and land resources have been damaged or lost (Kyiv School of Economics, 2023[3]). This includes agricultural machinery and equipment on farms along with infrastructure such as elevators and grain storage. More detailed estimates as of September 2022 suggest that 6.5 million tonnes of storage capacity had been destroyed, with another 2.9 million tonnes of capacity having been partially damaged (Kyiv School of Economics, 2022[4]).
Agriculture may have lost up to 15% of its labour force1 as many former farm workers now serve in the Ukrainian military. Land use is imperilled too as agricultural land has become part of the battleground, impacted by artillery strikes and land mines that make sowing and harvesting potentially life-threatening tasks. This touches farms not only in areas close to the combat zones but in large parts of the country.2 Estimates of the area affected differ widely, ranging from just over 1% of Ukraine’s farmland3 to as much as 30% of the country’s territory, including in several highly agriculture dependent regions4, with other estimates falling in-between.5 High concentrations of toxins from munitions and fuel pose an additional threat to agricultural land. At least 10.5 million hectares of agricultural land in Ukraine could be degraded, equivalent to a quarter of its total farm land.6
Economic losses to agriculture go well beyond destroyed or damaged property and were estimated to exceed USD 34 billion as of October 2022 (Kyiv School of Economics, 2022[5]), which would correspond to one-sixth of the country’s GDP in 2021. These losses include the effects of reduced crop production in 2022 (more than USD 11 billion), expected production shortfalls in the winter crop 2023 (USD 3 billion), livestock losses, higher input costs (notably for diesel and fertilisers, close to USD 1 billion) and depressed output prices due to disruptions in logistics and export facilities (more than USD 18 billion).
Before the war, Ukraine was an important producer and exporter of agricultural products, notably grains and vegetable oil. Over the five years preceding the war, Ukraine produced 4% of the world’s wheat, 3% of its maize and 6% of its barley. However, Ukraine’s shares in global exports were multiples of those at 9%, 14% and 12%, respectively (Figure 2.2), placing the country among the top five exporters for these commodities. The country’s importance was even higher in some oilseeds, with production of sunflower seed exceeding 25% of the world total. Ukraine was the world’s largest exporter of sunflower oil, originating 43% of global sunflower oil exports. Due to the very good harvest in 2021, shares in the year just preceding the war were even higher.
The combined production of wheat, maize, barley and sunflower seed could fall by between one-fifth and one-third relative to this five-year average due to the war, and by between one-third and a half relative to the year preceding the war.7 Total agricultural production in 2022 is estimated to have been about 28% below its 2021 level.8 This, combined with the damage to infrastructure and blockage of ports, significantly hinders Ukraine’s exports of these products. While data for the full marketing year following the invasion remain incomplete, exports of agricultural commodities are estimated to have fallen significantly in the 2022 marketing year and to be lower still in 2023 (OECD/FAO, 2023[2]), with future developments strongly depending on the continuation of the Black Sea Grain Initiative (Figure 2.3). Wheat and barley (the most important cereal in “other coarse grains”) exports are most strongly affected. Due to damage to infrastructure, more sunflower seed was exported rather than processed domestically in 2022, leading to some increased oilseed exports compared to historical averages.
Many countries introduced or increased support for rising input costs….
The rising costs of farm inputs were a global concern for farmers and policymakers responded with a number of different types of support to assist. Some countries introduced policy support targeting specific inputs, such as the Philippines which provided fuel discount vouchers to farmers. Others provided support to specific industries. For instance, China provided three rounds of direct subsidies to grain farmers between March and August 2022. Certain provinces also provided additional area and/or production payments to encourage higher production of soybean and intercropping of maize and soybean. Japan provided payments to livestock farmers to compensate for higher feed costs.
Countries also introduced more general support to compensate for rising input costs. For instance, Canada increased the interest-free limit on loans under its Advance Payment Program for 2022 and 2023, providing interest rate relief to participating agricultural producers. Colombia provided input cost support to small-holder farms through a 20% refund on the value of purchases of agricultural inputs. Iceland increased existing payments and introduced new payments to accommodate increased production costs. Norway similarly increased the size of its annual support package to farmers by a substantial amount, including one-off exceptional payments to compensate for rising input costs. Korea provided tax relief to farmers and direct compensation for higher feed and fertiliser prices. In the United Kingdom, the government of Northern Ireland expedited the delivery of direct payments to assist farmers with cash flow.
The European Union implemented an aid framework allowing individual Member States to implement direct support to farmers and rural areas; exceptional market measures; actions to foster the overall resilience of the sector; and exceptional flexibilities in the use of CAP funding. EU Member States implemented their own suite of support measures, such as tax concessions, investment assistance, and allowances to consumers and farm households to help farmers and agro-food enterprises cope with the financial impacts.
…including support to farmers for fertiliser
Fertiliser supply was of particular concern for many countries and led to many measures to attempt to either reduce costs to farmers or dependence on fertiliser. For instance, Chile both provided fertiliser and gave per hectare payments to compensate for rising variable input costs as part of the country’s Sow for Chile (Siembra por Chile) programme. India increased its fertiliser subsidies twice during 2022 and Mexico increased its subsidy by 16-fold across 2022 and 2023. The Philippines implemented subsidies for fertiliser in the form of fertiliser discount vouchers as part of its Plant, Plant, Plant Part 2 programme. Switzerland released 20% of its strategic reserves of fertiliser in 2021 in response to early supply difficulties in international and kept the measure in place throughout 2022 to mitigate the market effects of Russia’s war of aggression, equal to roughly one third of the country’s annual needs for crop production. Japan subsidised transportation and storage costs for fertiliser manufacturers to compensate for costs associated with changing suppliers. The United States announced the new Fertiliser Production Expansion Program to increase domestic fertiliser availability.
Internationally, a group of countries announced the Global Fertiliser Challenge in 2022. The challenge seeks to both strengthen food security and reduce agricultural emissions by advancing fertiliser efficiency and alternatives in low-and middle-income countries. It hopes to achieve this challenge through innovation and knowledge sharing on fertiliser-efficient farming practices. US and European officials announced at the 2022 United Nations Climate Change Conference (COP27) that USD 135 million in funding had been raised for the effort.
Some countries suspended environmental requirements to encourage domestic production
Several countries made decisions to postpone the implementation of sustainability measures as a response to food security concerns stemming from the war in Ukraine. The European Union adopted an exceptional flexibility to allow agricultural production on fallow land while still maintaining the full level of the associated income support payments. This option was taken up by several EU Member countries, including Austria, Belgium (Wallonia), the Czech Republic, France, Germany (partly), Italy, Latvia, Luxembourg and Poland. Switzerland similarly postponed measures to fallow cropland for the promotion of biodiversity by one year.
Additional support was provided for agricultural consumers
Rising inflation and cost of living was an issue for many countries in 2022. Some countries introduced measures to specifically aid agricultural consumers. For instance, China began releasing strategic supplies of pig meat with the objective of stabilising prices. The government in the Philippines imposed price ceilings for staple foods such as milk, beef, poultry and pork in an effort to counter food price inflation. In the United States, additional food assistance was provided for children in eligible families as part of the Consolidated Appropriations Act. Many more countries introduced other measures that were not agriculture-specific and increased consumer incomes. These included actions such as reducing various taxes; raising minimum wages and welfare payments for the poorest in society; energy price caps; and one-off cash payments.
Other countries implemented policies to assist processing firms who use agricultural products as inputs. For instance, Japan subsidised the costs of food producers to develop, manufacture, and source materials for new food products. Belgium introduced emergency changes to labelling regulations allowing food producers to more easily change the composition of food products and still abide by labelling requirements.
Trade restrictions were eased on some imports….
Several countries sought to make importing inputs and food easier to avoid domestic shortfalls. Brazil temporarily suspended some agricultural tariffs from non-Mercosur countries, including on maize, soybeans, soymeal and soy oil. China signed a protocol to allow imports of maize from Brazil as part of its strategy to diversify its import sources of key commodities. Colombia removed tariffs on all agricultural inputs and 163 basic household consumer products. Mexico similarly exempted tariffs on imports of 5 strategic agricultural inputs and 21 basic consumer goods. Switzerland reduced tariffs on animal feed imports from 15 March 2022. Some EU Member States made use of existing flexibility in EU legislation to make imports of animal feed easier, for example Spain relaxed maximum residue limits for pesticides in maize. Korea reduced the tariff rate to 0% for wheat and flour imports within quota to alleviate upward pressure on prices, and increased the quota for unhulled barley, wheat hull and root vegetables to secure supplies of feed.
Countries also facilitated trade as a way of providing economic support for Ukraine. Australia, Canada, Iceland, the European Union, the United Kingdom and the United States all implemented temporary exemptions from tariffs on agricultural products imported from Ukraine.
….but trade restrictions were increased on some exports
India introduced export bans, duties or permits on commodities such as rice, wheat, sugar and related products. China imposed a ban on state-owned phosphate producers from exporting phosphate starting from October 2021 until June 2022 and introduced a new requirement for inspection certificates to ship fertilisers. In addition, a quota limiting total phosphate exports to 3.16 million tonnes was introduced for the second half of 2022. Mexico introduced a 50% export tariff on white maize for human consumption.
Countries also provided support for Ukraine and Ukrainian agriculture
Along with domestic measures to assist with the fallout from the war, many countries also took steps to support Ukraine. As mentioned in Box 2.1, Ukraine was a significant exporter of grain and oilseeds before the war and exports were significantly hampered following its outbreak. To assist with the challenges, the Black Sea Grain Initiative was brokered with the assistance of Türkiye and the United Nations to allow Ukraine to resume exports of grain through the Black Sea. A Joint Coordination Center with officials from Türkiye, Russia and Ukraine and the United Nations was set up in Istanbul to oversee shipments of grain from three Ukrainian Black Sea ports. The European Union also assisted in establishing “Solidarity Lanes” to ensure Ukraine can export grain and import essential goods, such as animal feed, fertiliser, and humanitarian aid. The “Solidarity Lanes” and the Black Sea Grain Initiative allowed the export of about 25 million tonnes of Ukrainian grain, oilseeds and related products between May 2022 and the end of October 2022 (EC, 2022[13]). Despite these initiatives, logistics costs and bottlenecks have caused a larger-than-usual amount of Ukrainian grain to be marketed in neighbouring countries. In April 2023, Poland, Bulgaria, Hungary, and the Slovak Republic all introduced measures to ban imports of a range of agricultural products from Ukraine as a result. An agreement was soon made following intervention from the European Commission which keeps the import bans in place but allows Ukrainian grain to transit through these countries for export elsewhere. Romania joined this agreement later in April.
