1. Developments in agricultural policies and support
The key economic and market developments which provide the framework for the implementation of agricultural policies are analysed in the first section of this chapter. The next section presents the main recent changes and new initiatives in agricultural policies 2019-20 with a focus on environment and trade. A specific section focuses on emerging agriculture and food policy responses to the outbreak of COVID-19 implemented by the end of April 2020. This chapter also analyses the level and structure of agricultural support against the various policy objectives identified by governments, both for agriculture and the wider food system, including productivity and sustainability. The chapter concludes with the assessment of these developments and policy recommendations.
This report describes the evolution of agricultural policies and quantifies the extent of support to the sector through to the end of 2019. Policies and associated support are influenced by developments in agricultural markets and wider macroeconomic conditions. As the first section of this chapter outlines, agricultural markets were generally stable through 2019, with low prices for most commodities. The wider context was one of weak economic growth, but with continued growth in employment, while inflation and interest rates remained low. With the outbreak of the new coronavirus SARS-CoV-2 and the subsequent spread of the COVID-19 disease, however, both overall economies and agricultural markets and policies have seen significant changes.
Governments introduced a wide set of policies in early 2020 to respond to the challenges posed by the COVID-19 pandemic. These generally fall into three broad categories: support to farmers and other actors along the food chain, through both domestic and trade measures; initiatives to keep food and agricultural supply chains moving; and support to vulnerable populations. More broadly, many countries have responded to the dramatic economic contraction through heavy fiscal support, facilitated by low real interest rates. This wider policy response also has direct and indirect implications for the food and agriculture sector. In order to accommodate this sudden change in the context in which policies are being made, this report complements its regular analysis of policies through to the end of 2019 with a description of policy responses put in place in the first four months of 2020 and which significantly affect the food and agriculture sector, highlighting both the diversity of measures introduced and commonalities across countries.
This chapter also analyses the level and structure of agricultural support against the various policy objectives identified by governments, both for agriculture and the wider food system, including productivity and sustainability performance. The chapter concludes with the assessment of these developments and policy recommendations. Where relevant and possible, this assessment also takes account of key policy responses to the COVID-19 pandemic.
Key economic and market developments
Conditions in agricultural markets are heavily influenced by macro-economic variables such as global gross domestic product (GDP) growth (which supports demand for agricultural commodities) and energy prices, especially for crude oil (which affects the price of inputs into agriculture, such as fuel, chemicals and fertiliser, and influences demand for cereals, sugar crops, and vegetable oils through the market for biofuels).
After strengthening in 2017, global economic growth has slowed since mid-2018, and for 2019 is estimated to have remained fragile at less than 3% (OECD, 2020[1]). Signs of stabilisation were visible at the end of the year. Nonetheless, growth in the OECD economies has fallen to an average of 1.7% in 2019, one percentage-point below growth two years earlier. This reduction in economic growth was most notable in the Euro area, which grew by just 1.2% in 2019, and in Japan where a growth rate of 1.0% was slightly higher than in 2018 but much lower than the 1.9% measured in 2017. The continued deepening of trade tensions since May 2019 has reduced confidence and investment, and increased policy uncertainty (OECD, 2019[2]).
Despite lower growth, labour markets have continued to expand in many OECD economies. Across the OECD area, unemployment declined to 5.2% in 2019, compared to 5.8% two years before. Average inflation has come back to 2.0% after slightly higher levels in 2018.
Growth in emerging economies has slowed as well, although different key economies have slowed to varying degrees. Argentina, which had slipped into recession in 2018, and where the exchange rate and financial crises have intensified, saw its economy shrinking by -3% in 2019 and access to market funding dry up. Growth in Brazil, at just over 1% in 2017, slowed marginally to 0.8% in 2019. Looking at the large economies in Asia, growth in the People’s Republic of China (hereafter, “China”) continued to slow to 6.2% in 2019, while the Indian economy grew by less than 6% that year. Economic growth remained fairly robust in Indonesia with only a minor decline to 5.0% in 2019.
Lower economic growth and increasing trade restrictions, including higher tariffs applied to trade flows between China and the United States, have resulted in a continued and significant decline in the growth of global trade.
The outbreak of COVID-19 early in 2020, and in particular the measures to contain the spreading of the disease are having significant consequences for economies. In response to the pandemic, governments around the world have implemented significant restrictions to personal and economic activities, resulting in shutdowns of parts of the economies. OECD (2020[3]) estimates that the initial direct impact of the shutdowns could be a decline in the level of output of between one-fifth and one-quarter in many economies, with consumers’ expenditures dropping by around one-third. The impact on annual GDP growth depends on a variety of factors, such as the magnitude and duration of national shutdowns, and the speed at which the significant fiscal and monetary policies take effect. Annual GDP could decline by up to 2 percentage points for each month that strict containment measures continue.
International trade is likely to be hit even more strongly. The WTO (2020[4]; Bekkers et al., 2020[5]), estimates that world merchandise trade might shrink in 2020 by between 13% and 32% compared to 2019. Even the lower end of this range is greater than the reduction in global trade observed after the economic crisis of 2008/09. The extraordinarily wide range of this estimate is indicative of the exceptionally high level of uncertainty associated with the health and economic recovery trajectory. Agro-food trade appears to be more robust, but still subject to a significant reduction due to COVID-19 and associated lockdown measures. For instance, China’s trade in agricultural products in the first quarter of 2020 is estimated to be at the lowest level over the same quarter since 2012 (China Daily, 2020[6]).
Lower economic growth has put non-food commodity prices under some pressure. Energy prices declined from interim peaks observed in the second half of 2018. Slowing demand and ample supplies have pushed prices for coal and gas down by 37% and 27% on average in 2019, compared to 2018. Crude oil prices declined by 8% over the same period. Lower energy prices also pulled down fertiliser prices, which on average lost 17%, year-on-year (IMF, 2020[7]). Oil prices have since collapsed, as the COVID-19 pandemic has caused demand for transport fuel to plummet (IEA, 2020[8]).
In comparison, food prices remained more robust. On average, prices in 2019 were some 3% below those in 2018 (IMF, 2020[7]). Average food price developments were driven mainly by rising prices for meat, dairy products and, to a lesser extent, sugar, whereas grains and notably oilseed prices declined.
Note: The top part of the graph relates to the left scale, while the bottom part of the graph to the right scale.
Source: IMF (2020), Commodity Market Review, for all commodities, food and energy indices (base year: 2016), www.imf.org/external/np/res/commod/index.aspx; FAO (2020), FAO Food Price Index dataset, for meat, dairy and cereal indices (base period: 2002-04), www.fao.org/worldfoodsituation/foodpricesindex/en.
World meat production fell by nearly 2% in 2019, driven by significant reductions in pig meat production in China, as a consequence of the African Swine Fever, a virus that also spread into a number of other East Asian, South-East Asian, Central European and African countries. The lower pig meat production in China was partly offset by other meat sectors in China as well as increased meat production in Argentina, the European Union, Turkey, and the United States (OECD/FAO, 2020[9]). As a consequence of falling global meat production, average meat prices rose by 5.6% in 2019, compared to 2018 (FAO, 2020[10]).
Global dairy production rose mainly due to increased production in India, which however trades only marginal quantities of dairy products internationally. Milk production of the three major dairy exporters, New Zealand, European Union and the United States, increased only slightly. World butter prices continued to decline from relatively high levels, while those for skimmed milk powder recovered from low levels in 2019 (OECD/FAO, 2020[9]). On average, dairy prices registered a 3% increase between 2018 and 2019 (FAO, 2020[10]).
World sugar production in 2018/19 was below the previous season mainly due to lower sugar production in Brazil, following in particular an increased diversion of sugar cane towards ethanol production. In spite of continued growth in sugar consumption mainly due to increased use, notably in India and Indonesia, markets have remained in surplus. As a consequence, sugar prices remained below past levels for most of 2019 and fell further towards the end of the marketing year (FAO, 2020[10]). With the new marketing year announced to be in deficit primarily due to drought conditions in India and Thailand, prices started to rise again in late 2019 and the beginning of 2020. Following reduced fuel and sugar demand in most parts of the world due to COVID-19 related restrictions for travel and gastronomy, however, sugar prices have declined significantly in March 2020 (ibid).
In spite of rising production of major grains, global cereal stocks declined due to continued destocking of maize in China. Wheat and barley harvests recovered in the European Union, the Russian Federation and Ukraine from lower levels in 2018. Maize production increased, notably in Brazil and the Russian Federation. At the same time, Australia witnessed a major drought-related crop failure in 2019. Global rice production slightly declined from the all-time record in 2018 (OECD/FAO, 2020[9]). Overall, international grain prices in 2019 where slightly below 2018 levels, while those in early 2020 were only little affected by the COVID-19 pandemic (FAO, 2020[10]).
Global soybean production declined in 2019 due to significantly lower plantings in the United States, associated with both market uncertainty and extensive flooding in the US Midwest during the planting season. This decline was only partially offset by a record crop in South America. Reduced pig meat production due to African Swine Fever curbed feed demand in China. World output of other oilseeds also decreased slightly as shortfalls in the production of rapeseed in Canada and the European Union were not offset by increases in other producing countries. Despite these declines, international prices for oilseeds and products fell to multi-year lows in mid-2019, mainly reflecting a slowing global demand for oils and meals and uncertainties stemming from bilateral trade differences (OECD/FAO, 2020[9]). Oilseed prices continued to be volatile, rising significantly until early 2020 before dropping equally strongly in the first months of the year.
Recent developments in countries’ agricultural policies, with a specific focus on environment and trade
Agricultural policy developments in 2019 were diverse in terms of scope, objectives and instruments. This section reviews some of the key agricultural policy changes, focusing on two areas of growing importance: policies aiming to improve the environmental sustainability of the agricultural sector and agricultural trade policy changes. Policy settings in these two areas have the potential to affect agricultural productivity, sustainability and resilience in coming years. Other main domestic policy developments, including those that may affect the environmental performance of agriculture and agricultural trade, are also reviewed.
Main policy changes aiming to improve the environmental sustainability of the agricultural sector
A number of policy changes undertaken in 2019 aim to reduce the environmental impact of agriculture or increase the provision of environmental public goods, via the use of incentives, regulations or other instruments, or encourage adaptation to climate change.
Several countries adopted targets, plans and policies to mitigate greenhouse gas emissions or to facilitate adaptation to climate change
While many countries have included agriculture in their Nationally Determined Contributions under the 2016 Paris Agreement, few have set specific targets for the agricultural sector. New Zealand and Ireland are the only countries with legally binding policy targets to mitigate agricultural greenhouse gas (GHG) emissions, with both countries making this significant policy step in 2019. Other countries have also set strategic mitigation goals for agriculture in their national climate policy frameworks, however, the specific policy measures for achieving these goals are still being developed.
With the Zero Carbon Amendment Bill passed in November 2019, New Zealand introduced specific agricultural targets for the reduction of biogenic methane emissions ranging from 10% by 2030, and from 24% to 47% by 2050 compared to 2017, in addition to reducing all other GHG emissions to net-zero by 2050. A complementary Bill introduced a process aiming to price GHG emissions from livestock at the farm gate, and fertiliser emissions at the manufacturer and importer level as of 2025 (Box 1.1). Ireland’s Climate Action Plan sets out a decarbonisation pathway to 2030, in which the agricultural sector is required to deliver 17% of total emission reductions, amounting annually to 8-9% of agricultural GHG emission in 2030. An additional contribution of 26% is expected from other land use actions, mainly in the forestry sector, over this same period.
The European Commission presented their European Green Deal proposal to the European Parliament, which lays down a strategy to reach net zero GHG emissions by 2050. Several EU Member States instituted specific programmes or projects designed to reduce agricultural GHG emissions, including Denmark’s pilot programme on arable land multifunctionality; Finland’s plans to become carbon neutral by 2035, including sourcing 30% of aviation fuel from biofuels; France’s funding of new on-farm anaerobic digestion projects; Italy’s offering of incentives for biogas plants that are powered at least 80% by waste produced by farms and no more than 20% by second harvest crops.; and Spain’s Plan Renove to replace old agricultural machinery with newer, lower-emissions models. Other countries passed or began implementation of national climate change or climate change adaptation plans that included agriculture, including in Belgium (Flanders and Wallonia), Germany, Greece, Ireland, Luxembourg and Portugal.
The Climate Change Response (Zero Carbon) Amendment Act (ZCA), passed in November 2019, makes New Zealand one of the first countries to bind its climate commitments into law including objectives for agriculture as an integral component. To help meet these commitments, the government has introduced another Bill, to price agricultural greenhouse gas (GHG) emissions and work with actors in the agricultural sector to achieve the targets for agricultural emissions.
The ZCA sets dual national targets to reduce GHG emissions. They aim to reduce biogenic methane emissions by 10% by 2030 and by between 24% and 47% by 2050, relative to 2017 levels, and to reduce all other GHG emissions to net zero by 2050.
Almost half of all GHG emissions in New Zealand originate from the agricultural sector, and more than a third are in the form of methane from the dairy, sheep and beef industries. Most of the remaining agricultural emissions are in the form of nitrous oxide linked to fertiliser use and urine patches on pasture. While emissions from agriculture have stabilised in recent years, they increased by 13.5% from 1990 to 2017. With almost two-thirds of all New Zealand exports being agro-food products, originating to a large extent from the livestock sectors, trade-offs being considered in the development of the national mitigation policy are considerable for the economy as a whole and the rural economy.
The Interim Climate Change Committee (ICCC)1 was established in 2018 to provide recommendations on ways to reduce emissions, including from agriculture. It concluded that on-farm emission reduction is most efficiently achieved through emissions pricing – pricing would drive innovation, reward farmers who significantly reduce emissions, and give them autonomy over actions on their farm. The ICCC noted that pricing should be part of a broader package that includes tools, support and advice to farmers. The ICCC noted that it would take until 2025 to implement a farm level pricing scheme and recommended that agricultural emissions be priced at the processor level in the interim.
Following the ICCC’s recommendations and a proposal from primary industry organisations representing all farmers, the New Zealand government introduced, in October 2019, the Climate Change Response (Emissions Trading Reform) Bill (ETR) to price livestock emissions at a farm level, and fertiliser emissions at a processor level, from 2025. A pricing scheme is to be designed through a Joint Action Plan and in collaboration with a group of leading primary industry organisations. The Plan should also include on-farm programmes to support farmers to be ready for emissions reporting and pricing by 2025. The system would grant farmers 95% of their emission credits free with the remaining credits to be purchased. In the longer term, the share of emission credits to be purchased by farmers would increase, in line with the approach taken for other industries.
The Climate Change Commission is to monitor the progress being made under the Joint Action Plan and report back to the government in 2022. Should progress be considered inadequate, the government retains the option to impose pricing at processor level. The Minister for Climate Change is also to report back in 2022 on the details of a farm-level emissions pricing scheme, including details of an alternative pricing scheme to the New Zealand Emissions Trading Scheme.
← 1. As of December 2019, the Interim Climate Change Committee was disestablished and replaced by the independent Climate Change Commission, a government funded body set up under the Zero Carbon Bill to provide the government with advice on climate policy. The Commission is made up of a Chair and six Climate Change Commissioners who are experts in climate science, adaptation, agriculture economics and the Maori-Crown relationship.
The government of Korea released a second version of its Climate Change Response Plan, covering 2020-40. This plan sets a target to reduce GHG emissions by 37% from the business-as-usual (BAU) level by 2030, which is 24% lower than the 2017 level, and includes action plans across all economic sectors, including the agricultural sector, which is set to reduce GHG emissions by 7.9% from the BAU level by 2030. The plan also develops GHG monitoring and forecasting mechanisms, improves the current emissions trading system, and invests in infrastructures to adapt to climate change.
In Norway the 2017 Climate Change Act establishes by law the country’s target of becoming a low-emission society by 2050. The government reported to the parliament in 2019 according to provisions in the Climate Change Act and a climate agreement for agriculture with farmers’ organisations was negotiated. In 2019, an Action Plan was developed for the implementation of the national bio-economy strategy and work on developing a strategy on circular economy is in progress.
Efforts are also continuing to improve agriculture’s adaptation to climate change. Mexico is working with the International Maize and Wheat Improvement Center (CIMMYT) and agricultural producers, to provide farmers with information on weather forecasts and the most appropriate adaptation practices to minimise the impact of climate change. Costa Rica improved provisions to its credit system to respond to climate change related disasters, by issuing instructions to State Banks to provide options to agricultural and fisheries producers that defaulted on credit obligations due to climatic and pests disasters. These options comprise partial payments, debt rescheduling, extended grace periods, and improvements in interest rates, among others. This initiative also incorporates training strategies for financial education and the use of insurance for farmers.
In February 2020, the United States Department of Agriculture (USDA) announced a new initiative, the Agriculture Innovation Agenda (AIA) with the objective of aligning USDA resources, programmes and research to better equip farmers and producers to meet future food, fibre, fuel and feed demands while reducing the environmental footprint of US agriculture. The initiative sets goals and indicators for five outcomes: productivity growth, water quality, carbon sequestration, renewable energy, and reduction of food loss and waste.
Different approaches were employed to improve the use of agricultural inputs and control pollution
Several governments have introduced or implemented regulations on the approval or use of pesticides. In Argentina, a 2019 resolution established a list of legal restrictions on the use of active principles in agro-chemicals (pesticides). The Brazilian Health Regulatory Agency (Anvisa) approved in July 2019 a new regulatory framework for agrochemicals, updating the criteria of approval and classification of toxicity and improving the labelling requirements on risks of pesticides. At the European Union level, approvals for chlorpyrifos, chlorpyrifos-methyl, desmedipham and dimethoate were not renewed. Several Member States also introduced regulations on pesticides for environmental purposes. In particular, France banned two products that were deemed to function similarly to neonicotinoids (flupyradiforone and sulfoxaflor). Several EU Member States also either approved or began deploying national action plans for the sustainable use of pesticides, including Estonia, France, Greece and Romania.1
As complement to its regulation, Argentina’s government launched a public consultation on the policy principles for the application of agro-chemicals and an inter-ministerial working group on good practices on pesticides applications. A new Action Plan on Bio-inputs that involves all actors from the public and private sectors is developing alternatives and complements to chemical products.
