26. Turkey
Transfers to agricultural producers in Turkey since the 1980s have comprised an important but decreasing share of farm revenues, from a high of 31% in the 1990s to about 15% in recent years. Most of this support has been through influencing the market price of agricultural products. Measures to address the COVID-19 pandemic drove changes in the composition of support in 2020. These measures increased the producer support estimate (PSE) from an average of 15% in 2017-19 to almost 20% in 2020 – albeit still below the 24% PSE observed 2000-02.
Concessional loans increased sharply in 2020, bringing payments based on variable input use to almost half of total PSE, reversing the downward trend in total support as a share of GDP. Other interest concessions also grew, increasing payments based on fixed capital formation by a factor of four from the previous year.
Market price support (MPS) is provided mainly for sunflower, potatoes and beef, in the form of reductions of exporters’ debts to public corporations. MPS trended lower in recent years. This is a consequence of higher world prices following the COVID-19 pandemic, and continued depreciation of the Turkish Lira. MPS was estimated to make up 54% of the PSE on average during 2018-20, compared with 78% in 2000-02.
Support to general services (GSSE) mainly comprises irrigation infrastructure, duty write-offs and equity injections connected to commodity marketing agencies. At 2.6% of Turkey’s agricultural value-added on average for 2018-20, expenditures on general services relative to the sector’s size are below those in many OECD countries.
Total support to the sector was as high as 4% of GDP until 2000-02, but declined as the importance of agriculture in the overall economy diminished. Total support to agriculture was about 1.4% of GDP in 2018-20.
The Eleventh Development Plan, covering 2019-23, sets a number of targets to be achieved by 2023, including increased production of red meat and oilseeds, land consolidation and use of irrigation. The plan anticipates improvements to the agricultural information system, reform of regulations to protect and consolidate agricultural land, and continued development of irrigation.
Special measures were put in place in 2020 related to the COVID-19 pandemic. Some programme deadlines were extended to ensure that domestic agricultural production was not unduly impacted by COVID-19 precautions, and principal and interest payments on concessional loans for farmers were postponed for six months. Some tax deadlines were extended, and agricultural payments were made in advance instead of instalments.
To increase yield, quality and diversity of production, Crop Production Improvement Projects were initiated in 24 provinces where additional summer planting was possible. This provided grants covering 75% of seed costs. In addition, some public land was opened to production by farmers to increase domestic production.
Border measures for paddy rice, wheat, barley and maize were adjusted in 2020 to avoid any domestic supply disruptions that could be caused by COVID-19 restrictions. These reductions in tariff rates extend into the first half of 2021.
Apricots were included in the scope of intervention procurement for the first time. Aydın chestnut, Gaziantep baklava, Aydın fig, Malatya apricot and Milas olive oil were added as EU geographical indication registrations in 2020.
In co-operation with the Food and Agriculture Organisation, Turkey launched a national Save Your Food Campaign to reduce food loss and waste, and published its national strategy document on Prevention, Reduction and Monitoring of Food Loss and Waste, and its related action plan.
The largest form of support to farmers is market price support. This is a relatively inefficient way to support farmers’ incomes. Moreover, decoupled area payments introduced in the 2000s were re-coupled to production to a certain extent. Alternatives such as payments based on historical entitlements would be more efficient at raising farm incomes, while income-based disaster payments can reduce risks.
Existing commodity marketing entities require periodic capital infusions. Continuing the deregulation and privatisation of these enterprises can reduce their fiscal burden and improve allocative efficiency in the economy.
Turkey allocates a relatively small share of spending to investments in innovation, services to help farmers improve their practices, and education and training for farmers. Greater emphasis on these essential services should be considered.
The new Digital Agricultural Market (DITAP) is a good way to help farmers access markets and can increase allocative efficiency in the economy. It remains to be seen how this new platform will affect the role of State Economic Enterprises (SEE) and Agricultural Sales Co-operative Unions (ASCUs), but more alternatives for buyers and sellers of agricultural products are welcome.
A stronger policy emphasis on competition, adaptation and resilience to climate change rather than production quantity and quality can help set the stage for long-term sustainability of the sector. For example, the recent emphasis on water use efficiency rather than simple expansion of irrigation infrastructure can make the sector more resilient to drought.
Recent re-allocation of unused public land to farmers in response to the COVID-19 pandemic is unlikely to increase food supplies significantly. Care should be taken that expanded land use does not lead to problems for environmental sustainability, and that land allocation is done in a fair and transparent manner.
