Chapter 25. Turkey
Support to agriculture
Despite a series of reforms since the late 1990s, the level of farm support in Turkey, while varying from year to year, has remained around 20% during 2016-18, which is slightly higher than the average for the OECD area. Most distorting forms of support dominate as Market Price Support (MPS) accounted for 72% of the producer support in 2016-18, resulting from domestic price support, tariffs and other import barriers as well as export subsidies for certain products. The level of price distortions has remained higher than the OECD average: domestic prices remain on average 18% above world prices in 2016-18.
The other important elements of producer support are payments based on output and variable input use, which account for 13% of support to producers. Payments based on commodity output have increased since the decoupled direct payments were abolished in 2009. The main direct payments to farms in Turkey are deficiency payments (“premium payments”), which are designed to cover the difference between the target price and market price of the product. Payments based on current area and animal number, such as agricultural insurance programmes, have increased in recent years and the share of such payments reached 9% of producer support in 2016-18.
As for the General Services Support Estimate (GSSE), the main element is financing the development and maintenance of infrastructure, which accounts for approximately 75% of the GSSE expenditure. While expenditure for the agricultural knowledge and innovation system grew in the last decade, its share in GSSE expenditure remained around 5% in 2016-18. The total support estimate to agriculture (TSE) averaged 2% of GDP in most recent years, which is twice the OECD average.
Main policy changes
In 2018, the Ministry of Food, Agriculture and Livestock (MoFAL), and the Ministry of Forestry and Water Affairs were merged to form the Ministry of Agriculture and Forestry. The preparatory work for the next 2019-23 Strategic Plan is underway under the Ministry of Agriculture and Forestry (MAF).
The coverage of the support to agricultural insurance has been extended to more products and risks. In 2018, the coverage of the programme was extended to the production loss of barley, rye, oat and triticale, covering risks related to drought, frost, hot winds, heat waves, excess moisture and excessive precipitation. For 2019, the coverage was further extended to chickpeas, red lentils and green lentils. In 2018, 1.76 million agricultural insurance policies were issued with TRY 2.05 billion (USD 424 million) of government support to the insurance premium.
Within the scope of Combating Agricultural Drought, the “Turkey Agricultural Drought Strategy and Action Plan”, 2018-22, was published. The main strategies of the Action Plan are: developing a capable institutional structure, making a holistic and comprehensive plan, and transforming the structure of the agricultural sector to one least affected by drought. Activities in the Action Plan are grouped under five headings: 1) drought risk estimation and crisis management; 2) ensuring sustainable water supply; 3) effective management of agricultural water demand; 4) increasing support to R&D activities, and training and extension services; and 5) institutional capacity building.
Assessment and recommendations
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Turkey has made progress in the last decade towards strengthening the agricultural sector’s legal and institutional framework. However, greater efforts need to be made to transform the state economic enterprises into economically viable entities operating under competitive market conditions.
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Since 1986-88, progress in improving market orientation has been variable, with ad hoc changes to policy settings within a macro-economic context of high inflation and volatile exchange rates. The share of producer support in gross farm receipts is slightly higher than the OECD average.
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Agricultural policy should be reoriented from supporting production towards improving agricultural productivity and adding more value with sustainable use of natural resources.
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A re-orientation of agricultural policies should allow producers to react flexibly to market conditions. Currently, producer support is granted mainly through the most market distorting measures, altering the prices farmers face on output and input markets. Further efforts are required to reduce the share of the most distorting types of support.
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Programmes such as payments for supporting organic agriculture, good farming practices and land conservation are more targeted to the policy objective to develop an environmentally-friendly agricultural sector. The role of such policies should be increased.
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Turkey should increase investments on education and skills, critical physical infrastructure and the innovation system. The support directed to the agricultural knowledge and innovation system has increased in recent years, but still accounts for only around 5% of the expenditures for general services.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support to producers (%PSE) has been fluctuating with no clear long-term trend. In 2016-18, support has been around 20% of gross farm receipts, slightly above the OECD average. The share of potentially most distorting transfers has decreased slightly over time due to decline in market price support (MPS) and border protection, but still accounts for close to 90% of producer transfers (Figure 25.1). In 2018, the level of support has decreased due to lower MPS. The decrease in MPS results from a reduced price gap as world prices increased much more than domestic prices, due mainly to the depreciation of currency (Figure 25.2). Effective prices received by farmers, on average, were 18% higher than world prices; large differences between commodities persist with domestic prices for beef and veal, potatoes, and sunflower at more than 40% above world prices. Overall, SCT represent around 90% of the total PSE. MPS is the main component of Single Commodity Transfers (SCT): beef and veal, potatoes, sunflower, and poultry meat, but also cotton and barley had a high share of SCT in commodity gross farm receipts (Figure 25.3). The expenditures for general services (GSSE), mainly on development and maintenance of infrastructure, relative to agriculture value added were slightly lower than the OECD average. Total support to agriculture as a share of GDP has declined significantly since the mid-1990s. Around 85% of the total support is provided to individual farmers (PSE).
