3. Overall trends in agricultural support
Total support to agriculture (Total Support Estimate, TSE) in OECD countries1 represented USD 349 billion (EUR 311 billion) per year on average in 2020-22, of which 67%, or USD 234 billion (EUR 208 billion), was provided as support to producers individually (Producer Support Estimate, PSE). Producer support across the OECD represented 15.2% of gross farm receipts in 2020-22, down from around 28% in 2000-02 and more than 35% in 1986-88 (Table 3.1). These averages mask significant variations within the OECD, details on which are presented in Chapter 2 of this report.
There has been long-term decline in the use of Market Price Support (MPS) and output-based payments across OECD countries. Payments based on the unconstrained use of variable inputs slightly increased across the OECD compared to the beginning of the millennium. OECD work finds that these three types of support have the greatest potential to distort agricultural production and trade, and can induce negative impacts on the environment.
Overall, MPS represents the largest share of support to individual commodities, driven by a range of domestic and trade policies. Rice is by far the most supported commodity in the OECD area, followed by sugar, sunflower seed, and several livestock products (Figure 3.2). For several commodities – particularly maize, sorghum, soybeans, and sheep meat – support also comes through other types of transfers, including payments less directly coupled to production.
Some countries apply less-distorting forms of support, such as payments based on parameters not linked to current production, or based on non-commodity criteria such as land set-aside, or payments for specific environmental or animal-welfare outcomes (Chapter 2, Figure 2.15). Payments based on historical entitlements – generally crop area or livestock numbers during a reference period in the past2 – increased in the last two decades, representing more than 3% of Gross Farm Receipts (GFR) and about 22% of PSE during 2020-22. The share of payments based on current crop area, animal numbers, receipts, or income has fallen since 2000-02; these now represent around 23% of PSE (Table 3.1).
Expenditures financing general services to the sector (General Service Support Estimate, GSSE) in the OECD area increased in nominal terms from USD 37 billion (EUR 40 billion) per year in 2000-02 to USD 48 billion (EUR 43 billion) in 2020-22. However, this increase fell short of the sector’s growth, and expenditures for general services declined as a share of the agricultural value of production from 5.4% to 3.4%. In 2020-22, most of this went to infrastructure (USD 18 billion), a slight increase from 2000-02, and to agricultural knowledge and innovation (USD 15 billion), an increase of 87% in nominal terms, almost in line with the sector’s growth. Expenditures for inspection and control services more than doubled, while spending for marketing and promotion increased less and public stockholding declined substantially over the period. But all these accounted for comparatively small shares of the GSSE expenditure (Table 3.1). Total support to agriculture as a share of GDP declined significantly over time.
Agricultural policies in the 11 emerging economies3 in this report generated positive transfers to their agricultural sectors, averaging USD 497 billion (EUR 443 billion) per year in 2020-22, of which USD 391 billion (EUR 349 billion) went to individual producers. At the same time, policies in a few countries such as Argentina, India, and Viet Nam, suppressed domestic prices for certain products, generating an implicit tax in the form of negative MPS, averaging USD 179 billion (EUR 160 billion) per year in the same period.
Net support for the sector (TSE) amounted to 319 billion (EUR 283 billion) per year during 2020-22 (Table 3.2). Within this, the net producer support (PSE) averaged USD 213 billion (EUR 189 billion), or 7.1% of gross farm receipts (13% of positive support, -5.9% of negative MPS), up from 3.9% in 2000-02. These averages mask significant variations among the 11 economies included in this group, details on which are presented in Chapter 2 of this report.
The share of potentially most-distorting transfers (including positive and negative MPS, output-based payments and payments for unconstrained variable input use) in gross producer support still averaged 85% in 2020-22, slightly down from 89% in 2000-02. Maize, sugar, and rapeseed were the most supported commodities in emerging economies, with transfers amounting to 19-28% of commodity gross farm receipts, while oats and milk were the most taxed in 2020-22 (Figure 3.4). Almost all these transfers to specific commodities operate through MPS, and are a result of domestic or trade policies such as minimum support prices or import tariffs (in the case of positive transfers) or export taxes and other restrictions (in the case of negative transfers).
