World ag subsidies reach $486b in 2012

World ag subsidies reach $486b in 2012

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

IN 2012, the most recent year for which data are available, agricultural subsidies totaled an estimated $486 billion in the top 21 food-producing countries of the world.

These countries — members of the Organization for Economic Cooperation & Development (OECD) as well as Brazil, China, Indonesia, Kazakhstan, Russia, South Africa and the Ukraine — are responsible for almost 80% of global agricultural value added in the world, Grant Potter wrote in the Worldwatch Institute's latest "Vital Signs Online" trend.

OECD subsidies grew rapidly between 2001 and 2004, rising from $216 billion to more than $280 billion, but since then, the dollar amount received by OECD farmers has stayed roughly static at $240-280 billion (Figure).

From 2001 to 2012, however, the amount spent on these subsidies as a percentage of the total value of agriculture produced declined steadily from 32% to 19%. This means that for every dollar's worth of agriculture earned by OECD farms in 2012, 19 cents came from some kind of government subsidy policy, the report notes.

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 contributes a great deal to agricultural subsidies due largely to the Common Agricultural Policy (CAP) of the European Union.

At more than $50 billion, CAP subsidies accounted for roughly 44% of the entire budget of the EU in 2011, and this figure did not include EU price supports whereby 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 more than $106 billion on agricultural subsidies in total, the report states.

North America provides almost $45 billion in subsidies, with the U.S. spending just more than $30 billion and Canada and Mexico spending $7.5 billion and $7 billion, respectively.

Of the countries studied by OECD, 94% of subsidies were spent by Asia, Europe and North America, leaving just 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.

Direct payments were a staple of U.S. farm policy from 1996 to 2013, but the $5 billion spent on direct payments was struck from the 2014 farm bill. In lieu of these payments, the U.S. expanded the federally subsidized crop insurance program to $9 billion per year.

Volume:86 Issue:11

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