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Contextual information
Primary agriculture accounts for 6% of GDP and employs 19% of the workforce, making agriculture one of the most important sectors of the country’s economy. Turkey is a net exporter of agricultural products, which account for more than 10% of total exports, and access to world markets is a significant issue for the sector. Notwithstanding various structural bottlenecks, such as the predominance of small-sized, subsistence and semi-subsistence farms, Turkey ranks as a significant agricultural exporter of nuts, dried fruits, and some fresh vegetables; main export destinations include the European Union, Iraq, the Russian Federation and the United States.
Turkey has maintained a strong economic growth at more than 4% of annual growth of real GDP in recent years, but the growth decelerated in 2018. The exchange rate has depreciated steadily since mid-2017, but intensified market pressures in August 2018 led to a further depreciation of around 30%, contributing to rising inflation. Turkey’s agro-food imports are dominated by primary and processed products for further processing by the domestic industry. These accounted for 79% of total agro-food imports in 2017. In turn, processed and primary products for consumption are key export categories, accounting for 76% of total agro-food exports.
Sources: OECD statistical databases; World Bank, WDI and ILO estimates and projections.
Note: Numbers may not add up to 100 due to rounding.
Source: UN Comtrade Database.
During 2006-15, the agricultural output and total factor productivity (TFP) in Turkey grew faster than globally. The intensity of input use per hectare of agricultural land is, in general, lower than many other OECD countries, but the phosphorus balance is particularly high in Turkey due to intensive livestock production. Agriculture accounts for more than 80% of water use. The expansion of irrigated area, combined with a decrease in precipitation due to climate change, may have contributed to the increased water stress.
Note: Primary factors comprise labour, land, livestock and machinery.
Source: USDA Economic Research Service Agricultural Productivity database.
Description of policy developments
Main policy instruments
The strategic objectives of agricultural policies, as identified in the Tenth Development Plan (2014-18) include the development of a globally competitive and environmentally-friendly agricultural sector, and the provision of sufficient and balanced nutrition to Turkish people. The 2018-22 Strategic Plan of the Ministry of Food, Agriculture and Livestock (MoFAL) was prepared with the objectives of ensuring sustainable production, access to adequate and reliable food, rural development and competitiveness of the sector. Particular attention is given to the efforts to increase the efficiency of water use in agriculture, policies to support agricultural production and supply security, raising the standard of living in rural areas, encourage women and young population to production, and R&D and extension of technologies to the sector.
In the 2018-22 Strategic Plan, seven strategic areas have been defined for the agricultural sector: i) agricultural production and supply security; ii) food safety; iii) plant and animal health, and animal welfare; iv) agricultural infrastructure and rural development; v) aquaculture and fisheries resource management; vi) research and development; and vii) institutional capacity building.
Import tariffs, complemented by purchasing prices fixed for cereals and sugar beet, provide support for domestic production. Export subsidies are applied to a number of products including processed fruit and vegetables, poultry meat and eggs. Export subsidies are granted in the form of reductions of the exporters’ debts vis-à-vis public corporations (for example, for taxes, and telecommunications or energy costs) (WTO, 2016[2]). Production quotas are applied at the farm level for sugar beet.
Deficiency payments (“premium payments”) are provided for the products that are in short domestic supply. The payment covers the difference between the market price and the target price that is calculated based on production and marketing cost. Deficiency payments were first introduced in 2002 for oilseeds, olive oil and cotton and later for tea (2004), grains and paddy (2005) and pulses (2008). The payment rates are differentiated in 941 basins. In order to ensure the production planning, determining the most suitable ecological and economical crops with high yield and quality in each agricultural basin, in total 21 eligible products are defined under the support programme including grains, pulses, some oilseeds and feed crops. Contrary to the initial plan to convert former output based payments to area based payments, the payments continue to be based on output under the new system due to technical difficulties of implementation. The government aims to change crop production patterns to follow ecological conditions and to increase the production of crops that are short in supply, while decreasing excess supply in some other crops.
Hazelnut producers receive payments based on area. Area payments are also provided for fodder crops, organic farming, good agricultural practices, certified seeds, gasoline and fertiliser use.
Payments based on input use are provided mainly in the form of interest rate concessions and payments to improve animal breeds and farm production capacity (e.g. field levelling, drainage, soil improvement and protection and land consolidation). Farmers and agricultural enterprises benefit from concessional loans offered by the Ziraat Bank (TCZB) and Agricultural Credit Co-operatives (ACC). Interest rate concessions vary by type of agricultural operation (livestock breeding, irrigation, organic agriculture and good farming practices). Each farmer registered under the National Farmer Registration System (NFRS) receive a so-called “diesel payment” and a “fertiliser payment” separately based on current area of production. Additional support for soil analyses that were a perquisite for receiving fertiliser payments was re-introduced in 2017, as a support to the authorised laboratories.