Countries worked together with private companies and international organisations to aid Ukraine with seed and infrastructure investments. In February 2023, the United States (through the US Agency for International Development, USAID) and biotechnology company Bayer provided a joint donation of 13.5 tonnes of high-quality vegetable seeds to Ukrainian farmers in advance of planting season. USAID also partnered with agribusinesses Grain Alliance, Kernel and Nibulon to invest USD 44 million in storage and infrastructure expansion to help enable Ukraine to increase its grain shipping capacity. Japan partnered with the Food and Agriculture Organisation of the United Nations (FAO) to provide maize and sunflower seeds to agricultural producers and small farms during the 2023 spring-summer season. The Netherlands included EUR 40 million (USD 42 million) for the purchase of seed and equipment as part of its 2023 support package for defence and recovery.
To help address the challenges related to the large-scale contamination of Ukrainian agricultural land with mines and other explosives (Box 2.1), the Netherlands provided EUR 10 million (USD 11 million) for demining as part of its 2023 support package to Ukraine. Switzerland also included CHF 7.5 million (USD 8 million) in targeted support for mine clearance in Ukraine over the next few years as part of its “Action Plan on Mine Action 2023-2026
The United States and Ukrainian agricultural ministries issued a memorandum of understanding to co-operate on areas of productivity data, shared expertise and guidance on new technologies, and enhanced co-operation on bilateral trade and post-conflict capacity building. To date, technical assistance and other initiatives have been launched in the areas of animal health, biosecurity, sanitary and phytosanitary capacity building, agricultural and trade policy, wildfire control, water management, and preventing illegal deforestation.
The European Union activated the Temporary Protection Directive, granting access to labour market, housing, education and healthcare across the European Union to over 4 million people fleeing the war. Poland extended the admissible period of employment for Ukrainian citizens involved in harvest assistance. The Czech Republic supported inclusion of Ukrainian scientists, and students in research teams, including providing CZK 6 million (USD 269 224) to subsidise salaries of Ukrainians joining certain projects in agriculture, forestry, fisheries and aquaculture.
In addition to these activities, the OECD launched its Ukraine Country Programme to support Ukraine’s agenda for reform, recovery and reconstruction, including related to agriculture (Box 2.2).
Box 2.2. OECD Ukraine Country Programme
The OECD and the government of Ukraine launched a four-year Country Programme that will support Ukraine’s agenda for reform, recovery and reconstruction and will help Ukraine advance its ambitions to join the OECD and the European Union. The programme will enable Ukraine to leverage OECD expertise and best practices, strengthen institutions, and build capacity for successful policy reforms aligned with OECD standards and best practices. It will consist of reviews and other projects resulting in policy recommendations and capacity building activities; legal instruments for Ukraine to advance alignment with the Organisation’s standards; and targets to enhance Ukraine’s participation in OECD bodies.
Together with energy, agriculture will be one of the two focus areas of sectoral policy work within the programme. The OECD has monitored developments in Ukraine’s agricultural policy and provided recommendations and analysis as part of this publication since 2004 and will continue to do so into the future. The programme intends to build upon this work as the situation in Ukraine stabilises to conduct an OECD Agricultural Policy Review. Ukraine could also consider being a potential new member of the Co-operative Research Programme: Sustainable Agricultural and Food Systems.
Note: Further information about the Ukraine Country Programme is available at https://www.oecd.org/mcm/documents/Ukraine-Country-Programme.pdf.
Other recent developments in agricultural policies
While policies for agriculture and food have been strongly influenced by the war in Ukraine, not all policy changes introduced in 2022 were related to the war situation. This section provides a summary of some other major trends in agricultural policies implemented by countries. More details on specific policies are available within the relevant country chapters.
Several countries implemented changes to their policy frameworks
A number of countries updated their policy frameworks for agriculture during the year. The EU Common Agricultural Policy (CAP) for 2023-27 entered into force in January 2023. This new CAP is built around ten specific objectives: ensuring fair incomes for farmers; increasing competitiveness; improving the position of farmers in the food chain; climate change action; environmental care; preserving landscapes and biodiversity; supporting generational renewal; vibrant rural areas; protection of food and health quality; and fostering knowledge and innovation. Under the new CAP, Member States play a key role in designing and implementing their CAP 2023-27 Strategic Plans to achieve EU-level objectives. Canada agreed on its new five-year agricultural policy framework for 2023-28, called the Sustainable Canadian Agriculture Partnership. The framework focuses on five priorities: climate change and environment; market development and trade; building sector capacity, growth, and competitiveness; resiliency and public trust; and science, research and innovation.
In Colombia, the new administration introduced the Towards Agriculture for Life (Hacia Una Agricultura Para La Vida) development plan for 2022-26. The plan focuses on five key strategies of comprehensive land reform; addressing inequalities facing indigenous, black, women, and young people in the sector; environmental protection and sustainability; market inclusion on agricultural value chains; and a territorial approach. In the United Kingdom, both Wales and Northern Ireland introduced new policy framework documents. The Agriculture (Wales) Bill was introduced by the Welsh parliament setting the overarching framework for future support for agriculture with a major focus on sustainable land management. The Northern Ireland ministry published the Future Agricultural Policy Decisions report along with 54 policy decisions on the future of agricultural support. The Philippines published the National Agriculture and Fisheries Modernisation Plan that serves as the directional plan for the agricultural sector for the next decade.
Argentina launched the Plan GanAr with the aim of contributing to the sustainable development of Argentine livestock. Australia drafted the National Agricultural Traceability Strategy 2023-28 and its five-year implementation plan. The strategy aims to develop connected, aligned and interoperable world-class traceability systems along supply chains to accelerate premium Australian exports and enhance biosecurity and food security. The United States introduced a new rule, Requirements for Additional Traceability Records for Certain Foods, which establishes traceability recordkeeping requirements for participants in supply chains of certain foods in an effort to facilitate rapid identification and removal of potentially contaminated food from the market.
Costa Rica reduced market price support and liberalised trade in paddy and milled rice in 2022 as part of its Rice Path strategy. In 2023, the government unveiled a new public policy governing the agricultural sector for 2023-32 aiming for greater prominence of Costa Rican products in international markets; creating decent jobs; and improving living conditions. Israel similarly underwent important sector reforms for egg, dairy and beef production, and limited tariffs on selected produce. Production quotas for eggs and dairy target price mechanisms will be progressively phased out over time, while tariffs for chilled beef were eliminated and replaced with direct payment compensation and branding investments. Tariffs were also cut on selected fruits and vegetables and agricultural inputs.
Some countries increased their climate mitigation ambitions
Countries unveiled new measures relating to climate change. Chapter 1 of this publication provides a detailed discussion of the many adaptation policies implemented by countries. However, several countries also took further steps to mitigate the contribution to climate change of their agricultural sectors. Australia invested new funds into discovering technological solutions to reduce agricultural emissions and announced knowledge transfer initiatives to encourage farmers to participate in carbon markets and integrate low-emission technologies into their operations. Canada tabled its 2030 Emissions Reduction Plan in March 2022 which outlines efforts it is undertaking across all sectors to meet its 2030 emissions target and lay the foundation for achieving net-zero emissions by 2050. New Zealand published its first Emissions Reduction Plan in May 2022. The plan contains several key actions including the introduction of an agricultural emissions pricing mechanism by 2025, among others. The United States launched its initiative Partnerships for Climate-Smart Commodities in 2022, providing USD 3.1 billion in funding for 141 pilot projects to expand markets for climate-smart commodities.
Several countries also pledged to increase the ambition of their climate mitigation targets. Australia, India, Norway and Viet Nam all updated their emissions reductions targets, and Australia, Austria, the Czech Republic, the Slovak Republic, and the United Kingdom all joined the Global Methane Pledge in 2022. Of the 54 countries covered in this report, 19 have mitigations targets specifically for the agricultural sector. A summary of emissions reductions targets of all 54 countries is provided below (Table 2.2).
Table 2.2. Emissions reductions targets
Several countries responded to natural disasters with assistance to their agricultural sectors
Several countries that experienced natural disasters implemented direct support to those affected within the agricultural sector. Argentina adopted exceptional measures in 2022 and 2023 to compensate territories affected by droughts, fires and frost. In October 2022, provincial governments in Canada implemented programmes to provide additional support to agricultural producers significantly affected by Hurricane Fiona. China provided disaster relief funds to 13 provinces affected by floods and droughts. Several EU Member States, such as Croatia, the Czech Republic, France, Poland, Romania and the Slovak Republic provided disaster relief funding for various adverse weather events in 2022, ranging from droughts, floods, frost, hail, torrential rain, hurricanes, landslides and avalanches. New Zealand responded to a record number of weather-related adverse events, including flooding, drought and cyclones, by providing funding for psychosocial support, recovery and clean-up. The United States launched two temporary programmes in 2022 to compensate for losses incurred in prior years – the Emergency Livestock Relief Program and Emergency Relief Program.
Many worked on policies which will improve environmental sustainability
Australia launched several new measures that trial market-based approaches to incentivise landholders to improve biodiversity as part of the Agriculture Biodiversity Stewardship Package. These include the Carbon + Biodiversity Pilot, and the Enhancing Remnant Vegetation Pilot. A National Stewardship Trading Platform was also established allowing landholders to plan and evaluate carbon and biodiversity projects, and options are being explored to implement the Australian Farm Biodiversity Certification Scheme to certify farm businesses for their biodiversity management. As of 30 April 2023, the European Union completed 47 of the more than 100 actions committed to in the EU Biodiversity Strategy intended to halt and reverse biodiversity loss by 2030. Several EU Member States also adopted new regulatory measures to reduce the environmental impacts of agricultural inputs, including Austria, Croatia, the Czech Republic, France, Poland, Romania, and Spain. The EU CAP 2023-27 introduced a new “green architecture” with higher environmental ambitions, including stricter basic requirements (conditionality) in cross-compliance. Twenty-five per cent of the direct payments budget is dedicated to eco-schemes, a new policy tool that has been introduced to incentivise the adoption of farming practices with additional environmental benefits. These schemes are part of the CAP’s long-standing commitment to helping farms make necessary ecological transitions.