Several countries also undertook efforts to reduce pollution associated with the use of fertilisers. New regulations or adjustments to existing programmes to reduce nitrogen runoffs were introduced in Denmark, Estonia, Greece, and Ireland. National-level programmes or initiatives designed to improve air quality and reduce ammonia emissions were instituted in Estonia, Ireland and Luxembourg. Japan amended its Fertiliser Regulation Act to allow the production and sale of fertilisers combining chemical fertilisers and compost of livestock manure or soil amendment for a more efficient management of soil. The amendment also provides standards of raw materials to be used for producing fertilisers.
A few countries introduced broader conservation or farm measures to reduce the use of all chemical inputs. In Australia, the second phase of the National Landcare Program was deployed for the period 2019-23. The programme supports the development and uptake of best practice management through the Smart Farms Program and Regional Land Partnerships. The Agriculture Stewardship Package supports agricultural biodiversity, including the pilot testing of a certification scheme. China announced a plan to restrict farming that encroaches on major rivers, while accounting for food security concerns, defining “ecological protection red lines” with the objective of contributing to the restoration of contaminated water supplies. China is also implementing its 2019 Soil Pollution Prevention and Control Law, which aims to classify land, monitor risk, soil prevention and control measures in economic development and environmental protection plans.
India’s 2019-20 Union Budget promotes additional pilots of “Zero Budget Natural Farming” (ZBNF) across the country, which could allow gathering information on its viability and assessing the opportunities for scaling up its application. ZBNF is a method of chemical-free agricultural production drawing from traditional Indian practices. Costa Rica launched the Agro-ecological Zoning (ZAE) initiative for four cantons of the country. The initiative involves the development of zoning maps of soil use and soil fertility for selected crops, and offers training for farmers for the use of this tool to improve their decisions towards more resilient and sustainable production systems.
To prevent further land use change, Mexico will exclude support for productive units located outside the current agriculture production frontier. A platform entitled “National System for Consultation on Concurrent Incentives” (SINECI) will ensure the absence of support for productive activities on properties located in Natural Protected Areas and in priority areas for conservation. The government is also in the process of designing a National Strategy for the Conservation and Sustainable Use of Pollinators (ENCUSP), expected to be released in the first half of 2020.
Measures were planned or carried out to reduce agricultural freshwater use
One means to relieve the pressure of scarce freshwater resources is to call on the use of alternative water supplies. In December 2019, the European Union made a significant step towards the development of water reuse for irrigation by reaching an agreement on minimum water quality standards that ensure safety within reasonable treatment costs. The new rules, which are expected to be adopted in 2020, aim to ease the use of treated wastewater for agricultural irrigation, by introducing minimum water quality requirements, monitoring, and mandatory risk management plans for wastewater treatment plants.
In India, an Expert Committee of the Ministry of Environment, Forest and Climate Change suggested a set of measures for curbing exploitation of groundwater, including through tighter regulation on the overuse of water in the agriculture sector. The Committee recommends designing policies that would encourage crop diversification in areas where groundwater is overexploited and proposes the introduction of a groundwater conservation fee for farmers with landholdings above 5 hectares as well as of “water credit” for users who conserve groundwater above a certain threshold.
Sector-wide policies were introduced to reduce food loss and waste
Several countries introduced measures or legislation to reduce food waste and losses. Enacted in 2019, Japan’s Food Loss Act requires the national government to establish a basic policy to reduce food waste, and the local governments to devise their own action plans. These plans should include measures to educate consumers and businesses, and to facilitate the activities of non-governmental organisations collecting and distributing food expected to be wasted. The Act also urges businesses and consumers to be proactive about reducing food losses. Turkey’s National Strategy Document and Action Plan on Prevention, Reduction and Management of Food Losses and Waste were prepared in collaboration with the FAO in 2019 as part of the global SAVE FOOD campaign.2 The European Commission published a decision establishing a common EU methodology to measure food waste, which allows Member States to collect data on food waste beginning in 2020 and to report on national food waste levels starting in 2022. Food loss and waste activities were also undertaken within different EU Member States such as France, Germany, Latvia, Luxembourg, Slovakia, and Spain and the Flanders and Wallonia regions of Belgium. The United States began implementation in 2019 of the Winning on Reducing Food Waste Initiative with six priority action areas, including enhanced interagency co-ordination, increased consumer education and outreach efforts; improved co-ordination and guidance on food loss and waste measurement; clarification and communication of information on food safety, food date labels, and food donations; collaboration with private industry to reduce food loss and waste across the supply chain; and encouragement of food waste reduction by Federal agencies in their own facilities. Under its food loss plan, Argentina’s government implemented its National Plan on Food Waste and Losses and introduced a new law to limit the responsibility of the donor of food, while ensuring the conformity with food safety standards. The Philippines launched an initiative to exchange plastic for rice. Starting in September 2019, residents of Bayanan can get one kilogramme of rice for every two kilogrammes of plastic waste, which are handed over to the government for proper disposal or recycling.
Organic product legislations were enacted
The Russian Federation enacted its law on organic products in January 2020. The law defines the organic standard, and regulates the production, storage, transportation, labelling, and marketing of organic products. The law also outlines the role of accredited certification bodies in verifying organic production processes. It stipulates the maintenance of a state register of organic products developers. The Russian Government is also developing regulations, standards, and labelling related to environmentally friendly production. A draft law “On environmentally clean agricultural products, raw materials and foodstuffs” has gone through public discussion, to be later submitted to the Parliament. In Ukraine, the law on organic production and marketing came into force in August 2019 and defines the main framework for the production of, and the functioning of markets for, organic products. It also defines the roles and obligations for public authorities and organic market operators, and lays out further public policy directions for the development of organic product markets. In pursuance of the Law, the Cabinet of Ministers approved, in October 2019, the “Procedure for the Organic Production and Circulation of Organic Products”. The main provisions of this procedure are in line with the requirements of EU Regulation 889/2008.
Main agricultural trade policy changes
While multilateral trade negotiations have stalled, countries have continued to pursue regional and bilateral trade agreements. As shown in Table 1.2, at least 60 trade agreements were either negotiated, signed, ratified or revised by the countries covered in this report during 2019 or early 2020. This section highlights selected agreements of importance for the agriculture sector, but also some of the main import or export measures taken by the covered countries during this period.
Major regional trade agreements were signed or ratified
In June 2019, the European Union and Mercosur reached a political agreement on a free trade agreement involving EU member countries and the members of Mercosur (Argentina, Brazil, Paraguay and Uruguay). On agricultural goods, the agreement removes tariffs on 82% of EU imports from Mercosur (including many fruits, juice and coffee), and on 93% of Mercosur imports from the European Union (including olive oil, wine and chocolate), all with a transition period of up to 10 years after entering into force. It also includes the expansion of the EU Tariff Rate Quotas (TRQs) for sensitive products such as beef, poultry, pork, sugar, ethanol and cheese coming from Mercosur countries. The agreement also foresees facilitating trade with streamlined border and sanitary and phytosanitary (SPS) procedures, mutual recognition of geographical indications, and a chapter on trade and sustainable development. The agreement is still undergoing technical revision and translation, and remains to be approved by the European Union, as well as by Mercosur.
The Agreement between Canada, Mexico and the United States (called CUSMA in Canada, T-MEC in Mexico, and USMCA in the United States), signed in November 2018, was approved by the Mexican Senate in December 2019, the US Senate and US president in January 2020, and the Canadian Parliament on 13 March 2020. This new agreement will replace the North American Free Trade Agreement (NAFTA) and will enter into force on 1 July 2020. In the case of agriculture, its provisions preserve the existing agricultural commitments under NAFTA, eliminate tariffs for certain additional products (e.g. whey and margarine for Canada-US), and establish TRQs for other products (e.g. US dairy exports in Canada) on a bilateral basis. The agriculture chapter in the new agreement also includes new obligations for agricultural biotechnology, aiming to provide further transparency and predictability in the trade of products derived from current and future technologies.
As a member of the Eurasian Economic Union (EАEU) the Russian Federation was directly involved in the negotiation process for the conclusion of the Union’s free trade agreements with Singapore and Serbia, which were signed in 2019. After the completion of domestic approval procedures, the agreements will enter into force. An interim agreement leading to the formation of a free trade zone between the EAEU and Iran also entered into force in 2019. All these documents include, in particular, mutual concessions in agri-food trade.
Bilateral free trade agreements continue to be developed and signed
Japan’s agreements with major agricultural traders entered into force. The Trade Agreement between Japan and the United States was signed in September 2019 and entered into force in January 2020. Under this agreement, Japan sets to eliminate or reduce customs duties and mark-ups on the main agricultural imports from the United States, including beef, pork and wheat, while maintaining its tariffs for rice. At the same time, the United States eliminates or reduces customs duties on 42 agricultural products, such as cut flowers and yams, which Japan would like to export to the United States.
The European Union-Japan Economic Partnership Agreement entered into force on 1 February 2019 and substantially reduces tariffs and trade barriers for both partners. The European Union is scheduled to eliminate duties on 99% of tariff lines from Japan and Japan is set to eliminate duties on 90% of agricultural products exported from the European Union when the agreement is fully applied. Duties on most remaining products will be reduced over time, while Japan has opened country-specific TRQs for others. Aside from market access, the agreement establishes rules for the protection of more than 200 EU and 50 Japanese products’ Geographical Indications (GIs).
An “Economic and Trade Agreement between the United States and the People’s Republic of China” (also called “Phase One Deal” Agreement) was announced by China and the United States on 13 December 2019. The agreement was signed on 15 January 2020 and entered into force on 14 February 2020. The Agreement includes several chapters with a direct link to agriculture: Chapter 1 covers issues relating to geographical indications; Chapter 3 addresses non-tariff measures aspects for several agro-food products and issues with respect to the application of China’s TRQ system for wheat, rice and maize. Chapter 6 includes commitments from China to import various goods and services from the United States. In particular, the Agreement commits China to purchase and import no less than USD 12.5 billion in 2020 and no less than USD 19.5 billion in 2021 of oilseeds, meat, cereals, cotton, and other agricultural commodities over its baseline purchases in 2017. The United States also agreed to modify tariff actions under Section 301.
Other agreements entered into force. In particular, the revised Canada-Israel Free Trade Agreement (CIFTA) entered into force on 1 September 2019 opening new opportunities for the agriculture and agro-food sector. The agreement also includes new chapters on SPS Measures and Technical Barriers to Trade. Chile’s free trade agreements with Argentina and Indonesia also entered into force, bringing the number of Chile’s FTAs in operation to 29.
Negotiations on upgrading the New Zealand-China FTA were concluded in 2019, providing better conditions for improved market access for agro-food goods, streamlined border processes and simplification of trade documentation, as well as improved mechanisms for co-operation on non-tariff measures. Korea concluded negotiations for three free trade agreements in 2019, with Israel, the United Kingdom and Indonesia, which are expected to take effect in 2020-2021. On 30 June 2019, the European Union and Viet Nam signed a bilateral free trade agreement, the EU-Viet Nam FTA. India continued to negotiate trade agreements with Australia, Chile, Korea and the European Free Trade Association (EFTA), while Turkey engaged with Colombia, Indonesia, Japan, and Ukraine.
On 6 November 2019, China and the European Union (EU) concluded negotiations on a China-EU Geographical Indications (GI) Agreement – China’s first comprehensive bilateral GI Agreement – which will protect 100 Chinese GIs in the European Union and 100 EU GIs in China. The protected EU GIs include dairy products, beer, wine, and spirits.
The United Kingdom exited the European Union
After 47 years of membership, on 31 January 2020, the United Kingdom officially left the European Union. The departure of the United Kingdom – dubbed “Brexit” – has been negotiated under a Withdrawal Agreement. The two have entered into a transition period, slated to last until 31 December 2020, under which EU law will continue to apply in the United Kingdom. The future nature of the partnership between the United Kingdom and the European Union (with respect to areas such as regulatory harmonisation, trade in goods and services, and movement of people) has yet to be jointly agreed, with negotiations continuing during the transition period.
Selected countries reduced import barriers, but other barriers continued
The Philippines replaced the quantitative restrictions on rice imports with tariffs as of March 2019. There is a TRQ system with applied most favoured nations (MFN) tariffs within and outside of the quota of 40% and 180%, respectively. For imports from ASEAN countries, a single tariff (35%) is applied. A special rice safeguard duty may be imposed to protect the industry from extreme or sudden price fluctuations.
China adopted several measures to relax sanitary and phytosanitary measures for selected agricultural imports. First, China lifted the import ban on poultry and related products from France, Spain and Slovakia, as well as restrictions on poultry imports from the United States. China also lifted the import ban on beef imports and cleared four beef producing sites for export from the United Kingdom. It also approved beef imports from several meat-processing plants in Argentina and Brazil. Furthermore, it approved dairy imports from specific plants in Brazil. Lastly, China approved wheat imports from the Kurgan region as well as soybeans and barley imports from all regions of the Russian Federation.
In line with the country’s WTO commitments, the TRQ of the Russian Federation on pig meat was eliminated, these imports now paying a flat ad valorem rate at less than one-half of the previous TRQ’s over-quota rate. At the same time, the ban on agro-food imports from a number of countries imposed in 2014 was extended until end-2020.
In response to a suspension by the Russian Federation of its free trade regime with Ukraine under the Agreement on Free Trade in the Commonwealth of Independent States (CIS) Area, and the implementation of a ban by the Russian Federation on imports of agro-food products from Ukraine, Ukraine in turn has suspended trade preferences for imports from the Russian Federation foreseen by the CIS FTA. Ukraine has banned imports of a list of 43 agricultural goods from the Russian Federation. In December 2019, the suspension of trade preferences and the ban on specific imports were further prolonged until the end of 2020, and a number of corn-based products were added to the list of banned products. Since July 2019, Ukraine has also banned the import of mineral fertilisers, animal feeds and veterinary products from the Russian Federation.
Efforts were made to reduce export subsidies, but new export taxes were introduced
Some countries took steps to reduce or eliminate export subsidies. In Norway, all export subsidies are to be phased out by the end of 2020, at the latest. As a result of the abolition of export subsidies on cheese, milk production must be reduced by up to 100 million litres. The government and the Norwegian Farmers Union agreed on a scheme where quotas for up to 40 million litres of milk are removed from the market. The remaining overproduction is to be reduced by lower milk quotas on each farm. Switzerland adopted legislation abolishing export subsidies for processed food products. In India, the export subsidy programme Merchandise Exports from India Scheme will be replaced with the Scheme for Remission of Duties or Taxes on Export Product.
At the same time, several countries maintained or expanded trade-distorting measures for export. Argentina’s government approved an export tax exception for small and medium enterprises and increased the export tax rate for soya products. Ukraine had suspended VAT refunds for export of soybeans from September 2018, and for exports of rapeseed from January 2020. However, VAT refunds for exports of both commodities were re-established by the Ukrainian Parliament in January 2020. Indonesia’s government has maintained its variable export tax system on palm oil and, since 2015, added an additional fixed export levy of USD 50/tonne which will be reversed to the Palm Oil development Fund. Faced with a price hike of onions, the government of India initially introduced in mid-September 2019 a minimum export price (MEP) for onions, followed at the end of September 2019 by an export ban on onions. In addition, the government of India introduced limits on onions stocks held by private traders. India also started applying a sugar export subsidy to sugar mills in October 2019. This subsidy is transferred directly to the farmers’ accounts on behalf of the mills against cane price dues, while mills have to provide transaction details to the government for transferring the money in proportion to the cane bought from farmers.
Trade policies were evaluated in several countries
The WTO verification procedures with member countries regarding Korea’s tariffs on rice were finalised in January 2020. The New Zealand Government established the Trade for All Advisory Board (TFAAB) in December 2018 to conduct an in-depth review of New Zealand’s trade policy. The TFAAB published its independent report to the government in November 2019.Recommendations relevant to agro-food trade cover measures to address public confidence and trust, and to modernise trade policy; improving policy and foresight through better evaluation, assessment, and inclusion; advancing New Zealand’s interests in an enhanced international system; and aligning trade policy with improving productivity and sustainability.
A trade and climate change initiative was launched
New Zealand, Costa Rica, Fiji, Iceland, Norway and Switzerland launched negotiations towards an Agreement on Climate Change, Trade and Sustainability (ACCTS). The agreement aims to bring together some of the inter-related elements of the climate change, trade and sustainable development agendas.
Main domestic policy changes potentially affecting trade and the environmental performance of the sector
This section highlights other important domestic policy changes in the countries covered in this report in 2019 and early 2020 that may negatively affect agricultural trade or the environmental performance of agriculture.
Some countries introduced or reinforced measures with potential negative effects on the environment and international trade
Despite the increasing number of policy actions to improve the environmental sustainability of agriculture, several countries expanded their support for the use of agricultural inputs. Under its 2019-20 Union Budget, India’s allocation for fertiliser subsidy was increased by about INR 100 billion (USD 1.4 billion) to INR 799 billion (USD 11.2 billion). Mexico launched a fertiliser programme in 2019, which grants support to small-scale producers, particularly small producers of maize, beans, rice, sugar cane and coffee located in highly marginalized localities in the state of Guerrero. Up to 450 kg of fertiliser per hectare can be granted per producer per year for no more than three hectares, with a level of support that is not based on soil characteristics or nutrient needs.
Fuel tax concessions and compensations were introduced or expanded. The government of the Czech Republic continued to increase expenditures on fuel tax relief. In 2018, fuel tax relief was extended to fuel used in livestock production, and in 2019, this support was extended to fuel used in fruit, vegetable and wine production. In October 2019, Romania extended its list of institutions eligible to receive compensation on fuel excise duties to include research and development institutes in the agriculture sector. The Slovak Republic reinstituted their fuel tax reimbursement scheme for farmers, a programme that had been abolished in 2011. Fuel tax concessions such as these are only one type of tax concession for agriculture commonly offered in the covered countries; a review of agricultural taxation regimes shows that there is a wide disparity in levels and applications of agricultural tax and tax concessions across OECD countries (Box 1.2). The review highlights, in particular, that taxes can be applied to improve the environmental sustainability of agriculture, although the impacts of these tax instruments are rarely assessed.