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.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Overview of policy trends
Before 1980, an import substitution policy was in place and production was mostly controlled by agricultural policies. Some agricultural products were taxed while others received subsidies, but the sector was a net payer to the budget overall (OECD, 2016[1]).
From the 1980s until 2000, the sector was a net beneficiary of support, directed towards import-competing farm products. The main agricultural policy instruments were price support for crop products and input subsidies. Programmes provided low-cost credit, agricultural chemicals, seeds, irrigation and fertiliser. Livestock production was supported mainly by border measures.
State enterprises managed intervention buying, in the form of SEEs as exclusive purchasers of grains, pulses, sugar, tobacco and tea; and ASCUs responsible for horticultural crops, cotton, oilseeds, nuts, and olive oil. Support prices were announced after planting, and farmers received payment a year or more after harvest and delivery.
After 2000, the country embarked on a process of structural reform as a condition for receiving macro-economic stabilisation assistance from the IMF and World Bank (Burrell and Kurzweil, 2007[2]; OECD, 2016[1]). These reforms were carried out between 2001 and 2008 through the Agricultural Reform Implementation Project (ARIP). ARIP was intended to improve efficiency in the agro-food sector by removing market distortions, and contribute to fiscal consolidation. Under ARIP, Turkish agricultural policy was oriented towards closer alignment with the EU’s CAP.
Reforms after 2001 reduced the state’s role in setting prices, marketing, and trade of agro-food products. SEEs and producer co-operatives were made independent to varying degrees and at different speeds, and became more exposed to market conditions. Structural adjustment in agriculture was promoted through aid to convert land to alternative production, or land consolidation, and with transition support and aid for rural development. This period also saw a shift away from output and input subsidies towards direct income support payments, although high border protection for agro-food products remained in place (OECD, 2011[3]).
Since 2010, production-linked payments were re-established for many products. Current agricultural policies also include import tariffs, fixed purchasing prices, export subsidies, deficiency payments (income support payments), insurance support and input subsidies (mostly through interest concessions). In addition, there is an emphasis on infrastructure, particularly for irrigation, also connected to rural development objectives.
The PSE was mostly in the range of 25-30% of agricultural gross farm receipts over the past two decades, with a significant decline after 2018 (Figure 26.4). This is a consequence of exchange rate movement reducing the level of market price support, which made up about 54% of the PSE in 2018-20 but about 78% in 2000-02.
Overall, nominal support increased since the late 1980s. Budgetary payments grew, starting with the move towards decoupled payments in the early 2000s, and remained significant through successive reforms that changed their basis. Budgetary support jumped in 2020 as a consequence of exceptional spending related to COVID-19, mainly for concessional loans and interest concessions.
Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income.
Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.
Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Main policy instruments
The majority of support comes through market price support, consisting mainly of tariffs on imported products. Budgetary support comes through deficiency payments and area payments based on production characteristics. Purchases of inputs and marketing of major commodities is handled through SEEs or ACSUs, which have price-setting power.
Export subsidies apply to 14 commodity groups, out of the 19 groups eligible under Turkey’s WTO commitments. These include processed fruit and vegetables, poultry meat and eggs. Export subsidies are granted in the form of reductions of the exporters’ debts to public corporations (for example, for taxes, and telecommunications or energy costs). Production quotas apply at the farm level for sugar beet. Under the Nairobi agreement, export subsidies are to be phased out by the end of 2022.
Deficiency payments are provided as “premium payments” for products considered to be in short domestic supply. These are directed to producers of 17 different agricultural products, differentiated by production area to encourage ecological and economical suitability of production, and high yield and quality.
Area-based payments fall under several different rationales. Hazelnut producers receive payments based on area of production. Farmers can also receive area payments for producing fodder crops or certified saplings, organic farming, using good agricultural practices, using certified seeds, and for the rehabilitation of olive groves. Each farmer registered under the National Farmer Registration System (NFRS) receives a so-called “diesel payment” and a “fertiliser payment” separately based on current area of production.
State-supported agricultural insurance (TARSİM) comes through a public-private partnership where private insurance companies deliver uniform policies to farmers. The state pays between 50% and 67% of the total insurance premium on behalf of farmers (Agricultural Insurance Pool, 2020[4]).
