2. Overall trends in agricultural support
OECD Countries
The total support to agriculture (TSE) provided in OECD countries1 represented USD 319 billion (EUR 279 billion) per year on average in 2017-19, of which 72%, or USD 231 billion (EUR 202 billion) was provided as support to producers individually (PSE). Producer support represented 17.6% of gross farm receipts (%PSE) in 2017-19 across the OECD area, a decline from around 29% in 2000-02 and more than 35% in 1986-88 (Table 2.1).
The way support is delivered to producers has also evolved. In particular, the development in support to agriculture in the OECD area is characterised by the long-term decline of support based on commodity output (including market price support and output payments). OECD work has identified this form of support as having the strongest potential to distort agricultural production and trade, together with the payments based on the unconstrained use of variable inputs, which has slightly increased across OECD countries compared to the beginning of the millennium. These forms of support together represent 8.5% of gross farm receipts and 48% of producer support in 2017-19, down from 19.5% and 68%, respectively, in 2000-02.
At the other end of the spectrum in the PSE classification, some countries also apply less distorting forms of support, such as payments based on parameters that are not linked to current production or based on non-commodity criteria such as land set aside or payments for specific environmental or animal welfare outcomes. Most notably, payments based on historical entitlements (generally crop area or livestock numbers of a given reference year in the past) have increased significantly in many OECD countries in the last two decades, representing some 3.5% of gross farm receipts and about a fifth of the PSE during 2017-19. Payments based on current crop area and animal numbers have remained largely unchanged compared to 2000-02, and currently represent around 22% of total producer support (Table 2.1).
The expenditures financing general services to the sector (GSSE) increased (in nominal terms) in the OECD area from USD 36 billion per year in 2000-02 to USD 43 billion in 2017-19. Most of these expenditures in 2017-19 go to the financing of infrastructure (USD 18.4 billion), recording a slight increase compared to 2000-02, while the expenditures for agricultural knowledge and innovation (USD 13 billion) have increased by two-thirds. Expenditures for inspection and control services doubled, while spending for marketing and promotion activities and, more substantially, public stockholding declined over the same period, but all of these represented smaller shares of the GSSE expenditure (Table 2.1).
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support to producers in the OECD area as a share of gross farm receipts (%PSE) has declined gradually over the long term. In 2017-19, support has been at 17.6% of gross farm receipts. The share of potentially most distorting support has decreased over time mainly due to a reduction in market price support (MPS) (Figure 2.1 and Table 2.1). Effective prices received by producers, on average, were 9% higher than world prices; large differences between commodities persist with domestic prices for rice being more than twice the world price, prices for sunflower 30%, sugar 35%, milk 13% and beef 13% above world prices in 2017-19. Overall, in the OECD area, Single Commodity Transfers (SCT) represented 51% of the total PSE during 2016-18. Rice, sugar, sunflower, beef and veal, and milk had the highest share of SCT in commodity gross farm receipts, with MPS representing the main component of SCTs for most commodities (Figure 2.2). The relative expenditures for general services (GSSE), mainly on knowledge and infrastructure, have declined steadily as agricultural value added has grown more rapidly. Total support to agriculture as a share of GDP has declined significantly over time. More than 70% of this support is provided to individual producers (PSE).
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Emerging Economies
The total support to agriculture (TSE) provided in the Emerging Economies2 represented USD 295 billion (EUR 258 billion) per year on average in 2017-19, of which 71% or USD 210 billion (EUR 184 billion) was provided as support to producers (PSE). Expressed as a share of gross farm receipts (%PSE), aggregate support to producers represented 8.5% in 2017-19 on average across the Emerging Economies, up from 4.2% in 2000-02 (Table 2.2). The aggregate %PSE remains one-half that of the OECD area, although this is partly related to the large negative MPS in a few countries, worth USD 89 billion (EUR 78 billion) per year. This means that support to producers and the sector in other countries has been correspondingly higher than suggested by aggregate indicators.
The share of transfers based on output (accounting for both positive and negative MPS and output-based payments) and input use in total producer support has decreased only slightly, still averaging about 83% in 2017-19 compared to 89% in 2000-02. The transfers based on output have been identified as having the strongest potential to distort agricultural production and trade, together with the payments based on the unconstrained use of variable inputs. These transfers combined now represent 7% of gross farm receipts, up from 4% in 2000-02 but below the OECD average.
Among the remaining forms of producer support, the most important are payments based on other input use (mainly fixed capital formation) and payments to areas planted and animal numbers. Across the Emerging Economies, payments based on areas and animal numbers were almost non-existent in 2000-02 but reached close to 13% of aggregate support to producers in 2017-19. In turn, the relative importance of support for investments, often related to irrigation, has declined over time, now representing some 9% of the PSE. All other forms of support to producers remain small (Table 2.2).