Guaranteed minimum prices were introduced or increased for specific commodities. Mexico initiated a guaranteed minimum price programme granted to small and medium size producers of maize, beans, wheat, milk and rice, with prices exceeding current market prices. This programme establishes limits per hectare and volume for each crop and producer. India increased its minimum support prices (MSPs) for all kharif (summer planted) crops for 2019 and rabi (winter planted) crops that will be harvested and marketed during the 2020-21 marketing year at levels that significantly exceed national average weighted average cost of productions.
Self-sufficiency plans were consolidated. In 2019, China’s State Council issued a white paper on food security that stresses the importance for China to remain self-sufficient in grains by ensuring domestic production capacity while allowing for “moderate” imports. Through the white paper, China envisages “upholding its red line of absolute security of staple food and zero risk to farmers from low grain prices” while adapting “itself to the WTO rules, actively and steadily reforming its grain purchase and storage systems and pricing mechanisms”.
Output or price supporting measures were announced or introduced. The government of Viet Nam identified key national products eligible for preferential support measures. These measures include exemptions from or reductions in land or water surface rent and preferential credit, among others. The Russian Federation announced a change in the mechanism of provision of direct subsidies to support large investments for the agri-food sector. The government of Indonesia intervenes in markets to ensure both a minimum price for producers and a maximum retail price. Kazakhstan amended the agricultural legislation updated the 2021 State Programme. The policy focus is now to orient agriculture to import substitution and to develop exports of high value-added products.
Agriculture-specific tax concessions are widespread
A recent review of tax systems across countries (OECD, 2020[11]) outlines the diversity of tax provisions affecting agriculture and confirms the widespread use of tax concessions specifically for agriculture, although their importance and modalities differ across tax areas and countries.
Most countries offer tax concessions on personal income from farming, in particular for smaller farms, but concessions for corporate income and capital gains are less frequent. Common concessions also include reducing annual land and property taxes, reducing the taxes associated with the transfer of land between generations, and exempting farmers from being registered for value added taxes. Agricultural goods (outputs and inputs including pesticides and fertilisers) benefit from reduced taxation in almost all countries reviewed, as does fuel used in agriculture – a cost-reduction policy measure with potentially negative environmental effects.
A comparative analysis of these regimes is complicated by several factors, including that the overall tax burden varies across countries, and that some of the observed measures are not viewed as agricultural concessions in some countries, as the same treatment is available for non-farm households.
Tax policy affects agriculture
The review also suggests that tax policy is often used as a lever through which to affect behaviour in the agricultural sector, with impacts on producer income, farmland transfer, investment, innovation, and sustainability outcomes.
There is evidence that in many countries, tax provisions supported farm income, facilitated innovation and investment, thus allowing farm expansion. The economic position improved for farm households compared to non-farm households when after-tax income was considered. At the same time, income taxation generally reduces the frequency of low incomes among farm households. Another general finding is that tax instruments have limited capacity to improve sectoral productivity and sustainability when inefficient farms are largely exempted from taxation. There is growing evidence, however, that environmental taxation can be an effective tool to curb pollution, but careful design and communication on objectives are needed.
The impact of tax provisions on agriculture needs to be evaluated
Although many countries include provisions in their tax codes designed to influence the agricultural sector, there remains only scant sector-specific analysis that can inform future policymaking efforts on the impact of specific taxes on income levels, farm transfers and structural adjustment, investment and innovation, or environmental sustainability (with some recent exceptions). There is some evidence associated with the implementation of tax reforms, but long-standing concessions are rarely evaluated.
Further investigation is needed in order to make more definitive determinations on whether or not tax provisions have achieved their aims (and if so, under what conditions), what secondary effects these tax policies have had on production and investment decisions in the sector, and how they affect competition, within and across countries.
Source: (OECD, 2020[11]).
Other support measures could have limited, positive, or ambiguous effects on trade or the environment
Some policy changes could have limited or positive effects on trade or the environment. While the government of China will continue the minimum purchase price programme in the major wheat and rice producing regions in 2020, it introduced a minimum purchase price ceiling capping the volumes to be procured each year from farmers under this system. The destocking of grains from central reserves slowed down in 2019 due to a good harvest, weak demand and downward pressure on farm gate prices. Iceland revised the agreements on the operating environment for sheep farmers and cattle farmers. For sheep farming, the revision entails the introduction of voluntary financial support for up to four years to help sheep farmers to diversify their operations to other activities, while for cattle farming, the milk-quota system remains unchanged.
Korea is continuing to progress towards a transition to payments further decoupled from production of specific commodities (especially rice), together with reinforcing the environmental cross-compliance of farmers. In 2019, the government set up a new direct payment programme, which combines the direct payments for rice, upland crops and less favoured areas into one scheme. The Government of India is also engaged in some decoupling of support. It allocated INR 750 billion (USD 10.6 billion) for the direct income transfer scheme Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) in fiscal year 2019-20. Initially covering small-scale farmers operating a land area up to 2 hectares, the PM-KISAN scheme has been extended to all farm households with land titles, who will receive an annual direct transfer of INR 6 000 (USD 84).
Others policy changes could have limited or ambiguous effects on trade or the environment. Ukraine instated new support for small and medium sized producers. The area payments are higher for newly established farms during the first three years of their creation than for longer existing farms and require that the eligible land be used for farming purposes. Another new measure provides partial reimbursement of up to 30% of the investment for construction or reconstruction of grain storage and grain processing capacities. Kazakhstan transformed the public mandatory crop insurance system to a voluntary insurance scheme with a view to expand crop insurance markets in the country. The new subsidy would cover insurance premiums instead of provide indemnities. Further, investment subsidies were rationalised and focused primarily on the renewal of agricultural machinery and equipment, modernisation and creation of new agricultural enterprises, import-substitution, and the realisation of export potential. In October 2019, the government of China announced the expansion of insurance premium coverage for rice, wheat and maize to over 70% by 2022.
Other domestic policy developments: financing, disaster and risk management, agriculture marketing and nutrition
This section reviews other important policy developments in 2019, as identified in the country chapters, covering selected policy development related to financing, disaster and risk management and agriculture marketing and nutrition. It should be noted that this list is not comprehensive; other policy changes have been made by individual countries (including on innovation, digital infrastructure development, or rural development).
Preferential credit limits were increased in some countries
For the first time since 2007, in Canada, the loan limit under the Advance Payments Program (APP), which provides agricultural producers with easy access to credit through cash advances loan limit, was raised in line with farm operating costs. The maximum resources for rural credit in Brazil increased by 16% compared to the previous plan 2018/19. A new law also facilitated new sources of collateral for rural credit, allowing credit co-operatives and other private financial institutions – and not just federal official banks – to receive resources from the National Treasury to cover the difference between market rates and those applied to certain rural credit operations.
Disaster assistance and compensation programmes were provided in response to trade policy changes and disasters
The United States Department of Agriculture announced a second package of trade mitigation programmes to assist farmers affected by retaliatory tariffs resulting in the loss of traditional export markets. In Canada, the Dairy Direct Payment Program will provide payments based on quota holding to dairy producers as market access commitments made under the recent international trade agreements will affect the sector. In order to offset the effect of the liberalisation of rice imports, the government of the Philippines established a Rice Competitiveness Enhancement Fund with an annual PHP 10 billion (USD 192.3 million) appropriation to be spent over the next six years. In Switzerland, the funds used to finance the eliminated export subsidies are to be transferred to the agricultural budget to finance direct payments to milk and grain to compensate for the price reduction related to this policy change.
The United States’ Additional Supplemental Appropriations for Disaster Relief Act of 2019 authorised just over USD 3 billion in disaster assistance for necessary expenses related to crop losses as a consequence of hurricanes, floods, tornadoes, typhoons, volcanic activity, snowstorms and wildfires occurring in 2018 and 2019. In December 2019, the Further Consolidated Appropriations Act, 2020 opened up funding to crop losses from excessive moisture, severe drought, and quality issues. This act also transferred unused funds from the disaster assistance provided under the Bipartisan Budget Act of 2018 – approximately USD 1.5 billion – to be used for 2018 and 2019 crop losses. In New Zealand, several medium-scale adverse events, including drought, wildfire and flooding events, have triggered government support for the Enhanced Task Force Green programmes and Rural Assistance Payments in 2019. These programmes provide funding for clean-up and recovery work, and relief to farmers in hardship, respectively.
Australia undertook a series of measures to respond to the continued drought. These consisted of extensions to concessional loans, direct payments and tax exemptions. New loans were made available, payback conditions of existing credit instruments eased. At the same time, the network of farm financial counsellors was strengthened to improve farmer access to financial information and advice. Tax exemptions were extended, and eligibility to income support for farm households was widened. The payment amount was increased and the application process was simplified and matched by an increased and open-ended budget. Additional drought payments were made available and access to water was supported with rebated water rates and support to on-farm water infrastructures investments. Funding was secured for large-scale water infrastructure development.
Several measures were taken in the European Union in response to natural hazards in 2019. Primarily in response to hot and dry conditions, in August, Member States and the Commission agreed to a series of support measures, including advancing CAP payments and providing derogations on certain greening obligations in order to allow farmers to produce sufficient fodder for animals. Additionally, compensation was provided to affected farmers in response to natural hazards in Austria, Bulgaria, Czech Republic, Hungary, Italy, Latvia, Romania, Slovenia and Sweden. EU rules for responding to adverse events under state aid provisions were also revised, with the Commission raising the maximum amount of support that individual farmers can receive to EUR 20 000 (USD 22 388) per farm over three years without the need for prior approval by the European Commission.
A series of large-scale natural disasters, including typhoons and heavy rains, continued to hit Japan, causing major damage to the agricultural sector. The government earmarked supplementary budget funds of JPY 105.4 billion (USD 1 billion) for the restoration of these sectors, mostly used for the recovery of agricultural facilities and farmland as well as landslides and road destruction in mountains.
Measures were taken to curb the spread of African Swine Fever
In Canada, the government and industry took steps to prevent and prepare for African Swine Fever (ASF). In particular, the government strengthened import control measures, developed a national ASF action plan, increased testing capacity for ASF, and negotiated zoning arrangements with key trading partners. A government-industry working group was established to develop a better understanding of the implications of ASF on the pig industry. China’s central and provincial government responses to the ASF outbreak focused on policy measures to contain and prevent the spread of the virus, to compensate producers, as well as to rebuild the pig herd and enhance pig meat production. They also encouraged local authorities to relax the application of local environmental bans on livestock farms. Several Member States of the European Union also took steps to prevent or respond to ASF, including the installation of fencing to limit the movement of wild boar populations (Belgium and Luxembourg), offering compensation for culled animals (Bulgaria and Czech Republic), or increasing surveillance efforts and border controls (Bulgaria and Luxembourg).
Several countries upgraded their agriculture marketing and nutrition strategies and food assistance policies
Colombia developed a major policy strategy on contract farming. This programme seeks a sustainable linkage between small-scale producers and markets, through the execution of projects that promote inclusive business schemes between companies and smallholders. These projects include a sector marketing strategy; alliances with the industrial sector; comprehensive technical assistance; the creation of produce fairs for farmers and processors; the development of rural supply; and follow-up on the executions of contracts under this strategy. Eight Indian states also finalised action plans for the implementation of the national Agriculture Export Policy (AEP) framework, which focuses primarily on the exports-enhancing dimension of AEP through roadmaps for production clusters development, capacity building, and infrastructure and logistics.
The government of Canada launched its first-ever Food Policy for Canada, which aims to create a more co-ordinated and food systems-based approach to food policy and regulations. Short-term actions will focus on improving access to healthy food, promoting Canadian food, supporting food security in northern and indigenous communities, and reducing food waste. The new Safe Food for Canadians regulations, which are based on international standards, were implemented at the beginning of 2019. Moreover, the government proposed changes to food labelling requirements to make food labels clearer and easier to compare across products.
In Israel, efforts to improve nutrition continued with a programme to educate children on the consumption of vegetables and fruits and the January 2020 implementation of a mandatory nutritional labelling scheme providing warning labels on packaged food to signal excessive sugar, sodium and saturated fat levels. In September 2019, Germany decided to introduce, on a voluntary basis, the food labelling system Nutri-Score which has already been used in France, Spain, Belgium and Portugal. The label provides an aggregate signal to consumers, based on the content of sugar, fat and salt, but also that of vegetables, fibres and proteins.
New food-related social programmes were also introduced. In Argentina, a new social programme entitled “Argentina against hunger” was introduced in January 2020. It provides monthly financial support to current beneficiaries of social welfare through an electronic “Food card” allowing them to buy various foods up to the value of a basic basket including dairy, vegetables, meat, and other fresh food. A programme of electronic food vouchers (called BPNT) was implemented in Indonesia. Under this programme, eligible households receive a total value of IDN 110 000 (USD 8.2) per month onto a purchasing card that can be used to buy rice and eggs at selected retailer stores.
Emerging agriculture and food policy responses to the outbreak of COVID-19
This section synthesises agriculture and food policy responses to the COVID-19 outbreak from 1 January up to 28 April 2020 in the 54 countries covered in this report. The synthesis is based on information collected directly from governments, and from complementary information found on public databases. While it covers a broad set of measures, it should not be understood to cover all policies undertaken in response to COVID-19. OECD (2020[12])summarises the direct and indirect impacts of the virus infection and consequent lockdowns on the agriculture and food sector and offers general policy recommendations in the short and longer terms (Box 1.3). This section focuses on additional policy responses to address both the virus impacts and adapt to the economic and business regulatory measures. It should be noted that not all countries faced the virus at the same time; Table 1.A.1. in the Annex shows the dates of outbreak as notified to the World Health Organisation. Lockdowns and resulting agriculture measures may vary across countries with the dynamics of the virus. Furthermore the timing of measures may differ, as explained in country chapters.
The impacts of the COVID-19 pandemic are being felt by the agriculture and food sector, both directly and as a result of necessary measures put in place to contain the spread of the virus.
Agricultural production. Agricultural sectors in many countries are experiencing seasonal labour shortages. While this is not widely observed yet, farmers may also face extra difficulties in sourcing agricultural inputs due to restrictions on the movement of people and goods. In some cases, the disruptions downstream from farms are also causing surpluses to accumulate putting a strain on storage facilities and increasing food losses.
Shifts in consumer demand. The collapse in consumption of food away from home is placing some food value chains under pressure. The macroeconomic shock due to COVID-19 and associated measures is expected to have a strong impact on demand for higher value premium products and those with more service addition. Lower oil prices are also reducing demand for crops for biofuels.
Food supply chains disruption. Production and distribution costs have increased and the available workforce has also been reduced due to the virus and associated policy responses. Food supply chains are also experiencing delays and disruptions to transport and logistics services; border closures and additional procedures have led to congestion and delays, affecting the transit of perishable products in particular.
Finally, and potentially most important of all, the impacts on livelihoods and food security in developing countries may be more severe, because food systems are more labour-intensive, food supply chains are less well developed, and the macroeconomic shock of COVID-19 risks plunging large numbers of people into poverty. A high incidence of sickness among farmers and farm workers could have substantial effects on agricultural production.
How damaging these impacts are will depend on national and international policy responses in the short, medium and long term. The OECD has suggested that governments should prioritise three areas.
First, governments should keep domestic, regional and international agro-food markets open, transparent and predictable. Well-functioning domestic markets, regional co-operation and an open international trading system are important to connect producers to market opportunities, and help food get to where it is needed.
Second, governments should ensure the food and nutrition needs of vulnerable populations are met – now and in the future. Co-operative global solutions may be needed to address the needs of the poorest countries and ensure that COVID-19 does not result in a food crisis in these countries.
Finally, looking ahead, the COVID-19 pandemic offers an opportunity to enhance the resilience, sustainability, and productivity of the agriculture and food sector. Governments should work with stakeholders and international organisations to learn from the crisis, and accelerate investments and reforms to strengthen the resilience of food systems to a range of risks, including those associated with climate change.
Source: OECD (2020[12]).
A diverse set of agriculture and food related measures have been taken by governments in response to the crisis, focusing on agricultural production, the functioning of the food chain and consumer demand. A review of the more than 400 collected policy responses suggests seven broad categories of measures: 1) Sector-wide and institutional measures, 2) Information and co-ordination measures, 3) Measures on trade and product flows, 4) Labour measures, 5) Agriculture and food support measures, 6) General support applicable to agriculture and food, 7) Food assistance and consumer support.3 Each of these categories can be further separated into sub-categories of measures, as indicated in Table 1.3.
The number of measures are unevenly distributed among categories. The most frequently observed measures belong to category 5 (close to a quarter of total measures), on agriculture and food support, followed by categories 2, 6, 3 and 4 on information, general economic measures, trade and product flows, and labour. At the sub-category level, the largest number of measures focused on financial support for the sector (5.A) and overall economic measures (6.A), the third related to website or campaigns (2.A) and the fourth sub-category was that of agriculture labour measure (4.B). Of course, these numbers are limited by a number of factors, and do not reflect the importance and impact of each measure taken, which also varies widely. Furthermore, as noted above, countries are still in the process of developing measures, including those to limit the spread of the pandemic, in response to socio-economic developments.
The following sections provide examples of measures under each of the seven categories in the 54 covered countries.4 Detailed descriptions of each policy measure can be found in the relevant country chapters.
Governments have exempted agriculture and food activities from lockdowns and adjusted their own activities
All governments with lockdown restrictions exempted key agriculture and food production and marketing activities, often by declaring these activities as essential or critical (for instance, Argentina, Australia, India, Israel, Italy, New Zealand or the Philippines). The precise legal definitions of these exempt activities vary among countries. For instance, most countries allowed the production, trade and distribution of agricultural inputs (including, for instance, Canada, Slovenia, Ukraine or the United States), New Zealand and France excluded cut flowers/flower buds/bulb activities from its list of essential activities;5 Australia’s list includes services supporting the agriculture food and business, including food markets and food banks conditional on the application of social distancing measures. Some others have emphasised particular functions of the agriculture and food sector, for instance, Chile considers agriculture a critical infrastructure, the European Commission and Ukraine consider agriculture workforce as critical. Specific exemptions have also been introduced for particular agriculture and food services; for instance, Switzerland allows direct sale from farms to consumers, farm shops, and the online sale of seeds and other gardening products, but forbids food markets.
