Total support for agriculture and food: a contrasting global landscape

The FARM Foundation launched in December 2022 a Observatory global public support for agriculture and food, which allows us to compare the gaps in support across the planet. After analyzing the Public expenditure on support for agriculture and food (DPAA)) and the market price support, let's look at the third and final indicator: total support for agriculture and food.

Understanding Total Support

A little background: the FARM Observatory uses three key indicators to assess governments' commitment to agriculture and food. These indicators are public spending on agriculture and food, market price support, and total support.

Two major trends have been noted:

1) Countries that depend most on agriculture spend the least to support their farmers;

2) Rich and emerging countries have more pronounced protectionist policies to support domestic prices in the face of competition from imported agricultural products, particularly compared to African countries which are relatively less competitive.

Let us now focus on the total support that reveals a global landscape dominated by rich countries and a rise in emerging economies. Total support to agriculture and food is equal to the sum of public spending[1] and the agricultural price support[2]Over the period 2019/21, it was on average twice as high in high-income countries as in middle-income countries.

High-income countries support their agriculture and food sector on average with 29 billion pounds of the value of agricultural production, compared to 14 billion pounds for middle-income countries. However, we do not have data on agricultural price supports in low-income countries to compare them with others.

Support to agriculture: sharp decline in high-income countries, slight increase in middle-income countries

However, total support to agriculture and food in high-income countries has declined significantly over the past 20 years. It has been reduced by almost half, from 44 billion of the value of agricultural production in 2000 to 25 billion in 2021. This decline in total support is observed up to 2014 and remains attributable to to agricultural policy reforms undertaken by these countries to comply with the rules of the Agreement on Agriculture. These were signed at the end of the Uruguay Round of trade negotiations which led to the creation of the World Trade Organization (WTO) in 1994. Conversely, emerging countries have increased their support for agriculture to promote the development of their agricultural sector and ensure their food security.

These developments must, however, be viewed with caution, as total support automatically decreases when world agricultural prices increase, even if agricultural policies remain unchanged. This caution is justified by the method of calculating market price support. This is because it is calculated for a given agricultural product by multiplying the quantity produced by a price gap. This price gap is itself obtained from a difference between the domestic market price and the world price of the product concerned. Therefore, any increase in the world price of the product has the mechanical effect of reducing the difference between the latter (world price) and the domestic market price and, consequently, a reduction in market price support and total support.

The end of convergence?

As the graph showing the evolution of total support shows, in recent years there has been a widening of the gap in total support to agriculture and food between high- and middle-income countries after a long period of trend convergence. Since 2015, this gap has been linked to different agricultural support strategies. Public expenditures in support of agriculture and food (budgetary transfers to producers or consumers, investments in research, infrastructure, training, etc.) have thus increased in high-income countries since 2014. In middle-income countries, apart from a slight increase of 1 % in 2020, notably to support the agricultural sector in the face of the Covid-19 pandemic, the level of these budgetary disbursements has remained relatively constant over the last two decades. The increase in total support to agriculture and food in these countries is attributable to market price support policies such as border measures (customs duties, export subsidies and taxes, or import and export quotas) and non-tariff measures (health regulations).

Although they are at different levels in rich countries and in emerging countries, most of the total support is provided in the form of budgetary expendituresThese public expenditures reach more than 75 % of the total support of high-income countries and represent no less than 60 % in emerging countries.

Argentina and Vietnam: negative support

Typically, negative support policies often aim to achieve food security objectives by offering low prices to consumers, or to mobilize budgetary resources by collecting tax revenues through export taxes on certain agricultural products. Although there are significant differences between countries, it should be noted that this type of support characterizes some middle-income countries. This occurs when the monetary value of agricultural price support is lower than public expenditures on agriculture. Argentina and Vietnam are examples, with negative price support policies., respectively -20 % and -9 % of the value of agricultural production while public expenditure is only 1 % and 4 %. Thus, their total support to agriculture and food is reduced to -19 % and -5% of the value of agricultural production. In other words, for Argentina, this means that the State gives on one hand 1 % of the value of agricultural production in support of its farmers, to take back 20 % with the other via export taxes for example.

India also provides similar support to its farmers, but to a lesser extent: it does not take out more than it gives. With government spending and market price support of 24 and -19 billion pounds respectively, total support to agriculture and food is 5 billion pounds of the value of agricultural production. It should be noted, however, that Argentina, India and Vietnam have competitive agriculture. and are major exporters of agricultural products in the world, which allows them to practice such policies without compromising the prosperity of their agricultural sectors.

African states must provide more support to agriculture

In the absence of comparable data to assess total support to agriculture and food in sub-Saharan Africa, previous analyses on the nominal rate of protection And public support spending provide an idea of overall support for agriculture. They show that the low competitiveness of agricultural sectors in these countries, combined with weak protection against imports of low-cost and heavily subsidized products, reduces the effectiveness of public spending on agriculture, which is also insufficient. However, agriculture in Africa is seriously lacking in investment and protection to address the many challenges it faces.

It therefore appears essential that the support for agriculture be intensified in Africa, by governments with public policies that address the sector from the broader perspective of value chains, beyond agricultural production. Indeed, a systemic approach to agriculture, from field to fork with social protection measures including nutrition strategies but also biodiversity conservation policies appears essential. All the more so since the effects of climate change will weigh heavily on the continent's capacity to produce and feed a rapidly growing population. The role of technical and financial partners is crucial in this context to support these transformations. The second Dakar summit on food sovereignty and resilience seems to indicate a desire to give agriculture renewed importance in African policies, but it is still necessary to move from intentions to actions to realize the continent's agricultural and food potential..

[1] To learn more about public agricultural spending.

[2] Learn more about agricultural price support.