Among the remaining forms of producer support, the most prominent are payments based on other input use (mainly fixed capital formation), payments to areas planted and animal numbers, and payments based on historical entitlements. Payments based on areas and animal numbers were almost non-existent across emerging economies in 2000-02 but reached more than 16% of aggregate net support to producers in 2020-22. Similarly, payments based on historical entitlements account for more than 11% of net producer support. In contrast, the relative size of support for investments,4 often related to irrigation, declined over time to represent just over 9% of PSE. All other forms of support to producers remain small (Table 3.2).
Expenditure on GSSE in emerging economies reached an annual average of USD 59 billion (EUR 52 billion) in 2020-22. Most of this went to infrastructure projects (USD 31 billion), often related to irrigation, and public stockholding (USD 13 billion). The remaining expenditure mainly went to agricultural knowledge and innovation (USD 9 billion) (Table 3.2). Relative to the value of agricultural production, expenditures for general services declined and remain lower than the OECD average. Aggregate total support to agriculture as a share of GDP decreased slightly to 1.2% in 2020-22, and is mainly driven by producer support, which represents 67% of total support.
Agricultural policies across all 54 countries in this report generated positive transfers to the agricultural sector, averaging USD 851 billion (EUR 758 billion) per year in 2020-22, of which USD 630 billion (EUR 561 billion) went to individual producers. Considering implicit taxation of producers in some emerging economies – which created transfers away from producers (negative MPS) worth USD 179 billion (EUR 160 billion) per year over the same period – net support for the sector (TSE, Table 3.3) amounted to USD 672 billion (EUR 598 billion) per year during 2020-22. Around 71% or USD 452 billion (EUR 401 billion) of this was provided as net support to producers individually (PSE).
Aggregate support to producers in all 54 countries represented 9.8% of gross farm receipts on average in 2020-22. This is a significant reduction from 18.2% in 2000-02 (Table 3.3) and is composed of 13.7% of gross farm receipts in positive support, and -3.9% of negative MPS. These averages mask significant variations among the economies covered by this report, details on which are presented in Chapter 2 of this report.
Changes to the structure of aggregate support were relatively moderate between 2000-02 and 2020-22 in all countries. The share of potentially most-distorting transfers (MPS, payments based on output or unconstrained use of variable inputs) declined slightly, but these policies continue to represent around 73% of gross producer transfers (positive or negative) in absolute terms across all countries. Transfers based on output became less prominent while those based on unconstrained input use increased. Sugar is the most strongly supported commodity, followed by maize and rice. Several livestock products, particularly poultry meat, pig meat, sheep meat, and beef, also receive substantial transfers (Figure 3.6).
Among the remaining forms of support to producers, the most significant are payments based on area planted and animal numbers (20% of all producer support), and those based on historical parameters not requiring production. The latter, which are decoupled from current production, increased significantly to represent 16% of all producer support (Table 3.3).
Aggregate expenditures for general services to the sector (GSSE) reached an annual average of USD 106 billion (EUR 95 billion) in 2020-22, almost twice that spent in nominal terms by the 54 countries in 2000-02. Most went to infrastructure projects (USD 49 billion), agricultural knowledge and innovation (USD 24 billion), and public stockholding (USD 14 billion) (Table 3.3). Despite the growth, expenditures for general services declined in relative terms as the value of agricultural production more than tripled in nominal terms since 2000-02. Total support to agriculture as a share of Gross Domestic Product (GDP) declined over time, driven by the shrinking relative size of the sector within economies.
Notes
← 1. The OECD total does not include non-OECD EU Member States.
← 2. Payments based on non-current Area, Animal numbers, Revenues or Income, whether production is required or not (Table 3.1).
← 3. Argentina, Brazil, the People’s Republic of China (hereafter “China”), India, Indonesia, Kazakhstan, the Philippines, the Russian Federation, South Africa, Ukraine, and Viet Nam.
← 4. Payments based on fixed capital formation (Table 3.2).