Japan added nine key performance indicators to its 2030 MIDORI plan, including zero CO2 emissions from fossil fuels combustion in agriculture, forestry and fisheries sectors; reductions in risk-weighted use of chemical pesticides and chemical fertiliser; and increases in organic farming. In the United Kingdom, England launched a programme on sustainable farming standards for arable and horticultural soils, improved grassland soils and the moorlands. Numerous conservation projects were introduced to restore over 40 000 hectares of land to protect and provide habitats for wildlife as part of the Landscape Recovery scheme. The United States gave a substantial funding increase of approximately USD 20 billion over ten years to various conservation programmes as part of the Inflation Reduction Act. New initiatives were also launched in 2022 to assist businesses to transition to organic farming. In 2022, Viet Nam approved the National Green Growth Action Plan for 2021-2030 which includes goals to develop a sustainable and low-emissions agricultural sector that is adaptable in the face of climate change.
Countries took steps to foster inclusion in the sector
To improve equity and inclusion, the United States undertook several actions focused on improving equity for farmers from minority groups. These include new investments in Equity Conservation Cooperative Agreements, funding various outreach and assistance programmes and releasing the USDA Equity Action Plan. Canada renewed the AgriDiversity Program which aims to reduce barriers to participation for indigenous peoples and increase economic development through capacity building activities. Most EU Member States proposed to maintain higher rates of investment support for young farmers and the vast majority include plans for additional income support and installation aid for young farmers in their Strategic Plans. Some EU Member States, such as Austria, Germany, Ireland, Italy and Spain, included specific measures supporting rural women in their CAP 2023‑27 Strategic Plans. In particular, Spain included direct payments for young female farmers who own or co-own their farm.
Countries implemented new programmes for innovation and the modernisation of agriculture
Countries introduced a number of new initiatives aimed at knowledge generation in agriculture. In the European Union, the European Commission presented four new partnership programmes as part of its Horizon Europe Research and Innovation Framework. These are designed to bring together the European Commission and a consortium of partners, structured around research funders and other public authorities, to tackle some of the European Union’s most pressing challenges in agriculture by stimulating public and private investment in research activities.
Korea announced new innovation measures to enhance smart agriculture, with goals to convert 30% of horticultural and livestock facilities into smart facilities. The Philippines approved the Coconut Farmer and Industry Development Plan, aimed at modernising the coconut industry and increasing incomes and competitiveness of farmers. India introduced new support for the use of drones in agricultural activities to modernise land records, check the state of crops and for pesticide and fertiliser application.
Other countries made changes to modernise programme delivery. Türkiye made additional efforts to advance digital transformation, including the Tarim Cebimde mobile application deployment and the new Farmer Registration System which both make it easier to register applications and receive product notifications. The application also provides some functionality for livestock farmers to monitory herd demographics. Kazakhstan introduced the Unified State Information System for Subsidies to streamline subsidy registration and remove the need for farmers to pay subscription fees to apply for subsidies.
New laws and programmes on biosecurity and animal health were introduced
A number of new and ongoing disease outbreaks prompted countries to tighten biosecurity regulations. Australia passed the Biosecurity Amendment (Strengthening Biosecurity) Act 2022 to strengthen the ability to manage and respond to emerging biosecurity risks. Canada provided new funding to enhance efforts to prevent African Swine Fever (ASF) from entering the country and to prepare for a potential outbreak. Outbreaks of avian influenza led several EU Member States to adopt policies such as bans on outdoor poultry farming (the Czech Republic), vaccination programmes (France) and compensation payments for affected producers (France, Poland). In 2022, Indonesia declared an outbreak of Foot-and-Mouth disease for the first time in more than 30 years and introduced control measures including decontamination, massive vaccination, and strengthened surveillance on areas with known infections.
Measures were also introduced targeting animal welfare. New Zealand passed legislation in 2022 ending the export of livestock by sea from April 2023, although with an adjustment period for affected businesses. New Zealand also had a ban on battery cages for layer hens come into effect on 1 January 2023 following a period of adjustment since the ban was passed in 2012. In the United Kingdom, the Animals (Penalty Notices) Act 2022 gives ministers powers to impose financial penalties for a wide range of animal health and welfare offences in England and Wales. In the European Union, Austria and France ended the culling of male chicks in egg-laying hen production as of 1 January 2023, one year after Germany became the first to do so. Austria, Germany and Spain introduced new rules on the transportation of livestock.
Some COVID-19 measures were phased out while new and post-pandemic measures were implemented
Countries generally scaled back some of the support provided in previous years for the COVID-19 pandemic. In June 2022, Australia concluded its temporary emergency freight assistance support that had been introduced in response to the collapse of international airfreight capacity during the pandemic. The EU rules allowing Member States to introduce COVID-19 aid to affected sectors ended on 30 June 2022.
New Zealand lifted the annual cap on Recognised Seasonal Employee Scheme workers from 16 000 to 19 000 places to address seasonal worker shortages experienced during the pandemic. China introduced new disinfection requirements on imports of non-cold chain goods in September 2022. These and other PCR testing requirements were then later removed in December 2022.
Progress was made on several trade deals and negotiations
Countries advanced several multilateral agreements in 2022 and early 2023. The Regional Comprehensive Economic Partnership (RCEP) entered into force on 1 January 2022. The agreement covers 15 countries in the Asia-Pacific region including Australia, China, Indonesia, Japan, New Zealand, the Philippines, Korea and Viet Nam. The agreement foresees reductions to 8.4% of agricultural tariff lines, with an average tariff reduction of 12.8 percentage points. With the introduction of RCEP, around 83% of agricultural tariff lines are either subject to tariff reduction under the agreement or were already at zero (UNCTAD, 2021[14]). The agreement also provides a framework for streamlining rules of origin and border processes for perishable goods, as well as strengthening co-operation in the areas of standards, technical regulations, and conformity assessment procedures.
In other multilateral agreements, in 2022 and 2023, Chile, Malaysia and Brunei became the final three signatories to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP eliminates 98% of tariffs in the free trade area and contains a number of provisions on agriculture. These include reduced Japanese beef tariffs; new access for dairy products into Japan, Canada and Mexico; the elimination of all tariffs on sheep meat, cotton, wool and manufactured products; and some elimination of tariffs on seafood, horticulture and wine. The United Kingdom concluded negotiations to join the CPTPP in 2023 pending ratification of their entry from all 11 signatories. South Africa also ratified the African Continental Free Trade Agreement.
Several bilateral free trade agreements (FTAs) were finalised or came into effect in 2022, helping to facilitate trade in agricultural products. These include: the Australia-United Kingdom FTA, the Australia-India Economic Cooperation and Trade Agreement, the Israel-Korea FTA, the Cambodia-Korea FTA, the Indonesia-Korea FTA and the New Zealand-United Kingdom FTA. Many other FTAs are awaiting ratification, including the EU-Chile FTA, the EU-Mercosur agreement, the EU-New Zealand FTA, and the Korea-Philippines FTA. Market access and tariff reductions or phase-outs on agricultural products formed part of most trade agreements. However, products deemed domestically important continue to remain excluded from agreements, such as rice in Korea or wheat, rice and maize in India. The European Union agreements were notable for the novel inclusion of chapters on sustainable food systems, covering co‑operation on topics such as animal welfare, food waste, pesticides and fertilisers among others.
Developments in support to agriculture
This section provides an overview on developments in policy support in agriculture, building on the OECD indicators of agricultural policy support that are comparable across countries and time. These indicators show the diversity of support measures implemented across different countries and focus on different dimensions of these policies. Definitions of the indicators used in this report are shown in Annex 2.A, while Figure 2.4 illustrates the links between, and components of, the different indicators.
The Total Support Estimate (TSE) is the broadest of the OECD support indicators. It combines three distinct elements: a) transfers to agricultural producers individually; b) policy expenditures for the primary agricultural sector collectively; and c) budgetary support to consumers of agricultural commodities. The TSE is expressed as a net transfer indicator, including both positive and negative elements.
The Producer Support Estimate (PSE) measures all transfers to agricultural producers individually. Two major types of transfers can be distinguished: Market Price Support (MPS) represents transfers from taxpayers and consumers to agricultural producers through domestic prices that are higher than their international reference prices due to domestic and trade policies. MPS can also be negative, representing transfers from producers to consumers through domestic prices that are lower than references prices. Budgetary support is financed by taxpayers only and is further broken down into various categories distinguished by the different implementation of the underlying policies. The PSE indicator is expressed as a net transfer, including both positive and negative elements.
The General Services Support Estimate (GSSE) measures policy expenditures that benefit the primary agricultural sector as a whole, rather than going directly to individual producers. Different types of expenditures are represented in specific categories of the GSSE.
Similarly to the PSE, the Consumer Support Estimate (CES) reports support to consumers of agricultural commodities, distinguishes between market transfers that mirror the MPS, and budgetary support. To avoid double-counting, only the budgetary part of the CSE is included in the TSE.
Figure 2.4. Structure of agricultural support indicators
Note: *Market Price Support (MPS) is net of producer levies and excess feed cost.
Source: Annex 2.A.
Total Support
Total support to agriculture remains around record highs despite recommendations for reform
Across the 54 countries covered in this report, total support directed to the sector totalled USD 851 billion per year on average over 2020-22 (Figure 2.5). This is considerably higher than the USD 696 billion averaged in the three years preceding it from 2017 to 2019, largely reflecting policy responses to the COVID-19 pandemic, inflationary pressure and fallout from the war in Ukraine. Transfers to producers rose by 20% and budgetary consumer support for agriculture was nearly double in 2020-22 compared to 2017‑19. Producer support is estimated to have declined in 2022 due to falling market price support, but still remains higher than pre-pandemic levels.
Of the 2020-22 total, USD 630 billion (74% of total support) goes to producers individually either directly from government budgets or implicitly through market price support (MPS). The remainder of support was split nearly equally between support for general services (USD 106 billion, 12.5%) and budgetary transfers to consumers of agricultural products (USD 115 billion, 13.5%). At the same time, some emerging economies implicitly taxed their producers through measures such as export taxes and other actions which suppress domestic market prices. This implicit taxation was valued at USD 179 billion per year on average between 2020-22.
Figure 2.5. Breakdown of agricultural support, total of all countries, 2020-22
Notes: Data refer to the All countries total, including all OECD countries, non-OECD EU Member States, and the 11 emerging economies.