Turkey is a signatory to the Paris Agreement. Agriculture represents 7.3% of total greenhouse gas (GHG) emissions. In its Nationally Determined Contribution (NDC), Turkey proposes to reduce agricultural emissions through fuel savings from consolidation of agricultural land, rehabilitating grazing lands, controlling fertiliser use, implementing modern farming practices and encouraging minimum tillage farming techniques.
Domestic policy developments in 2020-21
The Ministry of Agriculture and Forestry initiated a new Project, named Digital Agriculture Market (DITAP) in co-operation with the Ministry of Treasury and Finance and the Ministry of Trade. The digital platform makes it possible for all operations from pre-sowing to post-harvest to be carried out in a digital environment. DITAP is a web-based digital platform for the supply and demand chain and includes a wide range of members from smallholders to big players in the retail sector. DITAP provides farmers with new opportunities to strengthen their marketing capabilities. The system also allows for contract farming, which helps farmers meet the needs of the industry and the market by planning production and sales in advance. Farmers can also purchase products such as seeds and fertilisers through DITAP, with the convenience of input financing. In addition, a new agricultural land lease module, lets farmers lease their land through DITAP (DITAP, 2021[5]).
Additional coverage is now available through the state supported agricultural insurance. Starting from 2021, coverage includes heat damage to oranges, tangerines, grapefruit, lemons and grapes, rain damage to cotton during the harvest period, bird damage to sunflower and several new crops. In 2020, 2.1 million insurance policies were issued and TRY 1.6 billion (USD 250 million) of state insurance premium support was provided.
In 2020, Turkey published its national strategy document on Prevention, Reduction and Monitoring of Food Loss and Waste and its action plan in co-operation with the FAO. The action plan aims to intensify efforts at national, regional and international levels to prevent food loss and waste. The national strategy sets 13 targets and 96 actions as part of four strategic goals to prevent food loss and waste (FAO, 2020[6]).
At the midpoint of the “Turkey Agricultural Drought Strategy and Action Plan, 2018-22”, activities continue under five headings: i) drought risk estimation and crisis management; ii) ensuring a sustainable water supply; iii) effective management of agricultural water demand; iv) increasing support to R&D activities, training and extension services; and v) institutional capacity building. As part of the strategy, Drought Management Plans are to be completed for 25 basins by the end of 2023. Between 2014 and 2020, 15 such plans were completed. Ten more basins are included in the 2021 programme, along with two plans that are due for revision (required every six years). Responsible institutions must report on the implementation of the Management Plans every six months.
Within the framework of the “Rural Development Investments Support Program”, 50% grant support is available for the installation of irrigation systems (drip or sprinkler). Approximately 323 000 producers were supported by grants and credit support, and pressurised irrigation systems were installed on a total area of 1.1 million hectares by the end of 2020. Since 2003, the use of closed system irrigation projects has been accelerated to reduce loss and leakage. In 2003, only 6% of irrigated area used piped irrigation networks, but by 2020 this had increased to 29%.
Domestic policy responses to the COVID-19 pandemic
A Working Group and a Scientific Board were established within the Ministry of Agriculture and Forestry to carry out monitoring and evaluation studies of COVID-19. To ensure that seasonal workers can continue to work, hygiene and personal protection products were provided and workers were allowed to travel to agricultural areas despite restrictions on movement in order to take up work. Transportation and living conditions of seasonal workers were checked to ensure sanitary conditions.
Deadlines were extended in some cases. Application deadlines for crop production supports for cereals and legumes as well as deadlines for oilseeds and olives, organic agriculture and good agricultural practices were extended to the second quarter of 2020. In April 2020, producers’ principal and interest payments on concessional loans were postponed by six months. Tax payments due between April and June for food enterprises were postponed. In addition, some agricultural payments are being made in advance instead of as a sequence of smaller payments over the course of the year. Interest-free loans were made available to small farmers and food enterprises.
Actions were also taken to accelerate planting. The “Crop Production Improvement Project” was initiated in 24 provinces suitable for additional summer planting, providing a grant of 75% of seed costs. The aim of the project is to increase the yield and quality of crop production as well as encouraging new species, varieties, methods and technologies and increasing the use of agricultural mechanisation.
In co-operation with the Ministry of Environment and Urbanization, state lands not currently in use are to be progressively opened for agricultural production. A pilot project allows non-cultivated state lands to be used by farmers for sample cultivation. In the first stage of this project, 970 hectares of land are to be planted to cereals, legumes, oilseeds and feed crops.