Governments have adjusted their work methods and scope of activities in response to the crisis, maintaining selected programmes and deferring pending policy actions. While agriculture ministries in countries under confinement have largely functioned by telework, adjustments varied in scope and intensity. For instance, Israel’s ministry of agriculture restricted its activity to 33% of its staff deemed essential early on, on par with other ministries, a proportion that gradually climbed to 51% in late April, while Costa Rica requested regional offices to switch to online activities. The United States, via the CARES Act, provided extra funding for US Department of Agriculture agencies to help with salaries and expenses in light of their adjusted activities related to the COVID–19 pandemic. Canada adjusted the work of the Canadian Food Inspection Agency, focusing on priority activities, and was allocated additional support to train and equip its personnel. Mexico maintained its regular agricultural support programmes and its programmes related to the conservation and restoration of water infrastructure. The government of India extended the current Foreign Trade Policy 2015-20 for six more months until 30 September 2020, as it was due to expire at the end of March. In the European Union, the release of the European Commission’s Farm to Fork Strategy and negotiations around the next multi-annual financial framework and the Common Agricultural Policy were delayed.
Governments adopted measures to inform producers and consumers, monitor the situation, and co-ordinate their action with private and international actors
Many governments have used online or more traditional approaches to inform producers or consumers, facilitate exchanges, or to promote specific products or practices. Web platforms were set up for instance to inform the public in Australia and the agro-food sector in Chile; many countries used online platforms as part of their campaigns to recruit seasonal labourers (including Austria, France, Germany, Hungary, Luxembourg, Switzerland or the United Kingdom). Ireland set up a database to identify available relief workers to replace farmers who contract COVID-19. China launched a campaign to assist co-operatives in communicating with farmers on safeguard measures, including via social media, while India encouraged farmers to use the federally-developed weather- and market-data online platform. Austria, Bulgaria, and Romania set up online platforms to link producers and consumers for direct sales. Other countries launched promotion campaigns, to support consumer purchases of national agricultural and food products (e.g. Italy and Portugal) or of specific products particularly affected by the crisis, as done by Japan for products subject to lower demand, Costa Rica for fish and Korea for horticultural and floricultural products. Finally, governments used information campaigns to inform consumers; for instance, the Philippines informed consumers on healthy eating, while Japan and the Russian Federation reassured its consumers of the availability of food through press conferences and websites, and used campaigns at retailers to discourage panic buying.
Many governments monitored more closely (frequently) food supply, demand and stocks to inform their decisions. Certain governments relied on existing institutions to monitor the agricultural market situation (Chile, European Union), while others set up new mechanisms to do so (Costa Rica). Some countries focused on all supply chains, such as Japan, while others focused on particular products, such as fruits and vegetables in Israel. A number of countries used this monitoring or assessments of the availability of food to identify possible shortages, including Korea, Norway, South Africa, the Russian Federation or Israel. Additionally, G20 members, including the European Union, and major grain trading countries used the Agriculture Market Information Systems (AMIS) to share information and improve global market transparency.
Many governments undertook new measures to co-ordinate their actions with the private sector. For instance, Canada, Chile, Denmark and Portugal set up new institutional mechanisms to co-ordinate with the private sector, allowing them to have regular discussions about the situation and needed actions. The Ministry of Agriculture of Mexico has worked with representatives of the private sector such as producers, organisations and chambers of commerce to guarantee the production and distribution of agro-food products. Similar mechanisms operate in Canada and Japan. Norway’s minister holds daily phone conversations with the head of the farmers’ union about the situation and Switzerland’s authorities have been in regular contact with relevant companies and the farmers’ unions. The United Kingdom temporarily suspended its competition law to facilitate intra-industry exchanges, allowing supermarket chains to exchange data on stocks and share distribution depots and delivery vans.
Many countries have also engaged in international co-operation efforts, whether by adopting common principles or practical mechanisms. Agriculture ministers of the G20 adopted a statement, in which they discouraged trade restrictions, and stressed the need to take the necessary actions to improve the functioning of food chains, support affected populations and advance towards a more resilient and sustainable food systems. Under the initiative of Canada, governments of 23 members of the World Trade Organisation, including Australia, Chile, Colombia, Costa Rica, the European Union, Japan, Korea, Mexico, New Zealand, Switzerland, Ukraine, the United Kingdom and the United States, committed to keep supply chains open and remove any existing trade restrictive measures on agricultural products.6 Agricultural ministers of 25 Latin American countries also signed a declaration whereby they committed to a series of actions, including assisting vulnerable producers and consumers, and ensuring the well-functioning of markets and limiting disruption of international trade. At the sub-regional level, agriculture ministers of Colombia, Chile, Peru, Bolivia and Ecuador agreed to share sanitary protocols, measures and experiences in the agriculture sector, and agriculture ministries of Central American countries (including Costa Rica and Mexico) agreed to set up an inventory of products ready to be exported as well as food transportation protocols.
A number of measures have been taken to facilitate or in some cases restrict trade and product flows
Governments have taken diverse measures to ease agricultural trade flows either to secure a continued income for their exporting industries or to ensure that food supplies are available for their consumers. Indonesia took a series of measures, from tariff reduction to relaxing export restrictions and facilitating border formalities. On the export side, Korea is monitoring trade developments and finding alternative markets to those that are difficult to access. Australia published COVID-19 updates to the manual of importer requirements for exporters, and like New Zealand, set up funds to support the additional freight costs of aviation-based exporters of specific products with established markets. Costa Rica has established an online real-time system for phytosanitary certificates of exported products, while New Zealand has adapted export verification requirements for animal or plant products. On the importing side, several countries have relaxed their importing regulations to facilitate entry of specific products. China, Colombia, Ukraine, the Russian Federation and Turkey have lifted duties on certain food items, from meat (China) to grains (other four), Israel has expanded some of its TRQs for onions, cucumbers and eggs to loosen market constraints, and Switzerland introduced flexibilities to its TRQs, with measures applied on butter and eggs at this report’s writing. A number of countries have also adopted additional trade facilitation measures, accepting digital versions of specific (phytosanitary) certificates (such as Australia, China, Costa Rica, the European Union and Mexico), reducing physical inspections at ports and borders based on records of trader compliance (Portugal), providing for 24/7 clearance of agro-food goods in major ports (China), or providing flexibility to the application of trade-related fees and charges in ports (India).
Governments in many countries adopted logistics and transportation measures to facilitate the transportation of food and agriculture products, internally and at the border. The Philippines, China (for animal feed, and food distribution) and the Russian Federation (for food imports) set up priority lanes for transportation of agriculture commodities, speeding transportation and simplifying procedures. The European Union set up such lanes for shipments of goods, including agro-food products. As part of the South Agricultural Council, Argentina, Brazil and Chile agreed to secure transit of trucks with food and agriculture products across their borders. India allowed interstate regulatory exemption to deliveries of feed and fodder, and some Indian state took measure to ease agriculture machineries transports across states. Chile also permitted trucks to cross quarantine areas, the Russian Federation allows food trucks to enter urban areas, and Canada exempted truck drivers from travel bans. India also set up special railway services only to deliver essential items like food, in small parcels.
At the same time, certain countries have imposed trade restrictions. The governments of Kazakhstan, the Russian Federation, Ukraine, Turkey and Viet Nam have implemented temporary export bans or export quotas of selected products, including wheat for the first three, lemons for Turkey and rice for Viet Nam.7 Upon declaring a state of emergency, the government of South Africa shut down ports and halted all exports for from March 27 until April 17. China has implemented a trade and consumption ban on wild animals to reduce the transmission of the virus. At the same time, national products promotion campaigns (cited above), while aiming to support local industry, may reduce import potential. Going a step further, Bulgaria has mandated retailers with more than 10 stores to sell Bulgarian food, and to ensure that 90% of milk sold is of national origin.
A few countries engaged actively in rechannelling surplus food products. Japan supports producers affected by the lockdown of schools to find alternative channels to sell their products. If they do not find such channels, they can provide food to food banks, with a transport cost compensation. Similarly, the government of the Czech Republic is distributing food originally intended for the country’s fruit, vegetable and milk school schemes to food banks in the wake of school closures. Korea encouraged organic growers who have lost markets to find alternative outlets. The United States is procuring dairy and meat products, and fresh produce from wholesale and food distributors affected by the closing of hotels, restaurants and other services, to provide to food banks, community and faith-based groups. In the Philippines, oversupply of rice in local areas was purchased for distribution in areas in need.
Lastly, several measures have been taken to ease internal market transactions. Online trading was facilitated via platforms in India, while the governments of China, Israel and Korea encouraged e-commerce platforms. In Ireland, Bord Bia (the Irish Food Board) offered a marketing grant programme to assist food producers and manufacturers in accelerating e-commerce operations and expanding marketing activities. Costa Rica is maintaining its farmer fairs under sanitary measures, and India’s central and state level governments have been making efforts to maintain the operation of distribution channels for fruit and vegetables. The Philippines’ Department of Agriculture has a marketing system whereby producers can locate where to sell products at retail prices to local consumers.
Governments have introduced measures to safeguard their agriculture and food workforce or and to ensure the availability of seasonal labour
A diverse set of efforts were made to ensure the health of agriculture and food workers. For instance, Argentina and Japan developed and disseminated protocols for actors in the agriculture and food supply chain to minimise risks of contagion. Some countries have implemented strict sanitary measures in food production systems, including France, Korea and the United States. In Costa Rica, the government has applied these measures to cattle auctions, and requires the disinfecting of wholesale market places regularly. Many countries, such as China, New Zealand, or South Africa are requiring that food workers follow a strict protocol. Norway’s Food Safety Authority prepared meat control personnel at slaughterhouse and border points, and has maintained monitoring of the protection of workers to limit contamination. Denmark has decreed flexibility in extending the working hours for slaughterhouses in order to maintain meat production levels while also protecting the health of workers. Italy, Spain and Turkey have undertaken specific measures for their agricultural seasonal workers. The European Union has reduced the use of on-farm spot checks to decrease physical contact.
Many countries have taken measures to ensure the availability of seasonal labour to plant, harvest or package food, especially fruits and vegetables, under the restriction of movements and closure of borders. Many countries loosened their visa or work allowance procedures to encourage foreign seasonal workers to come or stay longer (including Austria, Australia, Canada, Estonia, Finland, Israel, Korea, New Zealand, Norway, Poland or the United States). The European Union permitted the free movement of seasonal agricultural workers within the European Union, and the entry of seasonal agricultural workers originating from third countries. Germany allowed the entry of up to 40 000 foreign seasonal workers by planes from designated airports, with the cost of transportation to be borne by employers. A number of countries have introduced measures to ease the reallocation of unemployed people towards agricultural work. Seven European countries used web platforms (as noted above), Korea increased the number of agriculture job matching centres for farmers and candidates. The governments of France and Spain offered flexible arrangements to ease the temporary hiring of unemployed people, with unemployment benefits continued for those hired as seasonal agricultural workers in Spain. Norway introduced a temporary scheme to incentivise laid off citizens to work on farm, keeping unemployment benefits (that are higher than seasonal workers) for half of their time. Israel offered transportation and accommodation for volunteer workers and more flexible arrangements for workers to allow them to change employers. Italy offered compensation for seasonal labourers who had worked more than 50 days in 2019. Iceland and Estonia provided support to farmers to hire workers if they are infected by the COVID-19 virus. Farmers not finding seasonal workers in Norway are eligible for an insurance compensation.
Governments have taken a wide set of measures to support the agriculture and food sector
At least thirty-five countries and the European Union have set up general financial support schemes for affected farmers and other actors in the sector. Most of these measures involve expanded financial options, like credit lines, loan guarantees, loan repayment deference, lower interest rate loans or a combination thereof (including, among others, Chile, China, Colombia, Czech Republic, Germany, Hungary, India, Italy, Japan, Korea, the Netherlands, Norway, Poland and the United States). Canada uses similar instruments in addition to the support of their risk management programmes and advisory services.8 Secondly, a number of countries have deployed emergency funds – or support payments – for farmers or agro-food companies to cope with higher costs or reduced demand (for instance, Austria, Belgium-Flanders region, Finland, Greece, Japan, Korea, or South Africa). Colombia provided a one-time payment to farmers and farm workers older than 70. Other countries have implemented temporary exemptions or postponement of contributions to retirement, health or disability pensions for farmers (Poland and Slovenia). India, Switzerland and selected EU Member States advanced their agricultural payments from existing support measures (direct payments). Additionally a few countries used other mechanisms to support their producers. For instance, the government of Estonia allowed land sale and lease back to provide liquidity, the government of Hungary reimbursed VAT or accelerated VAT refunding and Latvia’s government provided compensation for producers no longer able to supply the country’s school schemes. The governments of the Czech Republic and Poland compensated producers who have to take care of their children and the government of Japan gave a subsidy to employers in the sector who grant a special leave to those needing to take care of children.
Some countries also resorted to pricing, input and output support measures for agriculture and agro food chains. China, India, Kazakhstan and Viet Nam expanded their procurement of grains. China also increased its minimum support price for rice. At the same time, China encouraged rice growers to use double cropping in order to increase supply. Input support measures were also undertaken. Costa Rica’s government procured seeds and fertilisers for small producers, South Africa’s government provided input support for poultry, livestock and vegetable producers. The government of China purchased animal feed for the Hubei province, prioritised energy supplies towards fertiliser companies, and water, electricity and gas to animal feed and poultry meat producers, slaughterhouses and processors. Kazakhstan implemented a diesel fuel discount to growers. Mexico promoted the “Sembrando Vida” Programme which fosters the production of traditional crops in conjunction with fruit and timber trees in a sustainable manner targeted to low-income producers. Israel prepared to release a water quota as it expected to increase its agricultural production area to fulfil the internal demand during this year.
Several governments set up specific support for particularly affected agriculture supply chains. The United States provided disaster relief for specific producers and production chains (including specialty crops, dairy and livestock producers). The European Union announced a series of measures to support the storage of dairy and meat products, to provide flexibility in the reallocation of funding towards crisis management for apiculture, fruits and vegetables, olive oil, and wine, and on a temporary and exceptional basis, to allow operators in the milk, flowers and potatoes sectors to collectively adopt self-organised market measures to stabilise markets. Among others, the governments of Iceland, Korea, Belgium (Flanders), and the Netherlands provided special support to impacted horticultural or floricultural producers (including potatoes for the Netherlands). The government of Japan introduced measures to support its milk producers and processors, Spain’s government provided support for its lamb producers, while Portugal’s government did so for fruit and vegetables and wine producers, and the Latvian government for the livestock industry.9 The government of Switzerland allocated funds to encourage the freezing of beef, pork and goat meat for which demand has reduced. Costa Rica’s state owned National Sugarcane Liquor Factory was tasked to produce alcohol and alcohol-based antiseptic solution for national hospitals and makes home deliveries.
Lastly, many countries instituted temporary administrative and regulatory flexibilities to agriculture and agro-food companies to ease their operations. The European Commission provided flexibility for countries to offer extended deadlines for farmers’ applications to annual payments. Some EU Member States opted to defer application for payments accordingly (for instance, the Czech Republic, France, Greece or Spain), while others temporarily halted or delayed on-farm compliance inspections (Estonia, Finland, Ireland, Luxembourg and Portugal) or other compliance activities (compliance for animal husbandry subsidies in Hungary, or organic farming checks in Portugal). Poland extended the validity of health certificates for livestock and the deadlines for livestock identification. Canada’s Food Inspection Agency was given funding to develop flexible ways to carry out inspections, notably via the use of digital tools. Several EU Member States also temporarily relaxed conditionality, cross-compliance or green measures (Hungary, Ireland, Portugal), while Germany delayed the application of its amended fertiliser ordinance. Greece and Japan deferred the payment of insurance premia for their farmers, while Croatia postponed the payments of rents on government owned land. In the United States, USDA agencies have also introduced temporary labelling flexibilities to facilitate the distribution of food to retail locations, e.g. relaxing the application of country of origin or nutrition labelling requirements. The Czech Republic allowed distilleries to produce disinfectants from denatured alcohol.
Actors in the food and agriculture sector are mostly eligible for general economic relief measures
Governments in many countries have introduced overall economic packages that apply to firms and actors in the agriculture and food sectors, and in some cases are the main source of assistance. These include stimulus packages in Japan, New Zealand, or Switzerland; direct support to business (for instance in France, Germany, Greece, Luxembourg, Spain and the European Union) or to freelancers and the self-employed (such as in Austria, Belgium, Denmark, Germany, and Slovakia, among others); or wage compensation, either for employers or employees (e.g. in Denmark, Estonia, France, Ireland, the Netherlands and Slovakia). Governments also adjusted their fiscal instruments, via tax concessions, deferrals or rebates (including in Croatia, Costa Rica, Denmark, Estonia, France, Germany, India, Indonesia, Italy, Latvia, Lithuania, or the Netherlands); delayed payment of rents or utility bills (France); deferred or suspended social contributions for some or all firms (including in Belgium, Estonia, Hungary, Luxembourg, or Poland); or the suspension of penalty or waivers for late taxes (e.g. in the Czech Republic, Estonia, Lithuania or the Netherlands). Canada, Kazakhstan and the Russian Federation employed a combination of measures, including support, wages or adjusted taxes or charges.
Many countries also introduced measures to increase the financing means for all sectors. For instance, agricultural producers in the United States are eligible for a guaranteed loan programme that aims to support the payroll of small businesses during the coronavirus pandemic. The European Union has increased financing availability from the European Investment Bank Group to be directed toward bridging loans, credit holidays, or other measures, to alleviate capital market constraints. Governments in some EU Member States (such as Austria, Belgium, Estonia, Denmark, France, Ireland, Italy, or Spain) also offered credit guarantees, or provided improved access to investment or business loans, including at concessional rates (including Czech Republic, Estonia, Germany, Latvia or Portugal). The governments of Denmark and Portugal also offered increased access to or state guarantees for export credit.
Poor or affected farmers, agro-food chain actors and consumers can also benefit from social safety net programmes. This includes temporary unemployment compensations in a number of countries, emergency monthly financial assistance for vulnerable workers and people in Brazil, a safety welfare programme in Indonesia, and a range of social payments in the Russian Federation. The government of Chile is implementing a family emergency income for the poorest 60% of the population whose incomes are mainly from informal sources. This subsidy will be given for three months, the amount will depend on the vulnerability and the size of the family, being higher for the largest and poorest families, and will decrease monthly. The government of Denmark offered economic support for high-risk employees and reduced working hour requirements for senior employees.