“Implicit taxation” of producers refers to negative market price support, “General services” refers to the General services support estimate, “Consumer support” is transfers to consumers from taxpayers, “Other pot. most dist.” refers to the potentially most distorting producer support measures other than market price support (i.e. support based on output payments and on the unconstrained use of variable inputs).
Source: Based on OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Support in countries covered in this report has risen consistently over the past 20 years in nominal terms (Figure 2.6). Much of this rise has been driven by emerging economies where support has increased markedly from averaging USD 68 billion per year in 2000-02 to USD 497 billion per year in 2020‑22. China and India account for the vast majority of emerging economy support, valued at USD 310 billion and USD 124 billion, respectively. Agricultural support among OECD countries has grown at a modest rate from a higher base, rising from an average of USD 278 billion per year in 2000-02 to USD 349 billion per year in 2020-22. The United States and the European Union combine for the largest share of OECD support at USD 122 billion and USD 107 billion, respectively, in 2020-22.
Despite the rise in nominal support among OECD countries, total support has been declining consistently relative to GDP. Support in the emerging economies covered in this report generally places a higher burden on their respective economies. This reflects the larger relative importance of agriculture to these economies and policy choices.
Expressing support as a share of the value of production adds important context to the data. For the 54 countries covered by this report, the total positive support provided in 2020-22 was equivalent to 20% of the production value generated by the sector. This represents a decline from 29% of the production value of the sector in 2000-02. Across the OECD area, support as a percentage of the value of production fell from 41% in 2000-02 to 25% in 2020-22. In contrast, this percentage rose across the 11 emerging economies from 13% to 17% over the same time frame. However, including the effects of negative MPS (that is, the extent that countries implicitly tax the sector), this percentage rose from 9% to 11%.
The situation varies considerably for individual countries.5 For example, in 2020-22 support as a percentage of production value was between 72% and 83% in Norway, Switzerland and Iceland; less than 5% in Brazil, South Africa, New Zealand and Ukraine; and negative in India, Viet Nam and Argentina (Figure 2.7). The countries that provide the highest level of support relative to the sector’s size are not always those with the highest economic burden of support. This reflects differences in levels of support, levels of economic development and agricultural sector size between countries. For example, countries such as Norway, Switzerland and Iceland have the highest levels of support based on value of production, but because agriculture is a relatively small share of GDP, the economic burden is lower than countries such as the Philippines, China and Türkiye. These latter three countries have the highest support relative to GDP at 2.3%, 1.8% and 1.6%, respectively. In Australia, South Africa, New Zealand and Ukraine, support is 0.25% or less of GDP. China and India, the world’s two most populous countries, are the largest providers of positive support to agriculture (USD 310 billion and USD 124 billion per year in 2020-22, respectively). However, the countries differ in how the support is provided. China provides almost all of its support to the sector in the form of positive market price support, while India provides high levels of producer payments for the use of variable inputs as well as budgetary support to consumers. Although gross support in India is high, its policies suppressing domestic prices result in negative net support to the agricultural sector.
Figure 2.7. Total Support Estimate by country, 2000-02 and 2020-22
Notes: Countries are ranked according to TSE relative to the value of agricultural production (left panel) and relative to GDP (right panel) in 2020-22, respectively.
1. EU15 for 2000-02, EU27 and the United Kingdom for 2020, and EU27 from 2021.
2. The OECD total does not include the non-OECD EU Member States. Latvia and Lithuania are included only for 2020-22.
3. The 11 emerging economies include Argentina, Brazil, China, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
4. The All countries total includes all OECD countries, non-OECD EU Member States, and the Emerging Economies.
Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Producer Support
Reform to producer support has stalled in recent years
Preliminary estimates for 2022 across the 54 covered economies indicate that the level of support to individual producers declined for a second year when measured relative to gross farm receipts (an indicator referred to as %PSE). This decline largely reflects an estimated decline in market price support (and increase in negative market price support) due to rising world prices rather than substantial policy reforms. On a three-year average, the %PSE across the 54 countries equalled 10% of gross farm receipts in 2020‑22, relatively unchanged from 2010-12 and down from 18% in 2000-02.
Producer support among OECD countries has been in long-term decline. However, the rate of decline has slowed since the early 2010s (Figure 2.8). OECD producer support averaged 15% of gross farm receipts in 2020-22, compared to 18% in 2010-12 and 28% in 2000-02. Levels of producer support among the 11 emerging economies rose markedly starting in the 2010s before stabilising at about half the OECD average. The average %PSE in these economies averaged 7.1% in 2020-22, compared to 4.5% in 2010‑12 and 3.9% in 2000-02. However, these figures for average support to producers include the effects of negative market price support. Countries such as Argentina, India and Viet Nam employ measures such as export taxes or other programmes which implicitly tax producers by suppressing domestic prices. Excluding negative market price support, the %PSE among emerging economies was 13.0% in 2020-22, close to but still below the OECD average, while across all 54 countries, the positive producer support corresponded to 13.7% of gross farm receipts.
Only four economies – China, Japan, the European Union, and the United States – account for roughly 70% of all positive producer support over the past 20 years. However, the relative shares among these economies have changed dramatically over this time (Figure 2.9). In 2000-02, the European Union6 accounted for the largest share with 30% of all positive producer support, followed by Japan (17%), the United States (17%) and China (7%). In 2020-22, China now represents just under 44% of producer support, followed by the European Union7 (15%), United States (7%) and Japan (5%). India has accounted for a majority and growing share of all implicit taxation among countries, from 61% of all negative support in 2000-02 to 76% in 2020-22.
While China provides the most support in terms of value transferred, the countries with the highest levels of producer support as a share of gross farm receipts are all found in the OECD area (Figure 2.10). In Norway, Iceland, Switzerland, Korea, and Japan, the benefits arising from direct budgetary support as well as implicit support from measures such as protective tariffs on imports represent between 35% and 55% of the revenue received by farmers. Conversely, support accounts for about 15% of farm receipts in China and less than 5% in New Zealand, South Africa, Chile, Brazil, Costa Rica, Australia, and Kazakhstan (including the negative effects of implicit taxation from policies in Kazakhstan).
Governments use a mix of different types of policies in order to achieve their objectives and support farmers, and each may emphasise different types of policies. For instance:
Market price support (MPS) arises as a result of domestic or trade policies that raise or lower domestic market prices, such as border tariffs, export taxes and price ceilings or floors. Excluding policies that depress prices, MPS accounts for the majority of positive support provided to farmers across all covered economies both in aggregate as well as within a majority of the covered economies (counting the European Union collectively as one economy).
Payments based on output are payments made to farmers per unit of production, often through measures such as strategic stabilisation funds or deficiency payments. These types of payments were between 10% and 25% of support in Iceland and Norway between 2020 and 2022.
Payments based on use of variable inputs, such as subsidies on the use of fertiliser, electricity, animal feed or credit. These types of payments were between 20% and 40% of positive support in South Africa, Viet Nam and Australia, and 70% of positive support in India in 2020-2022.
Payments made on the basis of production area or animal numbers, or to top up farmers’ receipts or incomes. This approach was the largest share of support provided to producers in the OECD in 2020-22, reflecting its prominence in the support packages provided in economies such as the European Union, the United Kingdom, Canada, and the United States.
Payments made to subsidise the acquisition of fixed capital like farm equipment, land, or breeding stock. This approach accounted for over 30% of the positive support provided to producers in Australia, Chile, and Kazakhstan.
Payments are provided to individual farmers to reduce the cost of on-farm services such as technical, accounting, commercial, training and sanitary or phytosanitary assistance. This type of support made up between 10-25% of total producer transfers in New Zealand, Chile, and the United States.
Payments can be based on variable input use, but with constraints, limits or restrictions. Brazil was the only country which used this form of support for more than 10% of their transfers to producers.
Payments for non-commodity criteria, which include payments for long-term resource retirement or for non-commodity based output such as reducing pesticide or fertiliser use, or linked directly to supply of environmental public goods. This type of support was 10-20% of producer transfers in Mexico and Switzerland.
The majority of producer support still takes the form of the potentially most distorting measures
Different types of support have different impacts on producer behaviour. Producers respond to the incentives provided by support policies and adjust their production decisions accordingly. This changes the overall level of agricultural production, the mix of agricultural products produced, farm incomes and social and environmental outcomes.
In 2020-22, USD 411 billion, or two-thirds of the USD 630 billion in positive support to producers across the 54 countries covered in this report, was in forms considered to be the potentially most distorting to production and trade (9% of gross farm receipts). Across the OECD, such support amounted to USD 103 billion, while for the 11 emerging economies such transfers to producers totalled to USD 308 billion per year. Negative MPS policies additionally gave rise to USD 179 billion in implicit taxation in 2020-22 and these also have a distorting effect. The OECD has consistently recommended the phase out of potentially most distorting policies. More recent OECD work has shown that these measures also have a particularly high potential to harm the environment (Henderson and Lankoski, 2019[15]).8
Based on past and ongoing OECD work, the types of support considered to have the potential to be the most distorting are market price support, payments based on output, and payments based on the unconstrained use of variable inputs. These forms of support are also known for being both inefficient and untargeted to providing support to those households in need as a large share of the transfers are leaked in the form of higher prices for and larger use of inputs, or capitalised into land values. On average, these forms of support are much more prevalent in emerging economies than in OECD nations. In the 11 emerging economies, potentially most distorting policies generated positive support to producers equalling 10% of gross farm receipts and implicit taxation equal to 6% of gross farm receipts in 2020-22. In OECD countries, potentially most distorting policies generated positive support equalling 7% of gross farm receipts in 2020-22, but did not implicitly tax producers (Figure 2.11).
Recent macroeconomic factors drove a decline in market price support
Preliminary estimates indicate that net market price support declined for a second year in 2022. Positive MPS fell by an estimated USD 22 billion and negative MPS became USD 24 billion further negative. This means that both farmers benefitting from supported domestic prices and those already implicitly taxed experienced an estimated reduction in support equivalent to 0.5% of their 2021 receipts. This decline has been largely driven by the recent period of exceptional spikes in agricultural prices (Figure 2.1). Market price support can fall or become increasingly negative when there are sudden increases in world prices if supported domestic prices do not change to match. This is because supported domestic prices lose some of their premium and suppressed domestic prices become increasingly unfavourable compared to border prices. This phenomenon of falling net MPS was also observed in 2008 and 2011 during instances of sudden and rapid rises in the prices of agricultural products (Figure 2.12). MPS subsequently rebounded as price spikes abated and emergency measures were eased, and this may be the case as well in 2023 depending on the path of global prices and the corresponding responses by countries.
