World ag subsidies reach $486B in 2012

World ag subsidies reach $486B in 2012

Asia spends more on ag subsidies than the rest of the world combined, followed by EU and then the U.S.

In 2012, the most recent year with data, agricultural subsidies totaled an estimated $486 billion in the top 21 food-producing countries in the world.

These countries-the members of the Organization for Economic Co-operation and Development (OECD) and seven other countries (Brazil, China, Indonesia, Kazakhstan, Russia, South Africa, and Ukraine)-are responsible for almost 80% of global agricultural value added in the world, writes Grant Potter in the Worldwatch Institute's latest Vital Signs Online trend (www.worldwatch.org).

Agricultural subsidies are not equally distributed around the globe. In fact, Asia spends more than the rest of the world combined. China pays farmers an unparalleled $165 billion. Price supports make up almost 70% of China's subsidy spending, and the government particularly encourages the growth of staple crops such as rice and wheat.

Significant subsidies are also provided by Japan ($65 billion), Indonesia ($28 billion), and South Korea ($20 billion).

Europe also contributes a great deal to agricultural subsidies due in large part to the Common Agricultural Policy (CAP) of the European Union (EU). At over $50 billion, CAP subsidies accounted for roughly 44% of the entire budget of the EU in 2011. And this figure does not include EU price supports, in which governments keep domestic crop prices artificially high to give farmers a further incentive at the expense of the consumer. Including these price supports, the EU spent over $106 billion on agricultural subsidies in total, the report stated.

North America provides almost $45 billion in subsidies, with the United States spending just over $30 billion and Canada and Mexico spending $7.5 billion and $7 billion respectively.

Direct payments were a staple of U.S. farm policy from 1996 to 2013, but the $5 billion spent on direct payments was recently struck from the U.S. farm bill. In lieu of these payments, the United States expanded the federally subsidized crop insurance program to $9 billion a year.

Of the countries studied by the OECD, 94% of subsidies were spent by Asia, Europe, and North America-leaving only 6% for the rest of the world.

The term "subsidies" covers a vast number of different policy options, but at the heart of all of them is government intervention in agricultural markets. A common type of subsidy is called direct payments. These are regularly paid to farmers who produce a designated crop and the payments are decoupled from production-which means that farmers can produce as much or as little as they want and still receive this subsidy. Direct payments are the cornerstone of the EU CAP and account for $40 billion of its $50 billion budget.

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