2. Overall trends in agricultural support
Total support to agriculture (TSE) in OECD countries1 represented USD 329 billion (EUR 289 billion) per year on average in 2018-20 of which 73%, or USD 240 billion (EUR 211 billion), was provided as support to producers individually (PSE). Producer support represented 18.2% of gross farm receipts (%PSE) in 2018-20 across the OECD area, a decline from around 28% in 2000-02 and more than 35% in 1986-88 (Table 2.1).
The way support is delivered to producers also evolved. In particular, the long-term decline of support based on commodity output (including market price support and output payments) characterises the evolution of support to agriculture in the OECD area. OECD work identifies this as having the strongest potential to distort agricultural production and trade together with payments based on the unconstrained use of variable inputs, which slightly increased across OECD countries compared to the beginning of the millennium.
At the other end of the spectrum in the PSE classification, some countries apply significantly less-distorting forms of support, such as payments based on parameters not linked to current production, or based on non-commodity criteria such as land set-aside, or payments for specific environmental or animal welfare outcomes. Most notably, payments based on historical entitlements (generally crop area or livestock numbers of a given reference period in the past) increased in many OECD countries in the last two decades, representing some 4% of gross farm receipts (GFR) and about 22% of the PSE during 2018-20. Payments based on current crop area and animal numbers remain largely unchanged compared to 2000-02, and represent around 21% of total producer support (Table 2.1).
Expenditures financing general services to the sector (GSSE) increased (in nominal terms) in the OECD area from USD 37 billion per year in 2000-02 to USD 44 billion in 2018-20. However, relative to the size of the sector, expenditures for general services declined from more than 7% of agricultural gross value-added to less than 6% suggesting that these expenditures did not keep pace with sector growth. In 2018-20, most of this went to infrastructure (USD 18 billion), a slight increase compared to 2000-02, and agricultural knowledge and innovation (USD 14 billion), an increase of 70%. Expenditures for inspection and control services more than doubled, while spending for marketing and promotion remained around the same and public stockholding declined substantially over the same period. But all of these represented smaller shares of the GSSE expenditure (Table 2.1). Total support to agriculture as a share of GDP declined significantly over time.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Agricultural policies in the 12 emerging economies2 covered by this report generated transfers to the sector averaging USD 385 billion (EUR 336 billion) per year in 2018-20 of which USD 294 billion (EUR 257 billion) went to individual producers. At the same time, however, policies in a few countries suppressed domestic prices for certain products, generating an implicit tax in the form of negative market price support (MPS) averaging USD 104 billion (EUR 91 billion) per year in the same period.
As a consequence, net TSE represented USD 281 billion (EUR 247 billion) per year, while net PSE averaged USD 190 billion (EUR 167 billion) per year during 2018-20. Aggregate support to producers across emerging economies represented on average 7.4% of gross farm receipts in 2018-20: transfers to producers worth 11.5% of GFR, and an implicit tax worth -4.1% of GFR. This %PSE represents a substantial increase from 3.8% in 2000-02 (Table 2.2).
The share of transfers based on output (accounting for both positive and negative MPS and output-based payments) and unconstrained variable input use in gross producer support still averaged 82% in 2018-20 – a modest decline from the 89% observed at the beginning of the century.
Among remaining forms of producer support, the most important are payments based on other input use (mainly fixed capital formation) and payments to areas planted and animal numbers. Payments based on areas and animal numbers were almost non-existent across emerging economies in 2000-02 but reached close to 15% of aggregate net support to producers in 2018-20. In turn, the relative importance of support for investments, (often related to irrigation) declined over time, now representing less than 10% of the PSE. All other forms of support to producers remain marginal (Table 2.2).
Expenditure on GSSE in emerging economies reached an annual average of USD 57 billion (EUR 50 billion) in 2018-20. Most of this went to infrastructure projects (USD 23 billion), often related to irrigation, and public stockholding (USD 17 billion). The remaining expenditure mainly went to finance agricultural knowledge and innovation (USD 12 billion) (Table 2.2). Relative to agricultural value-added, average expenditures for general services declined somewhat and remain lower than the OECD average. Aggregate total support to agriculture as a share of GDP barely changed over time, and is mainly driven by producer support, at around 70% of the total support.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
The total support to agriculture provided in all countries covered in this report represented USD 615 billion (EUR 540 billion) per year on average in 2018-20, of which around 71% or USD 436 billion (EUR 383 billion) were provided as support to producers. Gross transfers to the sector are significantly larger than that, given the negative market price support estimated for some emerging economies: in total, USD 719 billion (EUR 631 billion) were transferred to the sector across the 54 countries covered, while at the same time negative MPS in some countries amounted to USD 104 billion (EUR 91 billion). Expressed as a share of gross farm receipts, aggregate support to producers represented 11.2% in 2018-20 on average for all countries covered, a reduction from 18.2% in 2000-02 (Table 2.3).
Changes between 2000-02 and 2018-20 to the structure of support in all countries in the report were relatively moderate. The share of potentially most-distorting transfers (based on output or based on unconstrained use of variable inputs) declined slightly, but these policies continue to represent around 69% of gross producer transfers across all countries (whether positive or negative, in absolute terms). Transfers based on output became less prominent while those based on unconstrained input use increased.
Among the remaining forms of support to producers, the most important are payments based on area planted and animal numbers (18% of all producer support), and those based on historical parameters not requiring production. The importance of these latter payments (which are decoupled from current production and hence much less production- and trade-distorting) increased significantly and now represents 16% of all producer support (Table 2.3).
Across all countries in this report, the expenditures financing general services to the sector (GSSE) reached an annual average of USD 102 billion (EUR 90 billion) in 2018-20, almost twice the amount in nominal terms spent at the beginning of the century. Most of this went to infrastructure projects (USD 42 billion), agricultural knowledge and innovation (USD 26 billion), and public stockholding (USD 18 billion) (Table 2.3). In spite of the growth, expenditures for general services declined in relative terms as value added in agriculture almost tripled in nominal terms since 2000-02. Total support to agriculture as a share of GDP declined slightly over time, mainly driven by the smaller relative size of the sector within economies.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Notes
← 1. The OECD total does not include the non-OECD EU Member States, nor Costa Rica which joined the OECD in May 2021.
← 2. The Emerging Economies in this report include Argentina, Brazil, the People’s Republic of China (hereafter “China”), India, Indonesia, Kazakhstan, Philippines, Russian Federation, South Africa, Ukraine and Viet Nam, as well as Costa Rica which joined the OECD in May 2021.