A number of regulations control water and soil pollution, and provide protection to wetlands. Land conservation payments protect the land quality and ensure sustainability of natural resources in agricultural lands. The government plays a major role in providing infrastructure investment, especially for irrigation, including within the South-Eastern Anatolia and Konya Plain Projects.
Among the four state owned marketing boards for agricultural products, the former Sugar Authority and the Tobacco and Alcohol Market Regulatory Authority were closed and MoFAL took over the responsibility to administer the marketing regulations in 2017. Turkey continues to maintain two other state owned marketing boards for agricultural products: the Turkish Grain Board, and the Meat and Milk Board. Although their importance in agricultural marketing has declined, marketing boards provide price support through commodity purchasing and stockpiling. They also disburse subsidies, supply inputs to farmers, and are involved in the importing and exporting of agricultural commodities (OECD, 2011[3]).
The Action Plan for the Program on Enhancing Efficiency of Water Use in Agriculture, introduced in 2015, prioritises modernizing irrigation infrastructure, extending water saving practice for agricultural producers through training and extension programmes, revising support policies based on water scarcity and improving the governance of water policies. The plan aims to decrease the use of underground water and increase the use of water-saving irrigation technologies.
On rural development, a new National Rural Development Strategy was issued in 2014. The ongoing support on rural development projects involves co-financing of beneficiaries to mobilise private-sector resources. Public investments to improve the agricultural infrastructure have been accelerated to boost agricultural production and increase the competitiveness of the sector. MoFAL also increased funding for IT projects, to improve data collection and the monitoring network and its efficient use, and to develop traceability in the sector.
Since the mid-2000s, specific rural development policy frameworks have emerged in the context of Turkey’s efforts to comply with the EU acquis. The first national Rural Development Strategy for 2007-13 was adopted in 2006 as the basis of the EU Instrument for Pre-Accession Assistance Rural Development (IPARD-I). IPARD is intended to address the country’s needs in the pre-accession period in the area of rural development. Within the framework of IPARD-1, EUR 1.045 billion (USD 1.28 billion) was paid to the beneficiaries. The IPARD-I was implemented in 42 provinces and approximately EUR 2.3 billion (USD 2.81 billion) investment was realised with 10 653 projects. The National Rural Development Strategy for 2014-20 covering the IPARD-2 period was adopted in 2014. Turkey has launched its IPARD-II for 2014-20 with a budget of EUR 1.04 billion (USD 1.27 billion). As of the end of 2018, EUR 106.6 million was granted under IPARD-II.
Domestic policy developments in 2018-19
In 2018, MoFAL, and the Ministry of Forestry and Water Affairs were merged to form the Ministry of Agriculture and Forestry (MAF). The preparatory work for the next Strategic Plan is underway under the MAF.
The coverage of the support to agricultural insurance has been extended to more products and risks. In 2018, the coverage of the programme was extended to the production loss of barley, rye, oat and triticale, covering risks related to drought, frost, hot winds, heat waves, excess moisture and excessive precipitation. It was further extended to chickpeas, red lentils and green lentils at the beginning of 2019. In 2018, 1.76 million agricultural insurance policies were issued with TRY 2.05 billion (USD 424 million) of government support to the insurance premium.
Within the scope of Combating Agricultural Drought, the “Turkey Agricultural Drought Strategy and Action Plan”, 2018-22, was published. The main strategies of the Action Plan are: developing a capable institutional structure, making a holistic and comprehensive plan, and transforming the structure of agricultural sector to one least affected by drought. Activities in the Action Plan are grouped under five headings: i) drought risk estimation and crisis management; ii) ensuring sustainable water supply; iii) effective management of agricultural water demand; iv) increasing support to R&D activities, and training and extension services; and v) institutional capacity building.
Trade policy developments in 2018-19
The average rate of customs duties applied in 2018 for basic agricultural products, which are not a part of the Customs Union Common External Tariff, was 57.4%. Throughout the year customs duties were decreased on live breeding and fattening cattle, some nuts, residues, oilcakes and oilseeds.
Export subsidies for agricultural products were announced in the Official Gazette on 12 April 2018 and were applied on exports during 2018. In 2018, 16 commodity groups, out of the 44 groups eligible under Turkey’s WTO commitments, received export subsidies.
In 2018, Turkey signed Free Trade Agreements (FTA) with Venezuela and Qatar. FTA negotiations are still ongoing with 9 countries: Ukraine, Japan, Mexico, Colombia, Peru, Ecuador, Thailand, Indonesia and Pakistan.
References
[1] OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
[3] OECD (2011), Evaluation of Agricultural Policy Reforms in Turkey, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264113220-en.
[2] WTO (2016), “Trade Policy Review of Turkey”, WT/TPR/S/331, World Trade Organization, https://www.wto.org/english/tratop_e/tpr_e/s331_e.pdf.