Measures providing positive MPS to producers provided USD 333 billion per year on average between 2020-22 across all covered economies. This was equivalent to 7% of annual gross farm receipts over the same period. Negative MPS caused by policies which reduce domestic prices was worth USD 179 billion or 4% of gross farm receipts over that time. Import tariffs and tariff rate quotas are the most frequently applied policies which give rise to positive MPS, whereas export restrictions, quotas, bans or taxes are most frequent for negative MPS.
MPS declines estimated in 2022 were largest in China, where most commodities tracked in the MPS data are subject to domestic market price support and most of which saw declines, in particular cotton, maize, groundnuts, and milk. These declines more than offset a significant increase in MPS for pig meat that reflects policies implemented to encourage pig herd rebuilding following recent outbreaks of African Swine Fever. Japanese farmers also experienced a significant reduction in market price support. The value of MPS in Japan declined by over 50% for rice and over 25% for pork. This reflected a narrowing of the gap between domestic and border prices and a depreciation of the Japanese Yen.
Changes in India drove movements in negative MPS estimated in 2022. India introduced export bans, duties or permits on several commodities to stabilise prices following the outbreak of war in Ukraine. While this kept domestic prices from rising by the same rate as border prices, it also meant that producers’ receipts were lower than they would have been had these policies not been in place. The effect of these new and other existing policies was particularly pronounced for the MPS of Indian wheat, causing implicit taxation to increase by close to USD 10 billion. Indian wheat single commodity transfers were estimated to have risen from -48% to -74% of 2022 wheat receipts.9
The significance of MPS varies strongly across countries. In Norway, Switzerland, the Philippines, Iceland, Japan, and Korea, MPS accounts for around 20% to 40% of gross farm receipts. In 16 other countries, MPS represents less than 5% of gross farm receipts. While in Argentina, India, Kazakhstan, Ukraine, and Viet Nam, producers are implicitly taxed, with negative MPS values of anywhere from -1% to -26%.
Levels of support also differ between commodities in a given country. Countries can have a low rate of average MPS that masks the fact that particular commodities are highly supported while others are relatively unsupported or implicitly taxed. For example, in Indonesia, MPS represented 2.6% of gross farm receipts in 2020-22. However, MPS represented 55% of the gross farm receipts specifically related to the production of beef and veal, and -52% of those related to the production of palm oil. Gross farm receipts for a specific commodity are referred to as “commodity gross receipts”, which includes the value of production of that specific commodity plus any transfers arising from policies specifically targeting that commodity.
In Korea, Japan, Iceland and Switzerland, MPS on the most supported product is between 68% to 80% of commodity gross receipts. Whereas, in countries such as India, Kazakhstan and Viet Nam, MPS on the most implicitly taxed product is between -91% and -138% of commodity gross receipts (Figure 2.13) (see Box 2.3 for interpretation).
Figure 2.13. Variation of product-specific market price support by country, 2020-22
Notes: A. Number of MPS commodities. B. Number of MPS commodities with non-zero MPS values.
The ends of the whiskers represent the minimum and maximum values across commodities, while the boxes indicate ranges between the first and the third quartiles with the horizontal line inside indicating the median. Diamonds represent the MPS share in GFR for total agriculture.
The minimum value for Kazakhstan is -138%
EU27 and the United Kingdom for 2020, and EU27 from 2021.
Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Box 2.3. Market price support – concept and interpretation
Simply put, market price support (MPS) is the benefit or loss farmers receive by having domestic prices that do not reflect those of world prices. Specifically, MPS is defined as the “annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, arising from policy measures that create a gap between domestic market prices and border prices of a specific agricultural commodity, measured at the farm gate level” (OECD, 2016[16]). It is calculated for individual commodities as the gap between the domestic price paid to producers and the equivalent price at the border. This is multiplied by the quantity produced and aggregated to the national level.
This definition contains three key elements. First, it measures the transfers that arise from policy measures that create a price gap (e.g. import tariffs, minimum prices, export taxes, etc.). Second, it measures gross transfers (positive or negative) to agricultural producers from consumers and taxpayers. Third, it is measured at the farm gate level to ensure that MPS values are consistent with the production and price data for the farming sector overall.
The price gap for a specific commodity measures the difference between two prices: the average domestic price and a reference price calculated at the same level in the value chain (generally at the farm gate). This reference price corresponds to the country’s border price, i.e. the import price (for net-imported commodities) or the export price (for net-exported commodities). In the absence of a border price, another price indicative of them is used which could be a world price or another country’s border price, adjusted for transportation costs and any differences in quality, weight or processing level, to make them comparable to the average domestic price (see below).
If the price gap is such that the domestic price is twice the border price, the MPS as a share of commodity gross receipts should be 50% and producers receive double the revenue they would have otherwise. If domestic prices are five times border prices, the MPS as a share of commodity gross receipts would be 80%--an amount observed for some commodities. For negative MPS, if the MPS as a share of commodity gross receipts is -138%, the implicit tax on revenue would be 58%.
The price gap is calculated only if policies exist that can could cause such a gap, such as border measures that restrict or promote imports or exports, and government purchases, sales and intervention prices in the domestic market. If countries do not implement such policies, the price gap is assumed to be zero. A non-zero price gap, whether positive or negative, originates from price-distorting policies. It is important to note that MPS measures the “policy effort” (or level of support to prices), not the policy effect (e.g. the impact on farm income). In addition to policy instruments that restrict price transmission (say, a target price), market developments (such as exchange rate movements affecting world prices expressed in local currencies) may influence the implied policy effort and, hence, the resulting transfers.
The calculation of the price gap for individual commodities requires information not only on product prices, but also on differences in product qualities, processing and transportation margins, to compare like with like. In some cases, difficulties in identifying and obtaining relevant prices or other required information prevent the price gap calculation used to calculate MPS from being based on observed price gaps. An alternative option for calculating the price gap is the use of import tariffs or export taxes, which is likely to provide accurate MPS estimates only if a uniform tariff or tax rate is the sole border measure in place.
The use of tariffs rather than price gap data comes with a number of complex measurement issues, covering issues such as the composition of product groups across tariff lines and the seasonality of production and trade. Moreover, in order to capture the marginal rather than the average import protection rate, the statutory applied most-favoured nation (MFN) tariffs are used. In light of the growing number of preferential trade agreements (PTAs) engaged in by countries covered in this report, an important caveat therefore relates to the fact that the statutory applied MFN tariffs remain unchanged even when increased quantities of products are imported under preferential tariffs or duty-free within such PTAs. As a consequence, potential liberalising effects of new PTAs are not reflected in the MPS estimates when tariffs are used to calculate them. With the increased relevance of PTAs for international trade, it therefore becomes even more important to base the MPD calculations on price gap calculations whenever data allow.
When interpreting MPS values, it is important to bear in mind that MPS is not a measure of public expenditures but an estimation of implicit or explicit transfers. MPS estimates published by the OECD therefore often differ from, and should not be confused with, those published by other organisations, including by the World Trade Organization, which may use very different concepts to calculate their indicators, despite similar names.
Source: OECD (2020[17]).
The gap between domestic prices and world prices has narrowed over the past 20 years on average across the OECD (Figure 2.14). To measure this, the OECD uses the indicator Nominal Protection Coefficient (NPC), which is the ratio between average effective producer prices and the border price. The effective producer price is the price received plus any payments provided per unit of output. Declining price gaps, measured by NPC, imply that producers are receiving price signals that more closely reflect world prices.
On average over all OECD countries, the NPC averaged 1.07 in 2020-22. This means that effective prices received by farmers were on average 7% higher than world prices. This represents a decline of 19 percentage points from the 26% higher prices averaged in 2000-02. Price gaps have declined in almost all countries between 2000-02 and 2020-22. Change has been particularly substantial in countries such as Switzerland, Norway, Japan, and Iceland where price gaps have reduced by between 55 and 110 percentage points.
China is the only country to have seen a rising positive NPC over the past 20 years, with the gap widening from 1.03 to 1.15 over that time. This reflects the introduction of several measures that have increased domestic prices, such as minimum purchase prices for rice and wheat. Price gaps in India and Argentina are increasingly negative. The NPC in India has fallen from 0.91 to 0.78, meaning prices are now 22% below international levels. Likewise, the NPC of Argentina has fallen from 0.89 to 0.86, putting prices 14% below world prices.
The use of partly or fully decoupled producer support has increased
Payments based on production factors (area, animal numbers, revenue or income) or other non-commodity criteria have declined as a share of gross farm receipts across the 54 countries from 4.6% in 2000-02 to 3.8% in 2020-22. This has been driven by countries opting to remove or reorient policies which use current area, animal numbers, farm receipts or income as the criteria for determining the eligibility or amount of payments. Payments from policies of this type have declined from 3.2% to 1.9% of gross farm receipts in the last 20 years. This is a welcome development as payments that use current production factors as a criterion for payment provide a direct production incentive to farmers that can have a distorting effect, even if generally less so than MPS and other measures previously discussed.
Payments based on current production factors have in many cases been replaced by payments based on historical production factors (both those requiring and not requiring production), which rose from 1.1% to 1.7%. Payments based on historical production factors like this are generally said to be “decoupled” from production because they have no direct link to current production decisions, even though they tend to slow structural change and hinder the conversion of agricultural land to other uses. About 96% of payments based on historical production factors do not require current production.
The move from current to historical production factor payments has been particularly visible in the European Union. Payments based on current production factors accounted for 11.6% of gross farm receipts in 2000-02 and there were none based on non-current production factors. Following the Fischler Reform from 2003 much of the support in the European Union was decoupled from production and in 2020‑22, payments on current production factors had fallen to 4.1% of the total and those on non-current production factors represented 6.8%. A similar pattern of decoupling has occurred to lesser degree in Korea and Norway (Figure 2.15).
Figure 2.15. Use and composition of support that is less coupled to production, selected countries, 2000-02 and 2020-22
Notes: Figure presents countries having share of payments based on area, animal numbers, farm receipts or farm income and on non-commodity criteria above 1% for 2020-22 period. Countries are ranked according to the total share of payments for 2020-22.