Governments have provided food assistance to vulnerable population and acted to ensure consumer food affordability
Governments in many countries bolstered existing programmes or launched new initiatives of food assistance to cope with the large number of people affected by the economic lockdowns. For instance, the United States largely expanded the budget allocated to food and nutrition support and procured excess supply for food banks. The European Union amended the regulation on the EU’s Fund for European Aid to the Most Deprived – which provides food and/or basic material assistance to those in need – with a set of measures designed to address the COVID-19 crisis, such as allowing the use of electronic cards or vouchers as alternative to food, and ensuring the safety of aid workers. Canada and Italy expanded their funding of food banks or assistance programmes (Italy initially provided EUR 50 million and then added EUR 250 million in a later decree). The Philippines delivered pay-outs from its cash transfer programme earlier than scheduled. In the United Kingdom, vouchers were given to low income families in lieu of free school meals. The government of Portugal announced support for the distribution of fruits and vegetables through social solidarity NGOs and the national food bank network. Other countries also provided in-kind food assistance. For example, China, Costa Rica and Chile provided food baskets to low income populations. The Czech Republic distributed fruits, vegetables and milk destined for schools to food banks. Food distribution was scaled up, delivering food for school children in South Africa. The United Kingdom government distributed food parcels to vulnerable citizens. The government of India decided to distribute a six-month quota of subsidised food grains in one-go to beneficiaries under the Public Distribution System and also increased the monthly allocation of subsidised food grains by 2 kg to 7 kg per person. In addition, specific state- or Union Territory-level initiatives in India target as well distribution of grains and other food products such as pulses or sugar.
A number of market measures were also adopted by governments to ensure food affordability and availability for consumers. China released 10m tonnes of wheat to stabilise its market. Other countries, like Ukraine, the Russian Federation, Slovenia or Viet Nam encouraged or expanded their stocks of grains. The governments of Israel, Turkey, Poland, Portugal and Romania increased their oversight on prices of consumer products. Colombia focused its price monitoring activities on food baskets for vulnerable population, while the governments of Croatia and the Philippines fixed consumer prices for selected commodities.
Assessment of developments in agricultural support and performance
This section provides a quantitative assessment of developments in policy support to agriculture. The assessment relies on a set of quantitative indicators that are comparable across countries and time. First, OECD indicators of agricultural policy support are used to characterise the diversity of support measures applied in different countries (Annex 1.B provides definitions of these indicators). Second, the assessment utilises three indicators of performance of the sector to capture productivity and sustainability outcomes: total factor productivity (USDA, 2019[13]), nitrogen balance per hectare and greenhouse gas emissions per hectare (two OECD agri-environmental indicators).
These indicators are compared for 36 OECD countries, five non-OECD EU Member States, and thirteen emerging and developing economies. The assessment also discusses aggregate results for all the OECD and all emerging and developing economies, as well as for all countries combined. The European Union is presented as one economic region, and includes the United Kingdom, an EU member until January 2020. The assessment compares the evolution of indicators over time starting with a brief analysis of the most recent yearly changes in 2019. These figures are subject to the caveat that many numbers used for this estimate are provisional. Their discussion serves also to introduce the main components and concepts of support in the OECD methodology. Second a longer term comparison presents developments in support between most recent years and the early 2000s. For the outcome indicators on productivity and sustainability, comparisons are made over slightly different periods of time, from 1997-99 to 2013-15, recognising the lags in the publication of some of these indicators.
In 2019 total net support to agriculture decreased in OECD countries but increased in emerging and developing economies
The Total Support Estimate (TSE) is the OECD’s broadest indicator of support. It comprises policy expenditures in general services for primary agriculture that benefit the sector as a whole (General Services Support Estimate or GSSE); policy transfers to individual producers (Producer Support Estimate or PSE); and budgetary support to consumers included in the Consumer Support Estimate (CSE) (Figure 1.2). Total net support to agriculture in OECD countries fell in 2019 by 4.4% to USD 315 billion relative to 2018 levels, while it grew by 2% in the emerging and developing economies to USD 281 billion. This total net support in the latter group hides USD 100 billion of negative price support to commodities whose production is taxed, while transfers flowing to the sector in this group were correspondingly higher at USD 381 billion. The aggregate of net total support to agriculture across all countries covered in the report decreased by 1.5% to USD 601 billion.10
Note: *Market Price Support (MPS) is net of producer levies and excess feed cost.
Source: Annex 1.B.
These aggregates do not always reflect the diversity of changes in support across countries between 2018 and 2019. Total support to agriculture was reduced in many OECD countries (Australia, the European Union, Korea, Mexico, Norway, the United States and Turkey) and in several emerging and developing economies (Brazil, Colombia, the Philippines, Russian Federation, South Africa and Ukraine),11 (Panel A in Figure 1.3). In contrast, total support to agriculture increased in China, Costa Rica, Indonesia and Kazakhstan, but also in many OECD countries (Canada, Chile, Israel, Iceland, Japan, New Zealand and Switzerland). In almost all countries, the change in total support was mainly driven by changes in the policy transfers to individual producers and consumers (PSE-CSE), rather than to the sector in general (GSSE expenditures). Changes in expenditures on general services were larger than PSE changes only in New Zealand, Chile, Australia and Indonesia.
The amount of Producer Support Estimate (PSE), which measures policy transfers to agricultural producers individually, was reduced by 3.1% in OECD countries to USD 232 billion in 2019, while it grew by 3.4% to USD 199 billion in emerging and developing economies covered in the report. This latter is net of USD 100 billion negative price support, so positive producer support amounted to USD 298 billion. The aggregate of net producer support across all countries fell by 0.3% to USD 436 billion. The same countries that increased (reduced) the total support to the sector (TSE), also increased (reduced) producer support to farmers (PSE) (Figure 1.3). The only exception is the United States where the reduction in TSE was driven by reductions in budgetary transfers to consumers (food assistance programmes) in the CSE, despite support to producers PSE increasing in 2019.
Notes: Argentina, India and Viet Nam are not shown due to negative PSE estimates.
1. The OECD total does not include the non-OECD EU Member States.
2. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
3. The All countries total includes all OECD countries, non-OECD EU Member States, and the Emerging Economies.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Source: OECD (2020), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
The level of producer support relative to farm revenues fell slightly in 2019
In order to compare the degree of support to producers across countries, the OECD calculates the share of gross farm receipts (including market revenue) that is coming from support policies in each country (PSE over gross farm receipts or %PSE). Measured in relation to farm revenue, average producer support in OECD countries fell slightly to 17.8% of gross farm receipts in 2019, compared with 18.0% in 2018. In the emerging and developing economies covered in this report, net producer support as a share of gross farm receipts also decreased slightly, from 7.8% to 7.7% on average.
Transfers to producers in the PSE comprise market price support (MPS) provided through domestic market prices that are higher (or lower if support is negative) than world prices, and budgetary payments from the government to farmers (Figure 1.2). Focusing on MPS, the price gaps generated by trade policies and domestic market interventions [see Chapter 1 in OECD (2019[14])] are preferably calculated as a differential between domestic and reference prices, but in some cases alternative methods are used for these calculations (Box 1.4). In most countries covered in this report, the main contributing factor to PSE changes in 2019 was changes in market price support rather than changes in budgetary expenditures from the government to farmers (Figure 1.3). However there are notable exceptions. In the United States, the increase in producer support was largely driven by additional payments to farmers through the trade mitigation programmes and disaster assistance. Similarly, increases in the PSE in Chile, Iceland and Switzerland were due to increases in budgetary payments to farmers. In Mexico, reductions in expenditure on the investment on productive assets programme contributed most to the reduction in producer support, and in Australia, where market price support is zero, lower payments to farmers caused reductions in producer support.
Changes in MPS were also the main drivers of changes in producer support in 2019 for most of the emerging and developing economies covered in this report. For instance, in China the observed growth in producer support was driven by increasing price gaps in pig meat and other livestock commodities, following the African swine fever outbreak. In the Philippines, budgetary payments are a small share of support and they had only a minor contribution to changes in producer support. In contrast, in India, market price support remained negative and relatively stable, and increases in producer support were determined by the extended coverage of the direct income transfer scheme Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) introduced in 2018.
Market price support (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[15]). It is calculated for individual commodities, as the gap between the domestic price paid to producers and the equivalent price at the border (market price differential, MPD), 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 (MPD) is calculated only if policies exist that can cause the 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 MPD is assumed to be zero. A non-zero MPD, 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 transfers implied.
The calculation of the MPD for individual commodities based on prices 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 information required prevent the MPD calculation from being based on observed price gaps. An alternative option for calculating the MPD is the use of import tariffs or export taxes (OECD, 2016[15]).
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 MFN tariffs are used. In light of the growing number of preferential trade agreements (PTAs) engaged in by countries covered by this report (Table 1.2), 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 (Diakosavvas, 2002[16]; Effland, 2011[17]; Brink, 2018[18]).
Source: (OECD, 2019[14]).
The overall value of support grew mainly due to higher rates of support in large emerging economies
In 2000-02 the overall value of producer support was concentrated in a few OECD countries, with the European Union, the United States and Japan – the three largest economic areas – dominating the global figures (Panel A in Figure 1.4). Since then, support in the largest emerging economics – in particular, China, India and Indonesia – has also become increasingly important (Panel B in Figure 1.4). This evolution reflects both increasing rates of producer support in the largest emerging economies, and the fact that such support is extended to large agricultural sectors with much greater agricultural populations. Overall, the monetary value of the aggregate producer support in emerging and developing economies was less than one tenth of the aggregate PSE across OECD countries in 2000-02, yet by 2017-19 it was higher (Panel C in Figure 1.4).
In some emerging and developing economies – India, Argentina, Viet Nam, Indonesia, the Russian Federation and Kazakhstan – there is negative market price support for some commodities, implying that policies tax rather than support producers. These negative transfers harm producers and, in combination with budgetary payments and positive market price support to other commodities, distort production and trade. The amount of budgetary payments and positive market price support to producers in emerging and developing economies has multiplied by six in less than two decades while the amount of negative price support quadrupled, with these trends sending conflicting signals to farmers. Almost all the change in the amount of support to producers in recent years (87% of the change in net support) has taken place outside OECD countries.
Notes: Countries are ranked according to the PSE levels in 2017-19.
1. EU15 for 2000-02 and EU28 for 2017-19.
2. The OECD total does not include the non-OECD EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for both periods and in the European Union for 2017-19. Latvia and Lithuania are included in the OECD and in the European Union only for 2017-19.
3. The 13 Emerging and developing Economies include Argentina, Brazil, China, Colombia, Costa Rica, 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 and developing Economies.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
The average rate of producer support in OECD countries remains more than double that in emerging and developing economies
The long-term evolution of average %PSE (producer support as a share of gross farm receipts) reveals some convergence between OECD countries and emerging and developing economies from, respectively 28.9% and 4.2% in 2000-02 to 17.6% and 8.5% in 2017-19 (Figure 1.5). However this convergence seems to have halted since 2015. The average %PSE across all countries in this report declined in the long run from 18.4% in 2000-02 to 11.7% in 2017-19. Most of this decline took place before 2008, and was driven by reforms in OECD countries. From 2008 to 2015, the average %PSE declined more slowly in OECD countries while it increased more rapidly in emerging and developing economies. The decline in the average %PSE across all countries in this report from 13.1% in 2015 to 11.1% in 2019 masks an increase in average %PSE from 17.1% to 17.8% in OECD countries and a decline in the average of emerging and developing economies from 10.8% to 7.7%. This latter reduction also masks higher levels of negative market price support in some of these countries.
Notes: The two bars relate to emerging and developing economies and represent a decomposition of PSE on its positive and negative parts.
1. The All countries total includes all OECD countries, non-OECD EU Member States, and the 13 Emerging and developing Economies.
2. The OECD total does not include the non-OECD EU Member States. Latvia and Lithuania are included only from 2004.
3. The 13 Emerging and developing Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Behind the total %PSE numbers in emerging and developing economies there is a component of negative support to farmers through depressed domestic prices of certain commodities in some countries. These negative price support transfers are significant also relative to gross farm receipts and generate distortions in domestic and world markets beyond what is reflected in the net %PSE (Figure 1.5). Indeed, the %PSE, which indicates the net of positive and negative MPS elements tends to underestimate price distortions when both positive and negative price support are present.
Producer support declined in all OECD countries, and increased to above average in the Philippines, Indonesia and China from 2000-02 to 2017-19
The long-term trends in the aggregates reflects what happened in most individual countries. The level of producer support as a share of gross farm receipts was reduced in all OECD countries between 2000-02 and 2017-19 (Figure 1.6). The largest declines took place in Switzerland (18 percentage points), Mexico (16), Korea (13), Japan (12), the European Union (11), Norway (10), the United States (9), Canada (9) and Turkey (7), while it declined as well in low support countries, including New Zealand, Australia and Chile. In some emerging and developing economies, %PSE declined – particularly in Brazil (by 6 percentage points) but also in Colombia, Costa Rica, South Africa and Kazakhstan. Several emerging and developing economies increased their level of support as measured by the %PSE, including Indonesia (by 17 percentage points), China (8), the Philippines (5) and the Russian Federation (3). Three emerging economies – Argentina, Viet Nam and India – have negative %PSEs, with the %PSE declining in all three between 2000-02 and 2017-19.
There are wide differences in the level of producer support across countries (Figure 1.6). In 2017-19, five OECD countries have the highest levels of support, with rates of between 40% and 60% of gross farm receipts: Norway, Iceland, Switzerland, Korea and Japan. In these countries about half of the revenue of farmers is coming from agricultural policy transfers due to tariffs and other support measures. Five countries – the Philippines, Indonesia, Turkey, Israel and China – and the European Union have levels of support above the average across all countries covered in the report (11.7%) but below 30%. Six countries have levels of support below the average but above 5%: Colombia, the United States, the Russian Federation, Mexico, Canada, and Costa Rica. Seven countries have low levels of support below 5%: South Africa, Kazakhstan, Chile, Australia, Brazil, Ukraine and New Zealand. Finally, three countries have negative support with very different levels: Argentina, Viet Nam and India. Only three countries have significantly changed their relative position since 2000-02: China and Indonesia have moved from well below average to above the average; and Mexico has made the opposite movement from well above average to below the average.
Notes: Countries are ranked according to the 2017-19 levels.
1. EU15 for 2000-02 and EU28 for 2017-19.
2. The OECD total does not include the non-OECD EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for both periods and in the European Union for 2017-19. Latvia and Lithuania are included in the OECD and in the European Union only for 2017-19.
3. The 13 Emerging and developing Economies include Argentina, Brazil, China, Colombia, Costa Rica, 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 and developing Economies.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
On average, the share of total agricultural support in the economy is higher in emerging economies, but remains high in some OECD countries
The overall share of total agricultural support in the economy, including support to producers (PSE), to general services for the sector (GSSE) and subsidies to consumers (part of the CSE), is measured by the share of TSE in GDP or %TSE (Panel A in Figure 1.7). In OECD countries total support declined from 1.0% of GDP in 2000-02 to 0.6% in 2017-19. Reductions have been particularly large in countries where the burden was highest like Korea, Turkey, Iceland, Switzerland, Japan and Norway. The %TSE continued be above 0.8% of GDP in these OECD countries despite the relatively low share of agriculture in the economy in all of them except Turkey.
Total support to agriculture represented on average 1.3% of GDP in emerging and developing economies, more than double the OECD average in 2017-19. The %TSE is as high as 3.2% in Indonesia, 3.0% in the Philippines, and 1.7% in China. These higher shares reflect that fact that a given rate of support agriculture will translate into a higher share of GDP when agriculture’s share of GDP is higher. The %TSE declined since 2000-02 in China, Colombia, the Russian Federation, Costa Rica, Kazakhstan, India, South Africa, Brazil and Viet Nam.
Notes: Countries are ranked according to the %TSE in 2017-19.
1. For Kazakhstan and the Philippines, 2017-19 is replaced by 2016-18, due to missing GDP and agricultural value added for 2019.
2. EU15 for 2000-02 and EU28 for 2017-19.
3. The OECD total does not include the non-OECD EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for both periods and in the European Union for 2017-19. Latvia and Lithuania are included in the OECD and in the European Union only for 2017-19.
4. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
5. The All countries total includes all OECD countries, non-OECD EU Member States, and the Emerging Economies.
Source: OECD (2020), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
The level of agricultural support relative to the size of the agricultural sector is high in some OECD countries
The level of total support relative to the agricultural sector value added continues to be high in OECD countries compared to the overall average, corresponding to 42% of the agricultural value added in 2017-19, compared with 56% in 2000-02 (Panel B in Figure 1.7). Total support relative to the size of the sector varies widely across OECD countries, from 150% in Switzerland, 81% in Japan and 79% in Korea to less than 10% in only three countries: Australia, New Zealand and Chile. In several countries TSE relative to the agricultural value added was close to the OECD average including in Norway (40%), the European Union (44%) and the United States (52%).
In all emerging and developing economies total support relative to the size of the agricultural sector is below the average in OECD countries. The importance of support in the sector is highest in China (36%), the Philippines (32%), Indonesia (26%) and the Russian Federation (21%), low in Brazil (7%) and negative in Argentina and Viet Nam. The total effective tax on agriculture relative to the size of the sector was 48% in Argentina and 6% in Viet Nam.
From support to policy reform and sector performance
Building on the goals defined by the OECD Ministers of Agriculture in 2016 (OECD, 2016[19]) the OECD Agro-food Productivity-Sustainability-Resilience Framework (OECD, 2020[20]) provides a benchmark for policy performance. There is evidence that agricultural policy reform away from market price support towards less distorting forms of support, decoupled payments and general services for the sector can potentially improve productivity and reduce negative environmental outcomes (DeBoe, 2020[21]; Henderson and Lankoski, 2019[22]; OECD, 2019[23]).