Trade policy developments in 2020-21
The average rate of customs duties applied in 2020 for basic agricultural products outside the Customs Union Common External Tariff was 58%. Customs duties were reduced on cocoa shells, husks, skins and other cocoa waste.
In 2020, Turkey signed revised Free Trade Agreements (FTA) with EFTA, Bosnia and Herzegovina and Montenegro and ratification procedures are ongoing. FTA negotiations are actively ongoing with four countries: Ukraine, Japan, Thailand and Indonesia. FTA negotiations with the United Kingdom have been concluded and Agreement was signed on 29 December 2020. The United Kingdom is a top-ten export destination for Turkish agricultural products.
Trade policy responses to the COVID-19 pandemic
Exports of lemons were temporarily limited. Tariffs were reduced and in-quota import amounts increased for many other commodities. These trade actions are mainly designed to ensure domestic supply, and are in part a response to actions taken by trading partners and price increases resulting from demand spikes. Since April 2020, exotic animals and pets are prohibited from entering the country to prevent this possible vector of COVID-19 infection.
On 21 October 2020, customs duty rates, which were 45% for wheat, 35% for barley and 25% for maize, were removed until at least 30 April 2021. In addition, the tax rate, which is 34% for paddy and 45% for rice, has been reduced to 5% and 15%, respectively, from 23 December 2020 to 30 April 2021.
The exportation of lemons was subjected to prior authorisation to meet rising domestic demand due to the COVID-19 pandemic. This regulation was put into force on 7 April 2020 and terminated on 7 August 2020.
The government of Turkey also removed the customs duty for 100 000 tonnes of paddy rice imports until the end of May 2021.
Primary agriculture accounts for 6% of GDP and employs 18% of the workforce, making agriculture one of the most important sectors of the country’s economy. Turkey is a net exporter of agricultural products, which account for more than 10% of total exports, and access to world markets is a significant issue for the sector. Notwithstanding various structural bottlenecks, such as the predominance of small-sized, subsistence and semi-subsistence farms, Turkey ranks as a significant agricultural exporter of nuts, dried fruits, and some fresh vegetables; main export destinations include the European Union, Iraq, the Russian Federation and the United States.
The impact of the pandemic on economic activity unfolded later than in other countries in the region, but was sharp. Employment and aggregate demand contracted strongly in the first wave, and then rebounded following vigorous government support. However, they are again facing headwinds (OECD, 2021[7]).
Despite the pandemic, sector growth has outpaced overall GDP. In the first three quarters, overall growth of agriculture was 5.3%. Agricultural and food products exports increased by 5% in 10 months of the year compared to the same period of the previous year. However, growth in the sector has come mainly from increased use of inputs and productivity growth lags the world average.
Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.
Agriculture is relatively carbon intensive compared with the rest of the economy, with the share of emissions about double its share in GDP. Irrigation has been under continual expansion, and agriculture is the major water user, accounting for 85% of total water abstractions. Phosphorous balances have declined since 2000, but remain more than double the OECD average.
The agricultural sector has enjoyed robust growth based on increased use of inputs. Irrigated area has expanded as a result of continued public investment, opening more land to intensive production. Total factor productivity growth makes up only about a third of agricultural output growth between 2007 and 2016.
References
[4] Agricultural Insurance Pool (2020), Tarsim, https://web.tarsim.gov.tr/havuz/homePageEng (accessed on 19 January 2021).
[2] Burrell, A. and M. Kurzweil (2007), “Distortions to Agricultural Incentives in Turkey”, Agricultural Distortions Working Paper Series 48388, World Bank.
[5] DITAP (2021), Dijital Tarim Pazari (DITAP), https://ditap.gov.tr/ (accessed on 19 January 2021).
[6] FAO (2020), Turkey’s National Strategy Document on Prevention, Reduction and Monitoring of Food Loss and Waste and its Action Plan, FAO, Ankara, http://www.fao.org/publications/card/en/c/CB1074EN (accessed on 19 January 2021).
[7] OECD (2021), OECD Economic Surveys: Turkey 2021, OECD Publishing, Paris, https://dx.doi.org/10.1787/2cd09ab1-en.
[1] OECD (2016), Innovation, Agricultural Productivity and Sustainability in Turkey, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264261198-en.
[3] OECD (2011), Evaluation of Agricultural Policy Reforms in Turkey, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264113220-en.