22 June 2017

Billions of Dollars in Farm Aid Hurting Poorest, OECD Says

Governments are spending hundreds of billions of dollars a year on subsidies that hurt the poorest people in their societies by pushing up food prices to support farmers, according to the Organisation for Economic Cooperation and Development.

A study of 52 countries including all members of the OECD and European Union and 11 major emerging-market nations showed agriculture got an average annual $519 billion of support in 2014-16, the Paris-based organization said in a report on Wednesday. Almost 60 percent of that is aimed at driving local prices above those on global markets, it said.

“Supporting market prices harms consumers, particularly the poorest, and reduces the food industry’s competitiveness,” Ken Ash, director of the OECD trade and agriculture directorate, said in a statement. “Governments need to focus on agricultural policies, and particularly investments, that better align with their economy-wide goals.”

Countries should move toward programs that improve resilience to climate change and market shocks and promote sustainable productivity growth, the OECD said. Government payments for output and subsidies for farm inputs are normally inefficient, fail to achieve their objectives and often inadvertently contribute to unsustainable use of resources.

Most nations made marginal changes in 2016, adjusting rather than overhauling the system, the OECD said. State support amounted to $508 billion last year, down 1.7 percent from a year earlier, mainly due to lower agriculture prices and changes in exchange rates.

The aid accounted for 16 percent of producer receipts in the countries studied, compared with 21 percent 20 years ago. While support fell in some OECD countries, it has increased in some emerging economies.

Rice, cotton and sugar were the most-supported crops in the three years through 2016, with rice accounting for more than 30 percent of gross farm receipts. In absolute terms, rice, corn, wheat, pork, beef and milk attracted the highest levels of support, OECD said.

In the EU, producer support rose to an estimated $99.7 billion last year from $93.8 billion in 2015, while in the U.S. the amount dropped 13 percent to $33.3 billion, the report showed. In China, it sank 6.9 percent to an estimated $212.2 billion, the OECD said.

Source: https://www.bloomberg.com