The pace of agricultural policy reform has slowed in OECD countries since 2008
One way of evaluating the scope of reform is through the level of support (%PSE) and the share of potentially most distorting transfers (market price support, payments based on output and payments based on unconstrained use of variable inputs). Reform in most OECD countries in the last two decades has resulted in reductions in the level of support and in the share of most distorting support. All countries, with the exception of Canada, Israel and New Zealand (where support is in any event very low), have followed this pattern (Panel A in Figure 1.8). On aggregate, OECD countries have reduced %PSE from an average of 28.8% in 2000-02 to 17.6% in 2017-19, and have reduced the share of most distorting support from 67.5% to 48.3%
However, most of the reductions had already taken place in 2008-10 when %PSE was 19.9% and the share of most distorting support was 49.3% (see the first two steps in Panel A of Figure 1.8). Reforms in several OECD countries took place mainly up to 2008-10 and have slowed since, including in the European Union, and particularly in the United States where both %PSE and share of most distorting support have increased in recent years.
In emerging and developing economies, on average, the level of support is lower and the share of most distorting support in all transfers is higher than in OECD countries (Panel B in Figure 1.8). Brazil, Colombia, Costa Rica, South Africa and Kazakhstan have followed the same pattern of reform as OECD countries, reducing both the level of support and the share of most distorting support. The rest of emerging and developing economies have either increased the level of positive support (China, the Russian Federation, Ukraine, Indonesia and the Philippines) or saw an increase in negative transfers (implicit taxes) to producers (India, Viet Nam and Argentina).
Notes: Producer Support Estimate (PSE) as a share of the gross farm receipts. For the OECD aggregate, the beginning of the arrows indicates the composition in 2000-02; the intermediate point refers to 2008-10 period, while the end of the arrow to 2017-19 period. The scales in both axis are different in panels A and B.
1. Potentially most distorting transfers in cumulated gross producer transfers. Potentially most distorting transfers include transfers based on output (including positive and absolute value of negative market price support, and output payments) and on the unconstrained use of variable inputs.
2. The OECD total does not include the non-OECD EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for both periods and in the European Union for 2016-18. Latvia and Lithuania are included in the OECD and in the European Union only for 2017-19.
3. The 13 Emerging and developing Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
4. EU15 for 2000-02 and EU28 for 2017-19.
5. In New Zealand, price support is measured only for poultry and eggs and is due to non-tariff protection applied on SPS grounds.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Almost all countries have increased their productivity in the last two decades and, while nitrogen balances have fallen in many countries, GHG emissions per hectare have continued to grow in most countries
Observed performance in terms of productivity and sustainability varies across countries and periods of time as shown by a partial performance assessment based on Total Factor Productivity (TFP), nitrogen balances per hectare12 and greenhouse gas (GHG) emissions per hectare. Each of these indicators is discussed in the country chapters.
Figure 1.9 and Figure 1.10 plot the long-term performance of countries with respect to TFP and nitrogen balances per hectare, and TFP and GHG emissions per hectare, respectively, in two different periods of comparable length: period 1 from 1997-99 to 2005-07; and period 2 from 2005-07 to 2013-15. All countries but two increase TFP in each of the two periods, with changes in the range between -1% and 40% in each period. The performance of countries in terms of nitrogen balances and GHG emissions is even more diverse with increases in some countries and decreases in others, reflecting also the large differences in the starting levels of nutrient balances.
Notes: Data are not available on TFP for Belgium and Luxembourg and on NB for Chile, Estonia, Hungary, Israel and the United Kingdom for period 1; for Chile for period 2; and for Argentina, Indonesia, Kazakhstan and South Africa for both periods.
EU24 refers to all countries in the European Union except for Estonia, Hungary, Croatia and the United Kingdom for which indicators of Nitrogen balances series are incomplete for the period.
Source: USDA Economic Research Service, Agricultural Productivity database; OECD statistical database; FAO database and national data.
There are two types of de-linking − commonly called decoupling − environmental impacts from economic growth. Decoupling is said to be relative when the relevant environmental parameter (e.g. nitrogen balance or GHG emissions) is increasing at a slower rate than the relevant economic variable (total factor productivity in this case). Such relative decoupling appears to be fairly common and is represented by locations below the diagonal arrow in Figure 1.9 and Figure 1.10. Decoupling is said to be absolute when the economic variable is growing, while the environmental variable is stable or decreasing (locations in the lower-right quadrant in the figures).
In both periods, in almost all countries, productivity growth was relatively decoupled from growth in nitrogen balances (Figure 1.9). Fewer countries, but still a majority, are also in the “absolute decoupling” lower-right quadrant in the figure, that is, they experienced increased productivity with reduced nitrogen balances per hectare in both period 1 and period 2. In both panels of Figure 1.9, the number of countries in this quadrant is twice as large as the number of countries in “coupled” quadrants in which productivity growth comes with a higher nitrogen balance. In period 1, the correlation between productivity and nitrogen balance changes is negative. In the most recent period 2, the average increase in total factor productivity is stronger across countries and the relationship becomes flatter with a slight positive correlation between productivity and nitrogen balance changes, meaning that, on average, higher productivity growth is associated with higher nitrogen balance.
For the first period prior to 2005-07, many EU countries are in the absolute decoupling quadrant (including Austria, Denmark, Finland, France, Germany, Greece, Ireland, Netherlands, Portugal, Slovenia, Sweden and the group of European Union countries13) with average increase of TFP of around 10% in the period and decreases of nitrogen balances of similar magnitude. Other countries in this quadrant include Switzerland, Korea, Turkey, Ukraine, Russian Federation, Viet Nam and Costa Rica. North American countries experienced relatively higher increases in TFP beyond 18%, but minor reductions in nitrogen balances. In eastern EU countries like Latvia, Czech Republic, Slovak Republic, Poland and Lithuania, and in emerging economies like China and Brazil, productivity growth was coupled with larger increases in nitrogen surpluses,14 even if they start from different nitrogen balance levels.
For period 2, after 2005-07, most EU countries remain again in the absolute decoupled quadrant. Brazil and China continue experiencing large TFP growth rates above 30%, but, unlike in period 1, they show small reductions in the nitrogen balance. Australia and New Zealand experienced increases in both TFP and nitrogen balances.
Figure 1.10 plots the long-term performance of countries with respect to TFP and GHG emissions per hectare in the same two periods. In period 1 (1997-99 to 2005-07) there is a weak negative correlation and an equal number of countries in the coupled and decoupled quadrants. In period 2, the correlation becomes positive and most of the countries are in the coupled quadrant, that is, their increase in productivity takes place while increasing emissions per hectare. This is consistent with a general trend to increasing the agricultural GHG emissions in OECD countries (OECD, 2019[24]).
Note: Data are not available on TFP for Belgium and Luxembourg, on GHG emissions for Israel and the European Union (EU28) for period 1.
Source: USDA Economic Research Service, Agricultural Productivity database; UNFCCC database; FAO database and national data.
In the first period (pre-2005-07), a majority of EU countries stay in the right-low quadrant of environmental absolute decoupling, that is, increase in TFP and reduction in GHG emissions per hectare. However there are ten EU countries that increased their emissions in that period. Among American countries, only Canada, Chile and Costa Rica are in the decoupling quadrant, while Argentina, Brazil, Colombia, Mexico and the United States increased their TFP at the expense of raising GHG emissions per hectare. Other countries in the decoupled quadrant include Korea, Turkey, Indonesia, the Russian Federation, Ukraine, Viet Nam and South Africa.
In the second period (post-2005-07), less than one-third of the countries reduce their GHG emissions per hectare, being able to decouple its growth on productivity from the pressures on additional emissions. Among these countries, two have reduced these emissions by more than 10%: Israel and Chile.
Reforms in support in the past may have contributed to productivity growth that is more decoupled from environmental pressures
There are many factors that have an incidence on sustainability (OECD, 2019[24]) and productivity outcomes and, therefore, the performance of these indicators and their relationship is not only attributable to policy developments. However, there seems to be a higher degree of decoupling between productivity and nitrogen balances in period 1 compared to period 2, and, to a lesser extent, between TFP and GHG emissions. This is revealed by the negative relationship between TFP growth and growth in these agri-environmental indicators. Period 1 coincides in time with more active policy reforms in OECD countries towards less distorting support than in period 2.
Note: Shares of potentially most distorting support in gross farm receipt is represented by bubbles. The size of each bubble is proportional to the magnitude of the change in the share; while colour indicates the direction of change – dark blue for a decreasing share and light blue for an increasing share.
Countries exhibiting negative NB or PSE are excluded from the figure.
EU24 refers to all countries in the European Union except for Estonia, Hungary, Croatia and UK for which indicators of Nitrogen balances series are incomplete for the period.
Source: USDA Economic Research Service, Agricultural Productivity database; OECD statistical database; FAO database and national data.
This relationship between most distorting support and these two sustainability indicators can also be visualised by plotting bubbles whose size represent the change in the share of distorting support against TFP and nitrogen balances (where dark blue bubbles indicate a decline in support, while light blue bubbles indicate an increase in Figure 1.11). The dark blue bubbles, indicating reduction in most distorting support, are bigger in period 1 than in period 2. The reform towards less distorting support could be a factor of this better performance in period 1. In period 1, despite the reduction of distorting support, high support countries like Norway and Japan do not reduce N balances. On the other hand, in low support countries such as Australia or New Zealand further reductions of already low levels of distorting support do not show correlation with productivity and N balance performance. In several emerging and developing economies the share of distorting support in gross farm receipts has increased as reflected by bubbles in light blue. In these countries the total level of support transfers has increased significantly and this may create a differentiated relationship with these two indicators of environmental performance.
These results suggest that reducing most distorting forms of support may not only have improved the environmental and the productivity performance of agriculture (OECD, 2019[23]), but also helped to decouple productivity growth from increasing use of nitrogen and GHG emissions.
The profile of agricultural support across countries
This section analyses the current profile of agricultural support policies across different countries beyond the broad developments in support. The status of current policies and the scope of achieved reforms differ significantly across countries, particularly when accounting for the details on how support is provided. The analysis is based on additional OECD indicators of agricultural policy support that serve to characterise the diversity of support measures applied (Annex 1.B).
The way in which support is provided to producers matters. Although common across countries, market price support measures are just a subset of policies used to support farmers. Governments can implement a range of other measures that includes subsidies to reduce farmers’ input costs, and payments to farmers that can be provided on the basis of: farm output, area, animal numbers or farm income. Payments can also be provided with conditions in terms of specific production practices and input uses, pursuing environmental outcomes or other societal objectives. Other government policies focus on the provision of general services and public goods for the whole sector and the economy.
Different forms of support have different impacts on production, income, trade, farm practices, nutrient balances, emissions and many other outcomes that contribute to productivity, sustainability and resilience objectives. The most distorting forms of support – market price support, payments based on output and payments based on unconstrained variable inputs – are generally found to have a negative impact on farm technical efficiency and productivity (DeBoe, 2020[21]). They are also found to generally produce negative environmental outcomes (Henderson and Lankoski, 2019[22]). Negative environmental impacts of coupled support are particularly a concern for high intensity agricultural systems where existing high input use combined with policy signals to further intensify are more likely to result in negative environmental pressures (OECD, 2019[23]). Payments that are decoupled from production allow price signals to reach farmers and keep efficiency incentives; they also do not generally affect incentives at the intensive or extensive margin, although they might affect incentives at the entry-exit margin (Ibid.) and also impact production and trade through risk related effects.
Domestic prices not always aligned with international prices
The scope of agricultural policy reform towards policies that enhance productivity and sustainability outcomes is reflected by the extent to which prices received by producers are aligned with those prevailing on world markets. The Nominal Protection Coefficient (NPC) in Figure 1.12 is a ratio that compares effective prices received by producers – including per unit output payments – with world market prices. Across all OECD countries, producer prices have become more closely aligned with world markets, from an average of 1.26 in 2000-02 to 1.09 in 2017-19. In some emerging economies, like South Africa, Brazil, Colombia and Costa Rica, domestic prices have also tended to approach world market levels. However, in the majority of emerging and developing economies the gap has tended to widen over the same period, both in countries where effective producer prices are above world market prices (NPC larger than 1), and in those with prices below them (NPC below 1). The largest increases took place in China, the Russian Federation, Indonesia and the Philippines.
Notes: Countries are ranked according to 2017-19 levels.
1. EU15 for 2000-02 and EU28 for 2017-19.
2. The OECD total does not include the non-OECD EU Member States. The Czech Republic, Estonia, Hungary, Poland, the Slovak Republic and Slovenia are included in the OECD total for both periods and in the European Union for 2017-19. Latvia and Lithuania are included in the OECD and in the European Union only for 2017-19.
3. The 13 Emerging and developing Economies include Argentina, Brazil, China, Colombia, Costa Rica, 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 (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Despite the general reduction in the nominal protection coefficients in all OECD countries, large differences persist in the degree of price protection to producers across countries. Effective prices received by producers are very closely aligned with world prices in Australia, Chile, Brazil and New Zealand. Effective producer prices are less than 7% above world market prices in South Africa, the United States, the European Union, Canada, Mexico, Costa Rica and the Russian Federation. Effective prices are less than 7% below world market prices in Ukraine, Kazakhstan and Viet Nam.
The differences between effective producer prices and world prices are larger in all other countries: between 10% and 20% larger in China, Colombia, Turkey and Israel, and between 30% and 50% in Indonesia, the Philippines and Switzerland. Very large gaps between effective producer prices, larger than 50% and up to 95%, prevail in Japan, Korea, Norway and Iceland. In two emerging economies effective producer prices are more than 10% below world market prices: 12.2% lower in India and 19.8 % lower in Argentina.
Market price support rates differ also across commodities, creating additional distortions
Because market price support (MPS) is the main component of producer support, for most countries and commodities producers’ prices are often higher than world market prices. But there is a wide range of levels of price support for different commodities in different countries as measured by the share of MPS in gross farm receipts. The distribution of these levels of price support across different commodities in each country are represented in Figure 1.13. This diversity of price support across commodities have additional implications for the allocation of resources among agricultural products.
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 mean values for total agriculture.
Minimum values for Kazakhstan and Viet Nam are -107% and -116%, respectively.
Source: OECD (2020), "Producer and Consumer Support Estimates", OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
There are eleven countries with a relatively low average share of market price support in gross farm receipts in 2017-19, equal to or lower than 5%: Costa Rica, Mexico, Canada, the European Union, South Africa, the United States, New Zealand, Brazil, Chile, Australia and Ukraine. Out of these countries only Brazil, Chile and Australia have levels of market price support below 5% for all commodities. All other countries with low average market price support have at least one commodity with price support above 20%. Most of the countries with low average price support have most of their commodities with zero price support, but the European Union and Ukraine have more than two-thirds of the commodities with positive price support.
Israel, Turkey, Colombia, China and the Russian Federation have in 2017-19 average shares of market price support on gross farm receipts between 6% and 15%. In Turkey, high levels of market price support are concentrated in three commodities – sunflower, beef and potatoes. In the rest of these countries, the range of MPS rates is large across commodities and high support is less concentrated in few commodities.
Seven countries have high average levels of market price support, above 20% of gross farm receipts, but very different distribution across commodities. In one extreme, price support levels in Norway have similar values across commodities with a distribution concentrated around the median value. In the other extreme, there are high average price support countries in which few main commodities have much larger rates of price support than the average creating larger price distortions in the national markets. Domestic prices of rice, milk, pig meat and some fruits and vegetables in Japan, and of rice and sugar in the Philippines were more than 40% higher than in world markets. This means that farm revenues for these commodities in these countries were more than 67% higher than what they would have been if they were valued at world market prices. Finally, in all other countries with levels of market price support above 20% − Korea, Iceland, Indonesia and Switzerland − the range of market price support rates is large across different commodities and high support is less concentrated in few commodities.
Some commodities have prices below world market prices (negative MPS) in Norway (sheep meat due to higher costs of feed), Indonesia (palm oil and milk), China (eggs), the Russian Federation (wheat, barley, oats and sunflower) and Ukraine (oats, sunflower and milk), creating distortions that are hidden in positive averages for market price support in these countries. Average market price support is negative in Kazakhstan, Viet Nam, India and Argentina. In Argentina, export taxes depress domestic prices across several commodities, but negative price support is concentrated in soybeans with a share of more than 50% of gross farm receipts. Negative support is also mostly concentrated in only two commodities - rice and sunflower - in Kazakhstan.
Most of the cost of support policies are paid by consumers through higher prices
Market price support policies directly affect consumers of agricultural commodities, including food processors, livestock producers and final consumers. In most countries covered in this report, domestic prices are higher than world market prices, which increases the cost for consumers. The percentage Consumer Support Estimate (%CSE) expresses the monetary value of the transfers to consumers (both through prices and through food assistance programmes) as a percentage of consumption expenditure (measured at farm gate). When prices are higher than world market prices, this additional cost for consumers contribute negatively to %CSE, indicating an implicit tax to consumers.
Price support creates significant distortions to markets and reduces welfare. High agricultural prices burden poor consumers relatively more than rich ones, because food accounts for a greater share of their overall expenditures. Additionally, small producers in emerging and developing economies are often net buyers of agricultural products and, as a result, also bear part of these costs. Some countries, including the United States, Brazil, Mexico, Indonesia and Norway, provide targeted food assistance through budgetary transfers. This assistance may reduce negative impacts on poor consumers. Some food assistance programmes are focused on specific products (staples and milk in Mexico, rice and eggs in Indonesia) while others allow consumers buy a diversity of food products (the Supplemental Nutrition Assistance Program in the United States).
Finally, market price support also hinders the competitiveness of the downstream food industry. Livestock producers have to pay higher prices for their feed, and food processing industries higher prices for their inputs.
In most countries, consumers are harmed by price support policies as reflected in negative values in %CSE (Figure 1.14). In 2017-19, the level of this implicit tax ranges from zero in Australia to 40% or more in Norway, Iceland and Korea. The increased market price support transfers in most emerging and developing economies have increased the burden on their consumers when %CSE is negative. When %CSE is positive, as in Kazakhstan, India and Argentina, these transfers benefit consumers. The only OECD country with a positive %CSE is the United States where the budgetary transfers through the food assistance programmes are relatively high, while costs to consumers from market price support policies are relatively low.
Notes: Countries are ranked according to percentage CSE levels. A negative percentage CSE is an implicit tax on consumption.