1. EU15 for 2000-02, EU27 and the United Kingdom for 2020, and EU27 from 2021.
Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Producer support tied to specific commodities also declined
As well as the structure of support, another important lens to investigate producer support is to examine which commodities (or groups of commodities) are being supported. Policies are often designed to result in benefits or losses that are commodity specific. For example, a tariff put on imports of wheat results in market price support which advantages domestic producers of wheat to the exclusion of producers of other commodities. By their construction, policies providing MPS and payments for outputs are commodity specific, while other budgetary payments may or may not be targeted to a specific commodity. For example, payments based on inputs or other production factors often stipulate terms that make them commodity specific such as when a fertiliser subsidy is granted only for production of maize, or a payment that is made per head of livestock. The total value of such payments taken together with MPS are reported for each commodity as single-commodity transfers (SCT).
On average across all countries in this report, SCTs averaged 4.4% of gross farm receipts in 2020-22, roughly half of the 9.8% averaged in 2000-02. Preliminary estimates for 2022 indicate that SCTs declined in 2022 for the second year in a row. MPS policies account for most commodity-specific support, so SCTs followed a similar pattern to those described in the section on MPS above.
SCTs are particularly high for sugar, maize and rice where they each represented over 15% of the gross receipts for the respective commodity in 2020-22 (Figure 2.16). However, there is significant variation in the level of commodity support among the covered countries. Support averaged 8.7% of egg receipts, but this average is the net effect of significant price support in some countries and significant implicit taxation in others. In countries that subsidised egg production through supported domestic prices and other measures, support averaged 36% of egg receipts. Conversely in countries that penalised egg production through depressed market prices, implicit taxation averaged 27% of egg receipts. Egg production has been negatively affected by avian flu which has decimated flocks in recent years. As a result, the gap between domestic and border prices has been volatile, a fact that is reflected in the changed values of MPS.
Commodity-specific support can influence production choices by changing the relative returns of commodities or groups of commodities. For example, a payment per bale of cotton produced can lead to more area being planted to cotton instead of other alternatives. In this way, support that is targeted to a few specific commodities can be more distorting of production than the same level of support that is distributed evenly across commodities or that is not commodity specific. To the extent the commodities targeted by SCTs are more intensive users of natural resources or generate higher pollution than those not benefitting from this support, commodity-specific support can also increase environmental pressures.
Farm revenues continued to increase, despite lower levels of producer support in 2022
Despite falling levels of producer support in 2022, gross farm receipts are estimated to have increased for a sixth consecutive year. Higher world market prices for agricultural products in 2022 drove a significant increase in the value of agricultural production which more than offset declines in market price support and budgetary payments to producers. Overall, gross farm receipts were 20% higher in 2020-22 compared to 2017-19 before the COVID-19 pandemic.
Consumers support
Consumers are implicitly taxed on average due to market price support
Agricultural policies can increase the price of food bought by consumers, as when positive MPS is in place, or they can reduce food costs through food assistance programmes (which usually target poor consumers). The Targeted Public Distribution System (TPDS) in India and the Supplemental Nutrition Assistance Program (SNAP) in the United States are two examples. Consumer support includes both support to final consumers of agricultural products as well as industry consumers who transform agricultural commodities into processed products. India, Argentina, Viet Nam and Kazakhstan also support consumers via depressed commodity prices.
Budgetary consumer support rose dramatically following the outbreak of the COVID-19 pandemic. In 2020, governments provided USD 131 billion in budgetary support to agricultural consumers, roughly double the USD 65 billion provided one year earlier. Consumer budgetary support declined to an estimated USD 112 billion in 2022, still higher than pre-pandemic levels. Food subsidies in India accounted for a large share of this increase, with temporary measures in 2020 increasing budgetary consumer support 5‑fold to USD 74 billion.
While the pandemic brought about temporary increases in consumer support, the normal situation is that consumers pay higher than world prices for food. In 2020-22, policy support to consumers represented ‑3.7% of gross expenditures as measured at farm gate prices (an indicator referred to as %CSE) (Figure 2.17). This implies that consumers were implicitly taxed on purchases of agricultural products. In most countries, the %CSE mirrors the level of market price support provided to producers. Korea, Iceland, Japan, Switzerland, Norway, and the Philippines all have %CSE of -20% or above of gross expenditures reflecting high levels of market price support to producers. Norway and Indonesia provide some level of budgetary support to consumers to partially offset these negative effects.
Declining rates of MPS have reduced the effect of agricultural policies on consumers over time. Across all 54 countries, the %CSE has risen from an average of ‑10.3% in 2000-02 to ‑3.7% in 2020-22. This is most notable in OECD countries, where the %CSE rose from ‑18.3% in the early 2000s to ‑3% in the recent data. Conversely, consumers in emerging economies have become worse off over time, with %CSE falling from near zero 20 years ago to average ‑4.1% in 2020-22. This largely reflects increasing market price support in China which drove %CSE to average ‑12.7% in 2020-22.
General Services Support
Support to general services is declining in real terms
Countries provided USD 106 billion in support for general services to the agricultural sector on average over 2020-22. While this spending has increased in nominal terms over the past 20 years, it has declined as a share of total support to the sector. This share had fluctuated between 15% and 17% of support since 2000 but fell significantly after 2018 and averaged 12.5% in 2020-22. General services support has also declined relative to the size of the sector, from an average of 4.6% of the value of agricultural production in 2000-02 to 2.5% in 2020-22. This trend is observed both in the OECD and among emerging economies. In 2020-22, spending on general services was the equivalent of 3.4% of the value of production in OECD countries and 2% in the 11 emerging economies.
General services support arises from policies that are aimed to benefit the broader agricultural sector, rather than producers or consumers individually. Investments in general services can help the agricultural sector to become more productive, sustainable and resilient. For example, infrastructure development and maintenance can include building hydrological assets which make irrigation more accessible, or other physical infrastructure such as rail or port storage which makes transport and marketing of products easier and reduces wastage. It can also include institutional infrastructure such as support for farm organisations or payments relating to structural transformation of the industry, such as financing new entrants, exits or diversification strategies outside of agriculture. Infrastructure spending was almost half of general services support in the most recent data, worth 46% in 2020-22, most of which was for irrigation-related projects. Agricultural innovation systems, covering both the generation and transfer of knowledge; and inspection and control measures are also important for enabling productivity growth and accounted for 23% and 8%, respectively. These three types of investment will be crucial for preparing agriculture to adapt to a changing climate. However spending across all three has declined relative to the size of the agricultural sector, accounting for under 10% of total support.
Other forms of general service spending have the potential to distort markets, but also generally account for a low, and decreasing, percentage of general service spending. Marketing and promotion was 8% of general service spending and the cost of public stockholding10 was 13%.
Summary and conclusions
Agricultural support policies generated USD 851 billion per year in transfers towards agriculture in 2020‑22 across the 54 countries covered in this report. This is the highest level since records began and 2.5 times larger than aggregate transfers observed in 2000-02, although it represents a decline as a share of the agricultural value of production. Almost three-quarters of transfers, USD 626 billion, was transferred to individual producers through higher prices and budget payments. Some countries continue to implicitly tax their producers through policies that depress domestic market prices, generating transfers away from producers worth USD 179 billion per year.
Overall, total net support to the sector (TSE) is equivalent to 0.6% of GDP across the 54 countries, down from 1.0% in the early 2000s. As a share of the agricultural sector, total net support was 16% of agricultural value of production in 2020-22, compared to 27% in 2000-02.
Net producer support across all 54 countries has declined as a share of gross farm receipts (%PSE) over the past 20 years, from 18% in 2000-02 to 10% in 2020-22. This reflects declining producer support amongst OECD countries, which fell from 28% of gross farm receipts in the early 2000s to 15% in 2020‑22. Conversely, producer support rose in emerging economies between 2000-02 and 2020-22 from 4% to 7%.
Most of the decline in OECD support occurred in the 2000s, driven by declining market price support. Progress in reducing support has been slower in recent years and there has been some increase in payments based on current production factors in recent years, despite consistent recommendations to reduce notably the potentially most distorting forms of support. The rise in emerging economy support largely reflects a significant increase in the prominence of China as an agricultural producer and the vast market price support it provides to producers. China now accounts for around 44% (USD 276 billion) of all the producer support among the 54 countries covered in this report after accounting for only 7% in 2000‑02.
Market price support is still the dominant form of support to producers. MPS generated USD 333 billion or roughly half of the positive support to agriculture in 2020-22. It has declined as a share of gross farm receipts from 11.5% at the start of the century to 7.3% today. At the same time, several countries utilise policies which caused negative market price support worth USD 179 billion. This implicit tax was equivalent to 3.9% of gross farm receipts in 2020-22, up from 1.8% of GFR two decades earlier. This implies that across all 54 countries, positive producer support accounted for 13.7% of gross farm receipts in 2020-22.
Other support to farmers included USD 11 billion in payments based on production output and USD 67 billion in input subsidies without use constraints. These payments have a similar tendency as market price support to create production distortions. This means that USD 411 billion was transferred to producers in forms that are potentially the most distorting, or around two-thirds of positive producer support. The remaining USD 219 billion was provided for in payments that were less coupled to production decisions. This includes USD 77 billion in decoupled payments based on historical production factors such as area, animal numbers, receipts or income. Although they tend to be less harmful than coupled payments, decoupled payments may slow structural change and hinder the conversion of agricultural land to other uses.
Aside from support to individual producers, governments provided USD 106 billion to assist the sector more broadly through general services in 2020-22. This equates to around 12.5% of positive transfers to agriculture, down from 16.0% two decades earlier. Expenditures for general services also declined relative to the sector’s size, from 4.6% of the value of production in 2000-02 to 2.5% in 2020-22. Investments in agricultural knowledge and innovation, inspection and control, and infrastructure development and maintenance, which represent general services with a particularly strong potential to facilitate sustainable productivity growth and resilience, totalled USD 82 billion or about three-quarters of all support to general services. Relative to the total value of production, spending on these services fell from 3.1% in 2000-02 to 1.9% in 2020-22.
Consumers were also supported with direct budgetary assistance of USD 115 billion per year on average in 2020-22. This was mostly in the form of food assistance programmes. On average, however, consumers were still implicitly taxed on agricultural products through price policies that support farmers. These implicit taxes more than offset the direct budgetary assistance from government.
The level of support varied greatly among countries. On average during 2020-22, producer support ranged from 5% or less of the value of agricultural production in Brazil, South Africa, New Zealand, and Ukraine, to more than 70% in Norway, Switzerland, and Iceland. Net support was negative in Argentina, Viet Nam, and India.
