Agricultural subsidy
An agricultural subsidy is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural products, and influence the cost and supply of such commodities.
Examples of such commodities include: wheat, feed grains, cotton, milk, rice, peanuts, sugar, tobacco, oilseeds such as soybeans and meat products such as beef, pork, and lamb and mutton.
A 2021 study by the UN Food and Agriculture Organization found $540 billion was given to farmers every year between 2013 and 2018 in global subsidies. The study found these subsidies are harmful in a number of ways.
In under-developed countries, they encourage consumption of low-nutrition staples, such as rice. Subsidies also encourage deforestation; and they also drive inequality because smallholder farmers are excluded. According to UNDP head, Achim Steiner, redirecting subsidies would boost the livelihoods of 500 million smallholder farmers worldwide by creating a more level playing field with large-scale agricultural enterprises. A separate report, by the World Resources Institute in August 2021, said without reform, farm subsidies "will render vast expanses of healthy land useless".
History
One of the earliest known interventions in farming markets was the English Corn Laws, which regulated the import and export of grain in Great Britain and Ireland for centuries. The laws were repealed in 1846. Agricultural subsidies in the twentieth century were originally designed to stabilize markets, help low-income farmers, and aid rural development. In the United States, President Franklin D. Roosevelt signed the Agricultural Adjustment Act, as part of the New Deal in 1933. At the time the economy was in a severe depression and farmers were experiencing the lowest agricultural prices since the 1890s. The plan was to increase prices for a range of agricultural products by paying farmers to destroy some of their livestock or not use some of their land - known as land idling. This led to a reduction in supply and smaller agricultural surpluses. Initially seven products were controlled:. Unlike traditional subsidies that promote the growth of products, this process boosted agricultural prices by limiting the growth of these crops.In Europe, Common Agricultural Policy was launched in 1962 to improve agricultural productivity. According to the European Commission, the act aims to
- Support farmers and improve agricultural productivity, so that consumers have a stable supply of affordable food
- Ensure that European Union farmers can make a reasonable living
- Help tackling climate change and the sustainable management of natural resources
- Maintain rural areas and landscapes across the EU
- Keep the rural economy alive by promoting jobs in farming, agri-foods industries and associated sectors
By region
Canada
Canadian agricultural subsidies are currently controlled by Agriculture and Agri-Food Canada. Financial subsidies are offered through the Canadian Agricultural Partnership Programs. The Canadian Agricultural Partnership began in April 2018 and is planned to take place over five years with a combined federal, provincial and territorial investment of three billion dollars. Some programs offered surround issues including AgriAssurance, agricultural leveraging programs, promoting diversity in agriculture, crop and livestock insurance, marketing activities, risk mitigation, and more. Before the Canadian Agricultural Partnership, agricultural subsidies were organized under the Growing Forward 2 partnership from 2013 to 2018.European Union
In 2010, the EU spent €57 billion on agricultural development, of which €39 billion was spent on direct subsidies. Agricultural and fisheries subsidies form over 40% of the EU budget. Since 1992, the EU's Common Agricultural Policy has undergone significant change as subsidies have mostly been decoupled from production. The largest subsidy is the Single Farm Payment.Malawi
Increases in food and fertilizer prices have underlined the vulnerability of poor urban and rural households in many developing countries, especially in Africa, renewing policymakers' focus on the need to increase staple food crop productivity.A study by the Overseas Development Institute evaluates the benefits of the Malawi Government Agricultural Inputs Subsidy Programme, which was implemented in 2006–2007 to promote access to and use of fertilizers in both maize and tobacco production to increase agricultural productivity and food security. The subsidy was implemented by means of a coupon system which could be redeemed by the recipients for fertilizer types at approximately one-third of the normal cash price. According to policy conclusions of the Overseas Development Institute the voucher for coupon system can be an effective way of rationing and targeting subsidy access to maximize production and economic and social gains. Many practical and political challenges remain in the program design and implementation required to increase efficiency, control costs, and limit patronage and fraud.
New Zealand
New Zealand is reputed to have the most open agricultural markets in the world after radical reforms started in 1984 by the Fourth Labour Government stopped all subsidies.In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives. This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment. Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today. And New Zealand farming was marred by the same problems caused by U.S. subsidies, including overproduction, environmental degradation and inflated land prices.
As the country is a large agricultural exporter, continued subsidies by other countries are a long-standing bone of contention, with New Zealand being a founding member of the 20-member Cairns Group fighting to improve market access for exported agricultural goods.
Turkey
United States
The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, addressed a great variety of issues related to agriculture, ecology, energy, trade, and nutrition. Signed after the September 11th attacks of 2001, the act directs approximately $16.5 billion of government funding toward agricultural subsidies each year. This funding has had a great effect on the production of grains, oilseeds, and upland cotton. The United States paid allegedly around $20 billion in 2005 to farmers in direct subsidies as "farm income stabilization" via farm bills. Overall agricultural subsidies in 2010 were estimated at $172 billion by a European agricultural industry association; however, the majority of this estimate consists of food stamps and other consumer subsidies, so it is not comparable to the 2005 estimate.Agricultural policies of the United States are changed, incrementally or more radically, by Farm Bills that are passed every five years or so. Statements about how the program works might be right at one point in time, at best, but are probably not sufficient for assessing agricultural policies at other points in time. For example, a large part of the support to program crops has not been linked directly to current output since the Federal Agriculture Improvement and Reform Act of 1996. Instead, these payments were tied to historical entitlement, not current planting. For example, it is incorrect to attribute a payment associated with the wheat base area to wheat production now because that land might be allocated to any of a number of permitted uses, including held idle. Over time, successive Farm Bills have linked these direct payments to market prices or revenue, but not to production. In contrast, some programs, like the Marketing Loan Program that can create something of a floor price that producers receive per unit sold, are tied to production. That is, if the price of wheat in 2002 was $3.80, farmers would get an extra 58¢ per bushel. Fruit and vegetable crops are not eligible for subsidies.
Corn was the top crop for subsidy payments prior to 2011. The Energy Policy Act of 2005 mandated that billions of gallons of ethanol be blended into vehicle fuel each year, guaranteeing demand, but US corn ethanol subsidies were between $5.5 billion and $7.3 billion per year. Producers also benefited from a federal subsidy of 51 cents per gallon, additional state subsidies, and federal crop subsidies that had brought the total to 85 cents per gallon or more. However, the federal ethanol subsidy expired 31 December 2011.
Researchers have suggested that United States agricultural subsidies have worsened trends of the country's rates of obesity and related health issues, by primarily subsidizing the production of corn, soybeans, and wheat, thus significantly reducing the cost of high-fructose corn syrup, vegetable oils, and grain-fed livestock.
Asia
Agricultural subsidies in Asia vary significantly across countries, reflecting differing policy priorities, levels of development, and agricultural dependence. Several Asian nations allocate substantial government support to their agricultural sectors through subsidies for inputs, credit, infrastructure, and price support mechanisms.Farm subsidies in Asia remain a point of contention in global trade talks.