1. EU28.
2. The OECD total does not include the non-OECD EU Member States.
3. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, 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 (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Despite reforms in some countries, potentially most distorting measures predominate
In addition to market price support, payments based on output and payments based on variable inputs without constraints on its use are also potentially most production and trade distorting, and are generally found to have a negative impact on productivity and to produce negative environmental outcomes (OECD, 2019[23]). Support provided through these potentially most distorting forms represents more than half of all support measures in all countries with only five exceptions. In Brazil, Australia and Chile most distorting measures are less than a fourth of all support, and in Switzerland, the European Union and the United States they represent less than a half (Figure 1.15)
In all countries, market price support makes up the largest share of potentially most distorting support. The countries that provide high levels of support through other potentially most distorting support measures are also heavy users of market price support. In some of these countries, payments based on output are the second category of potentially most distorting support – up to 12.0% of gross farm receipts in Iceland, 7.6% in Norway, 3.1% in Switzerland and 2.3% in Turkey. In India, the share of other potentially most distorting support in gross farm receipts is 7.0%, mostly payments based on variable inputs without constraints.
Notes: Countries are ranked according to the %PSE levels.
1. Support based on output payments and on the unconstrained use of variable inputs.
2. EU28.
3. The OECD total does not include the non-OECD EU Member States.
4. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines, Russian Federation, South Africa, Ukraine and Viet Nam.
5. The All countries total includes all OECD countries, non-OECD EU Member States, and the Emerging Economies.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support to variable inputs without constraints is potentially distorting and significant in selected countries
Unlike market price support, the cost of payments, including those based on inputs, burdens taxpayers rather than consumers. Just like market price support, however, payments based on variable inputs without appropriate constraints are not well targeted. For instance, general fertiliser subsidies reduce the costs of fertilisers regardless of the individual needs of each plot, increase the risk of over- or misuse, and may aggravate the potential harmful consequences for human health and the environment. Support to fixed capital formation in the form of grants or preferential loans for investment on farm are potentially less distorting and less likely to increase pressures on sustainability.
In most countries, support based on input use is mainly provided without constraints that could potentially ensure that variable inputs are not used in an unsustainable manner. India has the largest rate of support based on inputs, worth 7% of gross farm receipts in 2017-19 (Figure 1.16). Almost all of this support is provided for variable inputs such as fertilisers and without constraints on their use. In Indonesia and the Philippines, most of input support goes to variable inputs and services rather than fixed capital, and they have both significantly increased its input support in the last two decades. Kazakhstan and Iceland have more doubled their rates of support to inputs, but most of it is based on fixed capital formation (that is, investments on the farm). Israel and Brazil have more than halved their rates of support based on input use, with fewer resources dedicated to preferential credit in recent years in Brazil.
But there are countries that impose constraints on a significant share of their payments based variable inputs. Brazil provides all its input support – including support to investment loans – with constraints that are adjusted for local environmental sustainability. In Colombia, most input support is also subject to constraints on how inputs are used, while in Chile, Mexico and Australia, between one-third and half of the payments based on inputs are subject to such constraints. In the United States, mandatory constraints apply to all crop insurance payments.
Notes: Figure presents countries having share of payments based on input use above 1% for 2017-19 period. Countries are ranked according to the total share of payments for 2017-19.
1. EU15 for 2000-02 and EU28 for 2017-19.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support has shifted to less distorting forms, but rarely to the provision of sectoral public goods and services
Particularly during the 1990s and the 2000s, several OECD countries engaged in policy reforms that moved support away from market price support into payments that were less coupled to production, in particular, payments based on area, animal numbers, farm receipts and farm incomes, as well as payments based on other criteria not linked to agricultural commodities. In more recent years some emerging economies have also moved in this direction with area payments in China and income support in India. In general, these payments are less production and trade distorting. However, some of these payments are based on current criteria with a closer link to production. Payments based on current area can provide incentives to maintain marginal land in production and their impact on sustainability depends on contextual factors such as whether land would otherwise be simply abandoned, or converted to potentially more environmentally-friendly uses (OECD, 2019[23]; Henderson and Lankoski, 2019[22]). Payments based on current area or animal numbers mostly affect environmental pressures via the extensive and entry-exit margins and they would therefore have environmentally positive (negative) impacts if they support shifts towards land uses with relatively lower (higher) intensity (Ibid.).
Other less distorting payments are not based on current farming parameters, most often based on historical criteria, and may even not require production. Some are based on non-commodity criteria, such as environmental outcomes, regardless of any agricultural production. These “more decoupled” payments allow for price signals to reach producers, who then have the freedom to make production decisions in light of market signals and their own resource situation. Decoupled payments generally do not affect incentives at the intensive or extensive margin, but they may affect incentives at the entry-exit margin (OECD, 2019[23]). Specifically, they could supplement incomes and thereby improve the viability of agricultural enterprises, dampening incentives to other land uses.
Finally, some support programmes do not provide payments or transfers to individual farmers, but provide services and public goods such as research, innovation, health inspection, infrastructure and marketing. These services are valuable for the sector as a whole, often improving its competitiveness and capacity to respond to market signals and societal demands. However they are in general smaller than support to individual producers.
There are significant decoupled payments to producers and input constraints in OECD countries
Because of policy reform in several members, less distorting payments account for an increasing share of producer support in OECD countries, from an average of 9.7% in 1986-88, to 26.8% in 2002-02 and 42.9% in 2017-19. In 2017-19, less distorting payments accounted for a large share of producer support in the European Union (69%), Australia (54%), Switzerland (47%), the United States (46%), Norway (41%) and Canada (34%). This type of payments are rare in emerging and developing economies, with the exception of China, which has increased these payments from 9% of its PSE in 2000-02 to 21% in 2017-19.
However, since 2002-02, the level of less distorting support as a share of gross farm receipts has increased only in Switzerland, Japan, Korea and China (Figure 1.17). In some countries, including the European Union and Norway, these payments have increasingly been made on historical basis or without the need of recipient farmers to produce, decoupling them from current production decisions. In the European Union, 60% of direct payments are based on non-current criteria without production requirements, including the Basic Payment Scheme.
In some countries, the opposite has occurred, with support moving out of decoupled payments. In Switzerland and Mexico, some support has shifted from not being based on current criteria in 2000-02, to requiring production in 2017-19. In the United States a larger share of less distorting support required production in 2017-19 than in 2000-02.
Payments based on non-commodity criteria are significant only in two countries, the United States and Switzerland, and have increased in the latter in the last two decades. These payments to farmers are in principle directly targeted to environmental or landscape outputs that are not necessarily linked to the production of any agricultural commodity.
In some countries, payments are tied to specific production practices that are intended to improve the environmental performance of the farm or the welfare of animals. This may include constraints in the use of inputs, treatment of animals or agri-environmental constraints. These constraints could be compulsory or part of programmes to which farmers can opt-in voluntarily, for instance committing to reduce nutrient applications or creating buffer strips. Only six countries apply these constraints to payments based on area, animal numbers, receipts and income: Norway, Switzerland, the European Union, Japan, the United States and Korea (Figure 1.17). In the European Union, most of these payments are conditional on the adoption of mandatory production practices and the 28 Member States have to spend a minimum share of Pillar 2 funds on voluntary climate and environmental measures. In Norway, Switzerland, Japan and the United States, more than two-thirds of these payments are subject to constraints.
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 2017-19 period. Countries are ranked according to the total share of payments for 2017-19.
1. EU15 for 2000-02 and EU28 for 2017-19.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
The share of expenditures on general services and public goods on total support has not increased
In addition to support to individual producers, governments also support agriculture through the provision of public goods and services that create enabling conditions for the agricultural sector and improve its competitiveness. Investments in innovation, in infrastructure, including transportation and the provision of information and communication technologies, and in biosecurity can contribute to the productivity and resilience of the sector. Public policies have a role to facilitate these investments. This support is measured by the General Services Support Estimate (GSSE), including expenditures on innovation systems, inspection services and development and maintenance of infrastructure, but also on marketing and promotion and public stockholding. Despite its potential to contribute to sustainable productivity growth, on average it is much lower than support provided directly to producers individually. Repurposing agricultural support could mean shifting most distorting forms of taxpayer-financed producer support to payments targeted on specific non-commodity outputs or general services and public goods, or even policy areas that are not specific to agriculture, such as the wider climate agenda. Some of the support to general services as measured by the GSSE may contain distorting elements, however. For example, government expenditures may indirectly support domestic producers by financing stockholding beyond market needs, by promoting sales on domestic and foreign markets, and by expanding irrigation infrastructure in ways that may be detrimental to the environment. For some of these investments, a detailed analysis is required to measure their wider costs and benefits, and avoid unintended consequences for the economic or environmental sustainability of the sector.
The ratio of the GSSE relative to the absolute value of Total Support Estimate (TSE) is only 17% on average in OECD countries in 2017-19, a share that has not increased since 2000-02. Support to general services has tripled in nominal value since 2000-02 in emerging and developing economies, but its share in total support has fallen from 40% to 21% in 2017-19 due to a much larger increase in producer support (Figure 1.18). Only in New Zealand, Australia, Chile, Ukraine and Brazil does the GSSE represent more than 30% of the TSE. Some countries have increased the share of GSSE in total support, however: New Zealand, Australia, Chile, Brazil, Canada, Kazakhstan, the Philippines, Colombia, the United States and Switzerland.
Notes: AIS = Agricultural Innovation System. Countries are ranked according to the share of total GSSE in TSE.
1. EU15 for 2000-02 and EU28 for 2017-19.
2. The OECD total does not include the non-OECD EU Member States.
3. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, 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 (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Among the different services provided to the sector, countries tend to prioritise the development and maintenance of infrastructure which represents 42% of expenditures on average, with very similar averages across OECD and emerging and developing economies, but with large differences across individual countries. Infrastructure represents more than 70% of GSSE in Japan, India, Viet Nam and Turkey, and more than half of expenditures on general services is on infrastructure in Korea, the Philippines and Chile.
The second priority across countries is expenditures on agricultural innovation systems (AIS), accounting on average for 31% of the GSSE in OECD countries and for 25% in emerging and developing economies. The knowledge created, shared and adopted through the AIS has the greatest potential for improving the capacity of the sector to grow sustainably and increase its resilience by adapting to shocks and the evolving market environment. Brazil dedicates 92% of its GSSE to innovation, and in Mexico, Norway, Australia, the European Union and Argentina, AIS represents more than half of expenditures on general services.
Expenditures for inspection and control systems represent a third important group of general services provided to the sector. While on average these systems receive a much smaller share of the GSSE than both infrastructure and innovation systems, inspection and control can be an essential service to increase competiveness, ensuring the safety of the production, protecting the environment and ensuring the consistency of the international agro-food trading system. In Ukraine, Kazakhstan, New Zealand, Iceland and Canada, inspection and control represent 40% or more of all expenditures for general services.
The global food system is expected to deliver on a formidable triple challenge. The first is to deliver safe and nutritious food to consumers, in sufficient quantities and at prices they can afford. The second is to use natural resources sustainably while reducing greenhouse gas emissions and avoiding the destruction of valuable ecosystems and biodiversity. The third is to provide a livelihood to farmers and others in the food chain, and promote rural development.
The fact that these goals are a long way from being attained, has led to charges of “system failure”. Yet the scale of past achievements is as remarkable as what remains to be done.
The world population has grown from 3 billion in 1960 to about 7.8 billion today and there is more food available per capita than generations ago. Yet globally there are over 800 million people undernourished, with an even greater number either overweight or obese, and both aspects (plus wider forms of malnutrition) are associated with a rising public health burden.
The tripling of production since 1960 was achieved primarily through improved yields and productivity growth, with little overall change in agricultural area. Had those productivity gains not been realised, the consequences for human development and for the environment would have been devastating. Nevertheless, production growth has imposed stresses on soils and water resources. The agricultural sector also accounts for 11% of GHG emissions, with that share doubling once land use change is factored in.
The process of technical and structural change has ultimately benefited many farmers who have been successfully absorbed in faster growing parts of the economy, while consumers have benefited from lower food prices. However, it has put pressure on the incomes of farmers who are not competitive, and in some countries led to distress migration to urban areas.
The challenges for the global food system are a crucial aspect of the broader challenges facing humanity as a whole, with implications for nearly all of the 17 UN Sustainable Development Goals (SDGs).
Addressing these challenges will require a perspective on the food system as a whole, i.e. “all the elements (environment, people, inputs, processes, infrastructures, institutions, etc.) and activities that relate to the production, processing, distribution, preparation and consumption of food, and the outputs of these activities, including socio-economic and environmental outcomes.” (HLPE, 2017[25]).
A critical aspect of national food systems is that different aspects of the triple challenge interact, sometimes in ways that create policy synergies, but also in ways that involve difficult trade-offs. For example, dietary guidelines in several countries suggest people should adopt diets with a limit on consumption of red meat. Insofar as those guidelines reduce demand for ruminant meat there could be a benefit in terms of lower emissions (a synergy). However, policies that lead to lower livestock production could reduce protein availability in regions where it remains low (a trade-off). Similarly, policies to raise farm productivity could generate income growth in agriculture and beyond and benefit consumers through lower prices, but this will raise trade-offs with respect to producers who are not able to raise their productivity. As another example, paying for public goods could benefit the environment and simultaneously support farm incomes, but pricing natural capital according to its social cost could lower incomes, at least in the short term. In some cases, there are complex synergies or trade-offs across all three dimensions. A single-issue perspective on any objective is unlikely to make headway in the face of these interactions, and could lead to unintended side effects.
OECD work on food systems is examining how countries can improve their policies in the face of such complex interactions. In many countries there are wide gaps between policies that would be effective in addressing the “triple challenge” and the policies that are currently in place. Those gaps may arise due to difficulties in identifying and addressing synergies and trade-offs, but they may also reflect issues such as divergences between popular beliefs and scientific evidence, or the relative power of specific interests. Responsibilities over different relevant policy areas may also be fragmented, requiring co-ordination by policymakers. OECD work is accordingly focused on both the substantive requirements for effective and ambitious policies and how policy-making processes can be oriented to ensure coherence in the face of multiple objectives.
Source: OECD (2020[26]).
Assessing support and reforms
OECD Ministers of Agriculture agreed in 2016 on the need for integrated policy approaches that would better enable farmers and the food sector to improve productivity, manage natural resources more sustainably and increase resilience (OECD, 2016[19]). These desired outcomes can be seen as essential pre-requisites for addressing a “triple challenge” confronting the global food system (Box 1.5). They are also reflected as benchmark indicators for assessing the performance of food and agricultural policies and support measures in the OECD Agro-food Productivity-Sustainability-Resilience Policy Framework (OECD, 2020[20]). In order to achieve these outcomes Ministers identified a set of key principles for agricultural policies. These include, among others, that they should be targeted to specific outcomes, tailored to the magnitude of those outcomes, equitable within and across countries, market oriented to support a well-functioning global trading system, and coherent with policies in other areas (OECD, 2016[19]). Together with existing analyses, these principles guide the assessment of policy developments.
Total support to the agricultural sector averaged USD 619 billion (EUR 542 billion) per year during 2017-19, while some countries implicitly taxed their producers. Little of this support is targeted to stated objectives
In 2017-19, the 54 countries covered in this report provided on average a total of USD 708 billion (EUR 620 billion) per year of support to their agricultural sectors. About three-quarters of this support, USD 536 billion (EUR 469 billion) per year, was transferred to individual producers, with more than half of this amount provided via instruments with the greatest tendency to distort markets – principally market price support to producers and subsidies linked to output or the unconstrained use of variable inputs. At the same time, six countries, in particular Argentina and India, implicitly taxed their agricultural producers by using measures that depressed the domestic prices of some commodities. These implicit taxes amounted to more than USD 89 billion (EUR 78 billion) per year in 2017-19, which when deducted from the gross positive transfers, resulted in net transfers to agricultural producers of USD 446 billion (EUR 391 billion) and to the sector overall of USD 619 billion (EUR 542 billion) per year. While lowering the level of aggregate support, these implicit taxes also increase overall market distortions.
Market price support (both positive and negative) and most distorting budgetary support are generally found to have negative impacts on productivity and to produce negative environmental outcomes, and therefore a majority of agricultural support is not targeted to governments’ desired outcomes. Countries’ performance on sectoral productivity and environmental outcomes respond to developments and incentives well beyond agricultural support policies, including technological change. But these final outcomes are influenced – most likely negatively for most of the support – by existing distorting policies.
Budget expenditures in the same period amounted to USD 425 billion (EUR 373 billion) per year, a volume that has increased significantly since the early 2000s, notably in a number of emerging and developing economies but also in several OECD countries. This part of support is particularly important in the context of governments looking for ways to improve the efficiency of public outlays.
Improvements of productivity and sustainability of countries’ agricultural sectors have been mixed
World agricultural productivity, as measured by the Total Factor Productivity, has increased at an average annual rate of 1.6% in the last decade. Despite the large differences across countries, all countries have experienced improvements in productivity when measured across two decades, from less than 0.1% to more than 3% per year.
While aggregate agri-environmental indicators show improvements in some elements of the environmental footprint, the performance of the sector varies across countries, regions and periods of time. There are many countries in which productivity improvements have occurred without additional agri-environmental pressures, enabling both lower GHG emissions per hectare and lower nitrogen balances per hectare. However this environmental decoupling was stronger in the decade of the 2000s and has been reduced in the last decade, coinciding with the loss of momentum in agricultural policy reform in OECD countries, as measured by reductions in the most distorting forms of support. This suggests that policy reforms in favour of lower and less distorting support could stimulate improvements in sustainable productivity growth.
More efforts are needed to monitor the environmental performance of agriculture and the environmental impacts of support policies. Governments should invest in improving the agri-environmental performance of farmers and policies, taking advantage of the existing digital technologies that allow the gathering and combining of different information sources and more granular data. In particular, there is scope for governments to expand the use of digital tools to monitor compliance with existing policy measures, to assess and revise regulations, and to improve access to agricultural data. The development of indicators requires co-ordination between researches and policy makers. The linkages between innovation and productivity deserve special attention to design policies that support innovative ways of decoupling productivity growth from additional environmental pressures.