The expenditures financing general services to the sector (GSSE) in the Emerging Economies reached an annual average of USD 64 billion (EUR 56 billion) in 2017-19. Most of these expenditures went to the financing of infrastructure projects (USD 26 billion), again often related to irrigation, and public stockholding (USD 20 billion), the remaining expenditures went to finance mainly agricultural knowledge and innovation (USD 13 billion) (Table 2.2).
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
In contrast to the OECD area, the support to producers in Emerging Economies has increased over the long term. In 2017-19, aggregate producer support has been close to 8.5% of gross farm receipts (GFR), still well below the OECD average, but including both implicit taxes on producers through negative MPS, worth 3.6% of GFR, and transfers to producers worth 12% of GFR. The share of gross producer transfers (whether positive or negative, i.e. expressed in absolute terms) arising from potentially most distorting measures (support based on output and variable input use – without input constraints) has gone down only slightly and stays above 80% on average in 2017-19 (Figure 2.3). Effective prices received by producers, on average, were 5% higher than world prices. This average figure hides large differences across countries and commodities as domestic prices stand below world market levels in a range of markets. Overall, Single Commodity Transfers (SCT) on average represented just over half of the total PSE during 2017-19 – with a falling trend in recent years partly due to more negative SCTs in India and Argentina and the extended direct income scheme in India. Rapeseed, sugar, maize, rice and wheat had the highest share of SCT in commodity gross farm receipts, while SCTs were negative for barley, oilseeds, milk and oats. Aggregate MPS is the main component of the SCTs in most cases (Figure 2.4). On average, the expenditures for general services (GSSE), relative to agricultural value added are lower than those observed for the OECD average. Aggregate total support to agriculture as a share of GDP has barely changed over time, and is mainly driven by producer support, which was about 84% of the total support.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
All Countries
The total support to agriculture (TSE) provided in all countries covered in this report represented USD 619 billion (EUR 542 billion) per year on average in 2017-19 of which around 72% or USD 446 billion (EUR 391 billion) were provided as support to producers (PSE). Given the significant negative elements in market price support that are estimated for some of the emerging economies, gross transfers are significantly larger than that: in total, USD 708 billion (EUR 620 billion) were transferred to the sector across the 54 countries covered, while at the same time negative MPS in some countries amounted to USD 89 billion (EUR 78 billion). Expressed as a share of gross farm receipts (%PSE), aggregate support to producers represented 12.5% in 2017-19 on average for all countries covered, a reduction from 18.4% in 2000-02 (Table 2.3).
The changes of the structure of support related to all countries in the report, in the period from 2000-02 to 2017-19, were relatively moderate. The share of the potentially most distorting forms of transfers (including positive or negative MPS, and payments based on output or based on unconstrained use of variable inputs) has declined slightly, but these policies continue to represent around 69% of gross producer transfers across all countries (whether positive or negative, in absolute terms), compared to 73% in 2000-02. They now represent 8% of aggregate gross farm receipts, down from 13% in 2000-02. Transfers based on output are shrinking in relative terms but those based on unconstrained input use have increased.
Among the remaining forms of support to producers, the most important are payments based on areas planted and animal numbers (18% of all producer support), and payments based on historical parameters not requiring production. The importance of these latter payments, which are decoupled from current production and hence much less production and trade distorting, has increased significantly and today represents 14% of all producer support (Table 2.3).
Across all countries covered in this report, the expenditures financing general services to the sector (GSSE) reached an annual average of USD 106 billion (EUR 93 billion) in 2017-19. Most of these expenditures went to the financing of infrastructure projects (USD 45 billion), agricultural knowledge and innovation (USD 26 billion) and public stockholding (USD 21 billion) (Table 2.3).
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support to producers (%PSE), when measured for all countries in the report, has declined between 2000-02 and 2017-19 and is currently around 12% of gross farm receipts. The share of gross producer transfers (whether positive or negative, i.e. expressed in absolute terms) arising from potentially most distorting measures (support based on output and variable input use – without input constraints) remains almost unchanged and stays around 69% in 2017-19 (Figure 2.5). Effective prices received by producers, on average, were 6% higher than world prices; larger price gaps are recorded for sugar and rice. Overall, Single Commodity Transfers (SCT) represented above 50% of the total PSE during 2017-19. Sugar and rice had the highest share of SCT in commodity gross farm receipts (Figure 2.6). MPS is the main component of the SCTs in most cases. On average, the relative expenditures for general services (GSSE), mainly on infrastructure, knowledge and public stockholding, have declined as agricultural value added has grown more rapidly. Total support to agriculture as a share of GDP has declined slightly over time, mainly driven by the smaller relative size of the sector within the overall economies.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Notes
← 1. The OECD total does not include the non-OECD EU Member States, nor Colombia which joined the OECD in April 2020.
← 2. The Emerging Economies total includes Argentina, Brazil, People’s Republic of China, Costa Rica, India, Indonesia, Kazakhstan, Philippines, Russian Federation, South Africa, Ukraine and Viet Nam, as well as Colombia which joined the OECD in April 2020.
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