Countries introduced a range of emergency measures in response to recent global shocks including inflationary pressures as well as the war in Ukraine and its effects. Countries should now act to build resilience to future shocks
Prices for agricultural products and inputs rose significantly following the outbreak of war due to the prominence of Ukraine and Russia in global trade markets for these goods. This happened in the context of global value chains that had already been tested by COVID-19 in the two years prior. Governments responded to these new global challenges by implementing a wide range of different policies aimed at supporting farmers and consumers, securing critical supplies, and providing assistance to Ukraine.
The shocks experienced have led some governments to rethink their approach to securing strategic supplies. Many countries reduced tariffs on imports of animal feed and agricultural goods as a means of taming rising input costs and consumer prices. Others put restrictions on exports of food and fertiliser to protect domestic supplies. Countries also took steps to help Ukraine and its agricultural sector. These included efforts to resume Ukrainian exports through the Black Sea and via road or rail through Europe, easing restrictions on trade with Ukraine, and providing employment opportunities to Ukrainian refugees in the agricultural sector. Countries are also taking steps now to prepare the Ukrainian agricultural sector to be able to rebound swiftly once hostilities end. Such efforts include bi- or plurilateral government-to-government collaboration, public-private partnerships, and international efforts such as the recently launched OECD Ukraine Country Programme.
Looking ahead, countries should draw on the experiences of the past few years and seek to build resilience to risks in the future. Governments should look to implement policies and investments that enhance the ability of the sector to absorb, adapt and transform in response to future shocks. For example, they should seek out “no-regrets” policies that provide these benefits under a wide range of future scenarios, while also contributing to agricultural productivity and sustainability. Temporary measures are often hard to dismantle once in place and long-term objectives need to be balanced with short-term responses. Risk management policies should be developed with stakeholders to ensure a common understanding of the risk landscape and responsibilities for managing risks.
Market price support has fallen in response to macroeconomic factors, but more reform is needed
Preliminary estimates indicate that market price support declined in 2022. This decline has been largely driven by the recent period of exceptional spikes in agricultural prices which caused prices of supported products to become relatively less valuable compared to if it were valued at world prices. This is a similar experience to what occurred during price spikes in 2008 and 2011. Market price support will likely rebound in 2023 depending on actions taken by governments implementing MPS policies and the path of global prices.
Two countries, Costa Rica and Israel, took steps in 2022 to reduce market price support as part of an effort to liberalise some of their agricultural industries in line with OECD recommendations. These are positive steps to reduce production and trade distortions within their agricultural sectors. However, policies which create market price support remains particularly prevalent in the portfolio of agricultural support for many economies and more should be done to reform.
Reforms in OECD countries have largely stalled in the past ten years, with little change in the level or composition of support over this period. In 2022, signatories to the OECD Ministerial Declaration11 committed to “intensify efforts as appropriate to reform or reorient agricultural policy, and in particular to address those support measures that are harmful to the environment, to move towards more sustainable agriculture and food systems”. Meanwhile, support, which had increased significantly in the past, has remained high over the past decade in large emerging economies. Across the 54 countries, two-thirds of support is still provided through price interventions and other distorting support. These are known for their negative implications for food security and the environment, and for being both inefficient and untargeted to providing support to those households in need. Countries should look to reinvigorate domestic policy reform efforts to reduce the use of these measures. At the same time, more stringent multilateral disciplines may be required to facilitate such reforms.
Countries should not lose sight of the need to do more to mitigate and adapt their agricultural sectors to climate change
The recent few years has seen significant challenges for agriculture between the COVID‑19 pandemic and now the fallout from the war in Ukraine. Countries have largely managed to respond effectively to these crises and absorb the shocks rapidly. However, countries should not lose sight of the existing and coming challenges posed by climate change.
Some countries pledged more ambitious climate targets in 2022. Others, such as New Zealand have taken positive new steps to price carbon. These are welcome developments that will help countries to respect their Paris Agreement commitments. More could be done to increase ambitions, however. Only 19 out of the 54 countries in this report have a mitigation target specific to the agricultural sector, and three do not have targets to reach or get close to net zero emissions for their overall economies.
The structure of much agricultural policy support is at odds with the actions needed to mitigate and adapt to climate change. USD 411 billion of support is in forms that are potentially most distorting, comprising market price support and payments linked to output or the unconstrained use of inputs. These policies may encourage over-production and can contribute to GHG emissions if they lead to the overuse of polluting inputs, degradation of soils and increased land clearing. They can also contribute to increasing pressure on resources, biodiversity and the environment that are already adversely affected by climate change. Many of these policies also have the potential to hinder climate change adaptation by reducing incentives for farmers to change production systems away from subsidised commodities in response to changing climatic conditions. Countries may need to collaborate to avoid possible environmental leakages and other issues that may arise from asymmetries in policies across countries.
The role of support for livestock production is particularly sensitive in this regard. Livestock is responsible for the largest share of agricultural GHG emissions and a strong contributor to the global methane footprint. Livestock is highly supported, typically in the form of MPS. Support to poultry, beef and veal and pig meat are all around 10% of their gross commodity receipts. Combined, market price support to these three commodities were worth USD 71 billion or 11% of all positive producer support. Rice also contributes significantly to emissions relative to other crops due to methane from flooded areas. Support to rice production totalled USD 54 billion in 2020‑22. These forms of support to highly emitting commodities should be reduced and reformed as much as possible while taking into consideration national conditions and policy design.
References
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Annex 2.A. Definition of OECD indicators of agricultural support
Nominal indicators used in this report
Producer Support Estimate (PSE): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policy measures that support agriculture, regardless of their nature, objectives or impacts on farm production or income. It includes market price support, budgetary payments and budget revenue foregone, i.e. gross transfers from consumers and taxpayers to agricultural producers arising from policy measures based on: current output, input use, area planted/animal numbers/receipts/incomes (current, non-current), and non-commodity criteria. PSE categories are defined in Box 2 A.1.
Market Price Support (MPS): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers arising from policy measures that create a gap between domestic market prices and border prices of a specific agricultural commodity, measured at the farm gate level. MPS is available by commodity, and sums of negative and positive components are reported separately where relevant along with the total MPS.
Producer Single Commodity Transfers (producer SCT): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policies linked to the production of a single commodity such that the producer must produce the designated commodity in order to receive the payment. This includes broader policies where transfers are specified on a per-commodity basis. Producer SCT is also available by commodity.
Group Commodity Transfers (GCT): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policies whose payments are made on the basis that one or more of a designated list of commodities is produced, i.e. a producer may produce from a set of allowable commodities and receive a transfer that does not vary with respect to this decision.
All Commodity Transfers (ACT): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policies that place no restrictions on the commodity produced but require the recipient to produce some commodity of their choice.
Other Transfers to Producers (OTP): The annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policies that do not require any commodity production at all.
Consumer Single Commodity Transfers (consumer SCT): The annual monetary value of gross transfers from (to) consumers of agricultural commodities, measured at the farm gate level, arising from policies linked to the production of a single commodity. Consumer SCT is also available by commodity.
Consumer Support Estimate (CSE): The annual monetary value of gross transfers from (to) consumers of agricultural commodities, measured at the farm gate level, arising from policy measures that support agriculture, regardless of their nature, objectives or impacts on consumption of farm products. If negative, the CSE measures the burden (implicit tax) on consumers through market price support (higher prices), that more than offsets consumer subsidies that lower prices to consumers.
General Services Support Estimate (GSSE): The annual monetary value of gross transfers arising from policy measures that create enabling conditions for the primary agricultural sector through development of private or public services, institutions and infrastructure, regardless of their objectives and impacts on farm production and income, or consumption of farm products. The GSSE includes policies where primary agriculture is the main beneficiary, but does not include any payments to individual producers. GSSE transfers do not directly alter producer receipts or costs or consumption expenditures. GSSE categories are defined below.
Total Support Estimate (TSE): The annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures that support agriculture, net of the associated budgetary receipts, regardless of their objectives and impacts on farm production and income, or consumption of farm products.
Total Budgetary Support Estimate (TBSE): The annual monetary value of all gross budgetary transfers from taxpayers arising from policy measures that support agriculture, regardless of their objectives and impacts on farm production and income, or consumption of farm products.
Gross Farm Receipts (GFR): The annual monetary value of production, to which budgetary transfers to individual producers are added (i.e. VP + PSE – MPS).
Commodity Gross Receipts: The annual monetary value of production for an individual commodity, to which budgetary transfers to producers of that commodity are added (i.e. VP + producer SCT – MPS).
Ratio indicators and percentage indicators
Percentage PSE (%PSE): PSE transfers as a share of gross farm receipts (including support in the denominator).
Percentage SCT (%SCT): Single Commodity Transfers as a share of gross receipts for the specific commodity (including support in the denominator).
Share of SCT in total PSE (%): Share of Single Commodity Transfers in the total PSE. This indicator is also calculated by commodity.
Producer Nominal Protection Coefficient (producer NPC): The ratio between the average price received by producers (at farm gate), including payments per tonne of current output, and the border price (measured at farm gate). The Producer NPC is also available by commodity.
Producer Nominal Assistance Coefficient (producer NAC): The ratio between the value of gross farm receipts including support and gross farm receipts (at farm gate) valued at border prices (measured at farm gate).
Percentage CSE (%CSE): CSE transfers as a share of consumption expenditure on agricultural commodities (at farm gate prices), net of taxpayer transfers to consumers. The %CSE measures the implicit tax (or subsidy, if CSE is positive) placed on consumers by agricultural price policies.
Consumer Nominal Protection Coefficient (consumer NPC): The ratio between the average price paid by consumers (at farm gate) and the border price (measured at farm gate). The Consumer NPC is also available by commodity.
Consumer Nominal Assistance Coefficient (consumer NAC): The ratio between the value of consumption expenditure on agricultural commodities (at farm gate) and that valued at border prices.
Percentage TSE (%TSE): TSE transfers as a percentage of GDP.
Percentage TBSE (%TBSE): TBSE transfers as a percentage of GDP.
Percentage GSSE (%GSSE): Share of expenditures on general services in the Total Support Estimate (TSE).
Share of potentially most distorting transfers in aggregated gross producer transfers (%): represents the sum of positive MPS, the absolute value of negative MPS, payments based on output and payments based on unconstrained use of variable inputs, relative to the sum of positive MPS, the absolute value of negative MPS, and all budgetary payments to producers.