A number of policy approaches are available for helping agriculture to become more productive, sustainable and resilient – but the focus on them remains limited
The policies that are best targeted to increase the productivity of the agricultural sector are those that contribute to improve its capacity to innovate, to respond to changing economic, social and environmental demands and incentives, and to flexibly manage external shocks that test the resilience of the sector. Those policies include no-regret policies and appropriate investments in targeted services and infrastructure for the sector that improve productivity and sustainability, even in the absence of a shock. Services that generate a high-performing agricultural innovation system and a competitive and resilient biosecurity environment contribute to both productivity and sustainability.
Governments’ support measures do not sufficiently prioritise public goods and services to the sector, with one-eighth of support going to agricultural innovation systems, inspection and control systems, and rural infrastructure
However, the bulk of the agricultural support measures are not focused on improving the public goods and services that make the sector more productive and responsive to environmental challenges. Support to these general services (GSSE) represents only 17% of net total support (TSE) and it has not been increasing since 2000-02 in most countries. Only five countries spend more than 30% of their respective total support on general services – New Zealand, Australia, Chile, Ukraine and Brazil. On average across all countries, only 7% of total support is dedicated to sector infrastructure, 4% to investment in agricultural innovation systems and 1% to inspection services.
Innovation is a key driver of agricultural productivity and sustainability, which makes the system more responsive to industry needs, societal demands and environmental pressures. In particular, international co-operation in research allows complementary specialisation across countries and knowledge spill-overs. The competitiveness of the agricultural sector and its resilience to shocks and new challenges also depends on investments in infrastructure, including transportation, and the provision of information and communication technologies, including connectivity infrastructure in rural areas. Public policies have a role to facilitate these investments – particularly those that improve human capital and facilitate farm-level decision-making through access to services, knowledge and information. Investments in biosecurity, animal and plant health that create incentives for producers to prevent and prepare for adverse events are also fundamental for a competitive and resilient sector. Funding of inspection services should respond to national needs, reducing the risk of pest and disease outbreaks without hindering production or trade.
Some general services support may have distorting elements, however. For example, government expenditures financing stockholding beyond market needs or expanding irrigation infrastructure in ways that may be detrimental to the environment can provide incentives for production and exports beyond market signals or sustainability limits. Policies supporting the provision of public goods and services would benefit from cost-benefit analysis including on their unintended environmental consequences.
Reforms of producer support toward less distorting measures lost momentum in the last decade, and targeted measures are still relatively underutilised
In past decades, many OECD countries implemented policy reforms that moved support away from market price support and other most distorting measures towards producer payments that are less coupled to current production decisions. In several OECD countries, payments based on area, animal numbers, receipts or incomes, or payments not linked to the production of agricultural commodities, represent a large share of producer support. These payments are more efficient in transferring income to the owners of land and other production factors, and they reduce the potential for creating market distortions and generating negative environmental impacts. However, in general these programmes are still not directly targeted to specific objectives for the sector or the society as a whole. Only a handful of countries have developed producer support programmes that are not linked to any agricultural production variables, present or historical, and are instead linked to the provision of other non-commodity outputs such as environmental or landscape. Such programmes represent a very small share of total support.
In a number of countries, payments are tied to specific farm practices or associated with mandatory or voluntary agri-environmental and animal welfare constraints. The increasing use of such payments by some countries reflects the growing importance of societal concerns with respect to the environment, animal welfare or the provision of other public goods. The efficiency and effectiveness of these measures requires that they are effectively targeted to the intended outcome and to the investments that prevent misallocation of resources due to market failures. These constraints can reduce some of the negative consequences of these policies on the environment but rarely target the final objective.
Policy interventions are generally more efficient and effective if they are targeted to the specific problem at hand. Governments can significantly improve the targeting of agricultural support to well defined and measurable outcomes. Progress towards targeting has been limited and most of the support provided through budget expenditure is not targeted to clearly identified beneficiaries or outcomes.
In contrast, policies identified as potentially both most distorting and most environmentally harmful provide for the majority of support
Most distorting support has declined only marginally as a share of all support, and has increased in absolute terms
In contrast, the majority of support continues to be provided in forms that are known to have particularly distorting effects on production and international trade. Market price support (of either sign), together with payments based on production quantities or on the unconstrained use of variable inputs such as fertilisers, account for more than half of all transfers to and from the sector, or 70% of transfers to and from individual producers. Differences in price support across commodities within countries, and the co-existence of significant price support in some products with depressed prices for others, create additional distortions in domestic markets.
Such forms of support also have the potential to harm the environmental performance of the sector. Higher effective output prices for producers and lower prices for important yet potentially harmful production inputs can affect production both at the extensive and the intensive margins, thereby potentially increasing greenhouse gas (GHG) emissions, raising the surplus of nutrients and their displacement into water reservoirs and air, and reducing biodiversity in agricultural areas.
Some emerging economies have increased levels of support, particularly most distorting support, to similar levels of those in OECD countries
Across the OECD area, many countries have reduced levels of harmful support in the 1990s and 2000s, but reforms have largely stalled in the more recent past. Looking more broadly, however, several emerging economies, notably Indonesia, China and, to a lesser extent, the Philippines and the Russian Federation, have moved in the opposite way and increased support to their agricultural sectors. More recently, however, China has made steps to provide some of its support in less distorting ways. On the other hand, several countries, in particular Argentina and India, apply various forms of export restrictions and, in the case of India, domestic marketing regulations, which effectively tax their agricultural producers. Across the 13 emerging and developing economies covered by this report, positive support to the sector in these most distorting forms today accounts for more than 9% of gross farm receipts – compared to 8.5% across the OECD countries, while the implicit taxation from suppressed domestic prices in several emerging and developing economies adds to regional and global distortions.
Growing needs for high-value food and rising demand for public goods, provide opportunities for the agricultural sector, while increasing resource pressures and uncertainties related to climate change create additional challenges
The agro-food sector continues to face great opportunities but also a number of challenges in the coming years and decades. Growing and more affluent populations and changing lifestyles are estimated to result in rising demand, notably for high-quality food products, such as fruits and vegetables, meat and dairy products. At the same time, natural resources in a number of countries are increasingly under pressure, and climate change is projected to result in more frequent and more intense extreme weather events. While the OECD-FAO Agricultural Outlook (OECD/FAO, 2020[9])) projects that the core tendency should be for supply growth to continue to outpace demand growth at the global level over the coming decade, a wide range of uncertainties imply that both higher and lower real prices are possible (OECD, 2016[27]). Irrespective of the outlook for prices, greater efforts are needed to ensure sustainable productivity growth and resilient food systems, in line with the call made by Agricultural Ministers at their Meeting at the OECD in April 2016 (OECD, 2016[19]). The current low price environment, with little risk of food production being unable to meet demand, provides a window of opportunity for fundamentally improving the sustainability of agricultural production.
Future priorities are to phase out support most harmful to markets and environment, better target income support, and shift the balance of support to investments that improve the productivity, sustainability and resilience of the sector
Much can be gained by reducing market distorting and environmentally harmful support
A large part of public policies continue to target producer prices for outputs or inputs. Given the size of such support and the increasing evidence on negative effects for sustainability, countries should reinvigorate efforts to reduce and eventually phase out such forms of support. Reducing market price support generally does not liberate public resources, but may temporarily create additional demands for budgetary expenditures to compensate farmers for the reduced protection. Where such compensation is needed for a limited period of time, it should be tailored to the actual losses in income. This amount of compensation required would be lower than suggested by the value of transfers implied by price support, because a large share of those transfers “leak” to other beneficiaries, including suppliers of purchased inputs and landowners. Support for variable inputs often aims to compensate farmers for insufficient infrastructure and access to input markets; investments in such infrastructure are generally a more efficient measure for overcoming such deficiencies.
Phasing out market price support and other potentially most distorting forms of support also improves the effectiveness of other policies. Producers protected by high border measures and insulated from market fluctuations are less likely to invest in cost-saving technologies, and structural change tends to be slowed down by such protection. The removal of distorting price signals would also increase the payoff to policies that reinforce the value of economic activities – in particular investments in research and development, and innovation more widely.
While in the 1990s and 2000s significant efforts to reduce distorting support in many countries were reinforced by multilateral pressures, the impetus to adopt more effective policies has largely stalled over the last decade. Nevertheless, a number of major preferential and regional trade agreements have recently come into force or are currently under negotiation. While greater gains can be realised through widespread multilateral reforms, preferential and regional trade agreements offer a way forward for cross-country action to reduce harmful domestic support and market access barriers. Moreover, they can be seen as viable second-best options to, at a minimum, binding applied tariffs and good regulatory practices (OECD, 2019[28]). To maximise that potential, participating countries should avoid protecting sub-sectors that receive high support in order to reduce distortions within domestic markets arising from a widening spread of support levels across commodities.
Recent responses by several countries concerned about the food security of their own populations following the COVID-19 pandemic suggest, however, that ad hoc trade restrictions remain on the trade policy agenda. Export constraints or outright export bans punish domestic producers who provide food as an essential good to the global community, risk undermining trust in the international trading system, and harm net food importing countries.
The efficiency of producer support would be improved by targeting well-defined, quantifiable outcomes of public interest
Payments to land users should increasingly focus on the provision of public goods. A few countries, notably Switzerland and the United States, are paying farmers for providing specific non-commodity outputs, such as landscape amenities or other goods that respond to societal demands. However, such payments are small in relative terms, representing a little more than 0.3% of public expenditures for the sector, or less than 0.6% of budgetary support to individual producers. Payments for non-commodity outputs are a means to create markets for public goods; while supplied by individual land holders or producer associations, they benefit the society as a whole. Governments therefore represent the demand side, offering specific contracts on the delivery of products which, while generally linked to the use of land, are not coupled with agricultural production. Countries should make increased use of such contracts to increase the supply of values that are in the public interest. As a positive side-effect, such instruments also offer an additional income opportunity for farmers and other land holders. However, when the provision of non-market goods and services requires government action, the payment should ideally target the specific outcome, while paying for the use of a specific practice or technology may be seen as a second best if outcome-based payments are not possible. Tailoring the payments is equally important, but requires additional information on the dimension of the problem and the marginal costs of reducing it. Digital technologies may facilitate the implementation of outcome-based payments and their tailoring, by helping to overcome information asymmetries and gaps, and lower policy-related transaction costs that previously may have been prohibitive for such measures (OECD, 2019[29]).
Reform income support by fully integrating farm households into social support systems
Past decades have seen a rapid expansion of direct income support, which has become less production distorting and hence more efficient in transferring income to farmers compared to other forms of support it replaced. Originally institutionalised to compensate agricultural producers for losses incurred from reduced price protection or lowered coupled payments, these payment have typically become permanent transfers rather than temporary compensation measures. Despite their relatively high transfer efficiency, however, such payments favour land owners and do not address social needs, as larger and wealthier farms benefit more than small and potentially more economically distressed producers. Governments should improve their understanding of the financial situation of farm households, and identify and target the market failures that may lead to persistent low incomes within the agriculture sector. To strengthen the social safety net for agricultural producers, social benefits should be integrated into the general social security system and consider both income and wealth.
Reconsider income support, including when linked to restrictions on environmentally harmful production processes and inputs
A number of countries have implemented policies that link income support to requirements to reduce the negative environmental impact of agricultural production. Linking support to environmental constraints can reduce policy inefficiencies, but such measures remain untargeted as the payments typically do not reach the most distressed beneficiaries, and generally are not targeted to the regions or farms causing environmental harm. Efficiency could therefore be further strengthened by making such cross-compliance a mandatory new baseline for delivering more ambitious public good and environmental outcomes linked to targeted support payments.
Focus risk management policies on measures that improve the sector’s resilience to catastrophic risks and improve sector and farm-level preparedness
Public engagement in risk management continues to involve a wide range of insurance and stabilisation schemes, in addition to ad hoc assistance in response to extreme events. Governments should focus their engagement on systemic risks for which private solutions cannot be developed, taking care that public support does not crowd out on-farm or market-based risk management tools. Governments should consider the risk landscape over the long term and prioritise investments that build farmers’ capacities to manage current risks, as well as to adapt and transform in response to uncertainty and an evolving risk environment, especially under climate change, while contributing to productivity and sustainability even in the absence of a shock. This includes building farmers’ entrepreneurial and risk management skills, and increasing preparedness through investments in research and development, knowledge transfer and innovation, market and weather information, and planning and assessment tools. Importantly, governments should adopt collaborative, participatory approaches to develop risk management policies, to ensure that all farmers are aware of the risks they face and understand their responsibilities for managing them.
The COVID-19 pandemic that has hit economies since the beginning of 2020 has required significant public attention and underscored the importance of policies that enhance the resilience of agriculture and food systems with respect to a wide range of shocks and uncertainties. The extraordinary scale of policy measures to mitigate the impact of COVID-19 on the economies and agro-food systems responds to the systemic nature of the pandemic. Care should be taken to ensure that lessons – such as the effectiveness of different government interventions in facilitating the continued functioning of the food system – are learnt, while specific support responses remain temporary and are rolled back as the situation improves.
Increasingly prioritise policy efforts targeted to the provision of key public services
A number of countries today focus their agricultural policies on providing the environment the sector needs for increasing productivity and sustainability. Other countries should follow their example, by prioritising key services for the sector and payments targeted to specific and quantifiable outcomes in the form of increased productivity, reduced environmental pressures and increased provision of agriculture’s public goods.
Public intervention is most important where markets fail to provide sufficient incentives for socially optimal outcomes. This particularly holds for a range of public services for the sector, which private agents tend to undersupply. Innovation through research and development is the backbone for sustainable productivity growth. Although private research has an essential role in the development of marketable technologies, stable and sufficient public funding is also important in areas generally undersupplied by private research, including, among others, basic research, linkages between innovation actors (including internationally) and innovation targeted to non-market outcomes. On average only 6% of the budgetary efforts highlighted above are targeted towards the agricultural innovation system, a share that has fallen over the past decade.
Government expenditures are equally important for providing the essential infrastructure that allows the agro-food sector to work efficiently. This includes both physical and knowledge infrastructure, ranging from rural, national and international transportation systems to digital systems for information and communication. Digital technologies are closely related to the information system, and investments connectivity infrastructure can provide significant synergies if properly linked to private activities.
Bio-security, control and inspection are a third group of key services to the sector. These services are essential for ensuring that agricultural production and trade are safe for human, animal and plant health and for the environment. Bio-security needs depend on the specific conditions within each country, but should always be based on available scientific evidence, both to be effective and to avoid unjustified trade restrictions and trade costs.
Reinvigorating the largely stalled process of policy reforms needs further steps in the direction of shifting support towards the stated objectives and the provision of public goods and services for the sector. Reforming policies for a more productive, sustainable and resilient agro-food sector therefore implies – for many countries – a greater focus on investments in these services that make the whole sector more resilient to unforeseeable shocks such as the COVID-19 pandemic. This means being able to absorb, adapt and transform, including in response to possible longer-term changes in the structure of food demand following the ongoing COVID-19 crisis. To some extent, this may require governments to shift some of the support elements to producers provided in the form of budgetary expenditures towards these critical general services.
Make agro-food systems fit to respond to future opportunities and challenges, by improving the coherence and transparency of policy packages
Agricultural policies should send consistent signals to producers and other market participants. Consistency in policy packages improves the predictability of outcomes and increases policy efficiency. Policies continue to provide conflicting incentives to market participants. For instance, support based on commodity output fosters the intensification of production processes, while agri-environmental payments aim to reduce unsustainably intensive practices. Removing such conflicting signals would reduce transaction costs and the gap between stated objectives and adopted policy instruments.
Moreover, policy packages for the agro-food value chain need to be transparently and coherently integrated into economy-wide policy areas such as labour markets and social security, environmental policy and investments in transportation, trade and other infrastructure. Agricultural policies that are focused on the provision of public goods and services, that underpin the competitiveness and resilience of the agro-food sector, and that are part of a broad coherent policy package have the best potential to effectively and efficiently achieve policy goals and to improve the long-term productivity, sustainability and resilience of the sector.
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The World Health Organisation (WHO) presents detailed information at country level on the appearance of confirmed cases and evolution over time of the COVID-19 disease in terms of new cases, overall confirmed cases and deaths. The table below gives a snapshot of the WHO reporting of the date of the appearance of confirmed cases by country and may inform the sequence of policy responses.
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 Annex Box 1.B.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.
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 farm 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 cumulated 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.
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 phyto-sanitary 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.
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 the 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. Several EU Member States also took actions to ban or phase out the use of glyphosate in agriculture, albeit for health related reasons.
← 2. More details on the initiative are available at http://www.fao.org/save-food/en/.
← 3. While categories were designed to be mutually exclusive, a few measures can be considered to belong to two of the seven categories. The section mentions those where this is the case.
← 4. Measures taken by EU member states are those reported in the EU chapter. Actions taken by the European Union as a whole are also mentioned where relevant.
← 5. New Zealand also excluded wool activities starting on 25 March. Restrictions on wool and floriculture were eased on 28 April.
← 6. See https://t.co/bmRPVVBPDn?amp=1
← 7. See country chapters for exact duration of export restrictions. Romania also introduced an export ban for grains and other foodstuffs going to non-EU countries, but it was lifted six days later.
← 8. Additional countries have similar support for any business including agriculture business (see next section).
← 9. A slate of measures were proposed by the European Commission to support the temporary storage of meat, milk and dairy products and to reorient existing support to manage the crisis for certain production systems (fruits and vegetables, olive oil, wine). These measures would need to be agreed by Member States before being implemented.
← 10. The totals of OECD countries and emerging and developing economies (EET) do not add up to the total across countries (TOT) because non-OECD EU Member States are included in the overall total (TOT) only.
← 11. In 2018, PSE was negative for Argentina, India and Viet Nam and, therefore, decomposition of changes in TSE cannot be interpreted for these countries.
← 12. The analysis focuses on countries with N surpluses since changes in negative balances cannot be interpreted in the same manner. A nitrogen surplus could stay in the soil, reach groundwater or surface water, or volatilise into the air causing pollution.
← 13. In Figure 1.9, EU24 refers to all countries in the European Union except for Estonia, Hungary, Croatia and the United Kingdom for which indicators of Nitrogen balances series are incomplete for the selected period.
← 14. These are the countries for which productivity and nitrogen balances were not even relatively decoupled.
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