Annex Box 2.A.1. Definitions of categories in the PSE classification
Definitions of categories
Category A1, Market price support (MPS): Transfers from consumers and taxpayers to agricultural producers from policy measures that create a gap between domestic market prices and border prices of a specific agricultural commodity, measured at the farm gate level.
Category A2, Payments based on output: Transfers from taxpayers to agricultural producers from policy measures based on current output of a specific agricultural commodity.
Category B, Payments based on input use: Transfers from taxpayers to agricultural producers arising from policy measures based on on-farm use of inputs:
Variable input use that reduces the on-farm cost of a specific variable input or a mix of variable inputs.
Fixed capital formation that reduces the on-farm investment cost of farm buildings, equipment, plantations, irrigation, drainage, and soil improvements.
On-farm services that reduce the cost of technical, accounting, commercial, sanitary and phytosanitary assistance and training provided to individual farmers.
Category C, Payments based on current A/An/R/I, production required: Transfers from taxpayers to agricultural producers arising from policy measures based on current area, animal numbers, revenue, or income, and requiring production.
Category D, Payments based on non-current A/An/R/I, production required: Transfers from taxpayers to agricultural producers arising from policy measures based on non-current (i.e. historical or fixed) area, animal numbers, revenue, or income, with current production of any commodity required.
Category E, Payments based on non-current A/An/R/I, production not required: Transfers from taxpayers to agricultural producers arising from policy measures based on non-current (i.e. historical or fixed) area, animal numbers, revenue, or income, with current production of any commodity not required but optional.
Category F, Payments based on non-commodity criteria: Transfers from taxpayers to agricultural producers arising from policy measures based on:
Long-term resource retirement: Transfers for the long-term retirement of factors of production from commodity production. The payments in this subcategory are distinguished from those requiring short-term resource retirement, which are based on commodity production criteria.
A specific non-commodity output: Transfers for the use of farm resources to produce specific non-commodity outputs of goods and services, which are not required by regulations.
Other non-commodity criteria: Transfers provided equally to all farmers, such as a flat rate or lump sum payment.
Category G, Miscellaneous payments: Transfers from taxpayers to farmers for which there is a lack of information to allocate them among the appropriate categories.
Note: A (area), An (animal numbers), R (receipts) or I (income).
Definitions of labels
With or without current commodity production limits and/or limit to payments: Defines whether or not there is a specific limitation on current commodity production (output) associated with a policy providing transfers to agriculture and whether or not there are limits to payments in the form of limits to area or animal numbers eligible for those payments. Applied in categories A–F.
With variable or fixed payment rates: Any payments is defined as subject to a variable rate where the formula determining the level of payment is triggered by a change in price, yield, net revenue or income or a change in production cost. Applied in categories A–E.
With or without input constraints: defines whether or not there are specific requirements concerning farming practices related to the programme in terms of the reduction, replacement, or withdrawal in the use of inputs or a restriction of farming practices allowed. Applied in categories A–F. The payments with input constrains are further broken down to:
Payments conditional on compliance with basic requirements that are mandatory (with mandatory);
Payments requiring specific practices going beyond basic requirements and voluntary (with voluntary).
Specific practices related to environmental issues.
Specific practices related to animal welfare.
Other specific practices.
With or without commodity exceptions: defines whether or not there are prohibitions upon the production of certain commodities as a condition of eligibility for payments based on non-current A/An/R/I of commodity(ies). Applied in Category E.
Based on area, animal numbers, receipts or income: defines the specific attribute (i.e. area, animal numbers, receipts or income) on which the payment is based. Applied in categories C–E.
Based on a single commodity, a group of commodities or all commodities: defines whether the payment is granted for production of a single commodity, a group of commodities or all commodities. Applied in categories A–D.
Drivers of the change in PSE
Decomposition of PSE
Per cent change in PSE: Per cent change in the nominal value of the PSE expressed in national currency. The per cent change is calculated using the two most recent years in the series.
Contribution of MPS to per cent change in PSE: Per cent change in nominal PSE if all variables other than MPS are held constant.
Contribution of price gap to per cent change in the PSE: Per cent change in nominal PSE if all variables other than gap between domestic market prices and border prices are held constant.
Contribution of quantity produced to per cent change in the PSE: Per cent change in nominal PSE if all variables other than quantity produced are held constant.
Contribution of budgetary payments (BP) to per cent change in PSE: Per cent change in nominal PSE if all variables other than BP are held constant.
Contribution of BP elements to per cent change in PSE: Per cent change in nominal PSE if all variables other than a given BP element are held constant. BP elements include Payments based on output, Payments based on input use, Payments based on current A/An/R/I, production required, Payments based on non-current A/An/R/I, production required, Payments based on non-current A/An/R/I, production not required, Payments based on non-commodity criteria and Miscellaneous payments.
Change in Producer Price
Per cent change in Producer Price: Per cent change in Producer Price (at farm gate) expressed in national currency. The per cent change is calculated using the two most recent years in the series.
Decomposition of the change in the Border Price
Per cent change in Border Price: Per cent change in Border Price (at farm gate) expressed in national currency. The per cent change is calculated using the two most recent years in the series.
Contribution of Exchange Rate to per cent change in Border Price: Per cent change in the Border Price (at farm gate) expressed in national currency if all variables other than Exchange Rate between national currency and USD are held constant.
Contribution of Border Price expressed in USD to per cent change in Border Price: Per cent change in the Border Price (at farm gate) expressed in national currency if all variables other than Border Price (at farm gate) expressed in USD are held constant.
Note: The change in Producer Support Estimate (PSE) is not decomposed when PSE is negative for the current and/or previous year. The producer price change and the border price change are not calculated when both negative and positive market price support (MPS) occur at the commodity level for the previous year. Note that negative MPS estimates for livestock products may arise in cases of aligned product prices if there is positive MPS for feed commodities.
Definition of GSSE categories
Agricultural knowledge and innovation system
Agricultural knowledge generation: Budgetary expenditure financing research and development (R&D) activities related to agriculture, and associated data dissemination, irrespective of the institution (private or public, ministry, university, research centre or producer groups) where they take place, the nature of research (scientific, institutional, etc.), or its purpose.
Agricultural knowledge transfer: Budgetary expenditure financing agricultural vocational schools and agricultural programmes in high-level education, training and advice to farmers that is generic (e.g. accounting rules, pesticide application), not specific to individual situations, and data collection and information dissemination networks related to agricultural production and marketing.
Inspection and control
Agricultural product safety and inspection: Budgetary expenditure financing activities related to agricultural product safety and inspection. This includes only expenditures on inspection of domestically produced commodities at first level of processing and border inspection for exported commodities.
Pest and disease inspection and control: Budgetary expenditure financing pest and disease control of agricultural inputs and outputs (control at primary agriculture level) and public funding of veterinary services (for the farming sector) and phytosanitary services.
Input control: Budgetary expenditure financing the institutions providing control activities and certification of industrial inputs used in agriculture (e.g. machinery, industrial fertilisers, pesticides, etc.) and biological inputs (e.g. seed certification and control).
Development and maintenance of infrastructure
Hydrological infrastructure: Budgetary expenditure financing public investments into hydrological infrastructure (irrigation and drainage networks).
Storage, marketing and other physical infrastructure: Budgetary expenditure financing investments to off-farm storage and other market infrastructure facilities related to handling and marketing primary agricultural products (silos, harbour facilities – docks, elevators; wholesale markets, futures markets), as well as other physical infrastructure related to agriculture, when agriculture is the main beneficiary.
Institutional infrastructure: Budgetary expenditure financing investments to build and maintain institutional infrastructure related to the farming sector (e.g. land cadastres; machinery user groups, seed and species registries; development of rural finance networks; support to farm organisations, etc.).
Farm restructuring: Budgetary payments related to reform of farm structures financing entry, exit or diversification (outside agriculture) strategies.
Marketing and promotion
Collective schemes for processing and marketing: Budgetary expenditure financing investment in collective, mainly primary, processing, marketing schemes and marketing facilities, designed to improve marketing environment for agriculture.
Promotion of agricultural products: Budgetary expenditure financing assistance to collective promotion of agro-food products (e.g. promotion campaigns, participation on international fairs).
Cost of public stockholding: Budgetary expenditure covering the costs of storage, depreciation and disposal of public storage of agricultural products.
Miscellaneous: Budgetary expenditure financing other general services that cannot be disaggregated and allocated to the above categories, often due to a lack of information.
More detailed information on the indicators, their use and limitations is available in OECD’s Producer Support Estimate and Related Indicators of Agricultural Support: Concepts, Calculation, Interpretation and Use (the PSE Manual) available on the OECD public website (http://www.oecd.org/agriculture/topics/agricultural-policy-monitoring-and-evaluation/documents/producer-support-estimates-manual.pdf).
Notes
← 1. This report does not contain a country chapter on the Russian Federation, nor any tables with support indicators in the Statistical Annex. However, aggregate data for the 11 emerging economies and for all 54 countries covered in this report continue to include those for Russia.
← 2. Crop production developments are expressed on a crop year basis.
← 3. The Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian ports, also known as Black Sea Grain Initiative, is an agreement between Russia and Ukraine facilitated by Türkiye and the United Nations and creating procedures to safely export grains from certain Ukrainian ports, after Russia had blocked such exports following its invasion of Ukraine. The agreement was originally signed in July 2022 for a period of 120 days and renewed several times thereafter. The initiative was not renewed after its third term, which expired on 17 July 2023.
← 4. This refers to total gross farm receipts expressed in current US dollar.
← 5. Any variation in support levels across EU Member States is not presented in the support database OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
← 6. Includes 15 countries.
← 7. Includes all current EU27 countries for all three years. United Kingdom is included for 2020 only.
← 8. Further analysis is needed on the environmental impacts of market price support when limits on production are in place.
← 9. Single Commodity Transfers (SCTs) are the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers arising from policies linked to the production of a single commodity, such that the producer must produce the designate commodity in order to receive the transfer. In this instance it is the monetary value of the gross transfers from Indian producers of wheat to consumers and taxpayers as a result of policies affecting wheat production. SCTs are measured at the farm gate level.
← 10. Cost of public stockholding are expenditures to cover the cost of storage or disposal of agricultural commodities, as well as their depreciation.
← 11. OECD (2022[18]), Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems, OECD/LEGAL/0483, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0483.