Ensuring food and nutritional security and supporting farmers’ livelihoods and the rural economy are longstanding objectives of agricultural policy. Over time, concerns such as sustainability and inclusion have grown in importance and been integrated into policy design. More recently, resilience and adaptation and mitigation in the face of climate change have gained prominence. Multiple objectives and tight budgets mean that available funds need to be used efficiently and synergies and trade-offs across objectives carefully considered. By helping to understand the implications of government actions, agricultural policy monitoring can facilitate reforms that ensure that policies are able to efficiently achieve needed outcomes.
Agricultural policy monitoring
Well-designed agricultural policies can help farmers meet increasing global demand for safe and nutritious food in a sustainable way. However, some current policies can have negative consequences for food security, markets, the environment, at both the domestic and global levels. The OECD’s regular monitoring of agricultural policies across 54 countries representing three-quarters of global agricultural value-added provides a comprehensive understanding of their nature, implementation and impact, with a view to helping guide governments towards more effective and efficient policy making.
Key messages
Food is heavily traded; 20% of global calories consumed cross at least one border and no country is entirely self-sufficient in producing all the foods it consumes. Without the easy flow of food across borders, consumers would face higher prices and limited options on store shelves, while farmers would have less opportunity to sell their products to those who want them. Trade is also vital for food security, with poor harvests in one region made up for by, supplies from other areas. Lastly, trade enables the spread of innovations that improves productivity and sustainability, and farmers in open economies are more likely to adopt innovative methods and technologies than those who are protected by trade barriers.
Yet, trade barriers such as import tariffs and quotas, and other measures that can slow or limit trade, remain widespread. Indeed, policies that restrict trade and thereby lift domestic prices above reference levels account for almost half of all the support provided to the sector, at USD 411 billion of the USD 851 billion per year in total support in 2020-22 across 54 countries.
Much of the support provided to the agricultural sector comes in forms that are potentially the most market- and trade-distorting and risk harming the environment. Market price support, payments based on output, and subsidies to fertilisers, fuel or water are the most trade-distorting types of support, notably if no limits have been fixed on the use of these inputs. By encouraging farmers to produce more, these policies can increase the use of polluting inputs and encourage harmful production methods. Support based on production also mainly benefits larger farms, and drive up the prices farmers pay for land and other inputs, reducing the net benefit of the support provided by up to 75%. Lastly, these policies hinder the structural and other adjustments that are needed for adaptation to climate change and to improve the sector's ability to provide safe, nutritious, affordable food for a growing global population.
Countries often deal with food security concerns through policies that lift domestic prices above those on international markets as a means to encourage farmers to increase domestic production. These policies, such as high tariffs or other import barriers, generally result in higher costs for food, whichdisproportionately hurt low-income households. In some countries, governments try to offset this through large payments to consumers or food distribution systems; however, these are not always targeted at those in need, can lead to food waste and loss if not well-managed, and can result in a significant budgetary burden. Effective food security policies combine investments in sustainable domestic production with easily available food imports.
Since the green revolution of the 1960s, productivity growth has helped farmers to meet the demand for more food without using more land – something that is essential for combatting climate change. Productivity growth is the result of innovations in genetics, farm management practices, materials, and machinery, supported by public investments in R&D, extension services, training, and advice. At the same time, investments in other services have also provided an enabling environment for agriculture to grow sustainably. Investments in biosecurity, such as inspection and control systems, help prevention and recovery from pests and disease outbreaks, while investments in physical and digital infrastructure and institutions underpin well-functioning production systems and markets. Lastly, governments also pay farmers directly to produce public goods on their land, e.g. for various ecosystem services such as increased biodiversity or water protection.
Yet, despite the evidence that these investments lead to significant long-term payoffs, they remain a tiny share of support to the sector. Of the total support to the sector across the 54 countries in the OECD's annual monitoring in 2020-22, investments in innovation, biosecurity, infrastructure, and other general services represented only 12.5% of all transfers to the sector. This is a drop from 16% two decades earlier. And while the share of payments for on-farm public goods has almost doubled over the same time, they still accounted for less than 0.2% of the total. Moreover, investment in innovation needs to be well-targeted if it is to achieve sustainability objectives alongside productivity growth. There is significant scope for governments to both increase the share of support that goes to long-term investments in key general services, and to better target those investments for fostering sustainable productivity growth.
Context
Government support for agriculture has reached record-level highs
Support to agriculture averaged USD 851 billion per year from 2020 to 2022, an almost 2.5-fold increase from 20 years ago (in the context of an overall 3.6-fold increase in the value of agricultural production). Almost three-quarters of this total benefits farmers individually, either in the form of higher prices or through payments and tax concessions, while expenditures for general services and for consumers accounted on average for 12.5% and 13.5% of the total.
Agriculture faces a major challenge in adapting to climate change
As a sector uniquely dependent on nature, agriculture is in the front line of adapting to climate change. Many economies are developing adaptation plans or strategies, or are implementing capacity building, climate-related information services, or financial and insurance mechanisms. Yet there is scope to do more, and governments should build on and expand measures that are targeted at finding solutions for farmers and farming systems Further investments are needed in ecosystem-based approaches, infrastructure, and in innovation and technology.
Yet while general services (such as R&D, biosecurity, and infrastructure) play a vital role in helping the sector adapt to climate change, their share of total government support to the sector fell to 12.5% in 2020-22, down from 16% two decades earlier.
The OECD Agricultural Policy Monitoring and Evaluation report provides transparency and insights into how countries support their agricultural sectors
This annual OECD flagship report monitors policies that affect the performance of agriculture and assesses the value of support arising from these policies in ways that ensures consistency and comparability across countries and time. This allows for a well-informed policy dialogue at various levels.
- At the national level: The monitoring report and underlying support data provide countries with a means to understand the overall shape of their agricultural policies, and the support they are providing to the sector. The benchmarking of countries’ policies in comparison to others can help inform a national dialogue on the objectives, impacts, and directions of policy efforts based on a common frame of reference.
- At the international level: The report facilitates mutual learning and dialogue about trends in support to the sector, highlighting alternative policy tools and practices to achieve diverse objectives for food systems. Countries benefit from seeing other models of expenditure and investment, and of alternative approaches to strengthening productivity, sustainability, and resilience in agriculture.
Since the first edition in the 1980s, the OECD Agricultural Policy Monitoring and Evaluation report has provided a consistent and comparable picture on agricultural support across countries and time. This unique source of support estimates covers 54 countries across all continents, representing three-quarters of global agricultural value-added. The detailed classification of different types of support that distinguishes between various characteristics of policy implementation enables overall assessments of levels and composition of support globally.
How we measure agricultural support
To help governments better understand how much and in what form support is provided, the OECD created a set of indicators that express policy measures with numbers in a comparable way across time and between countries.
While the main agricultural support indicators used in our analysis are defined below, you can find a complete guide to all definitions and methodology in our online PSE Manual..
The Producer Support Estimate (PSE) indicator estimates the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm-gate level, arising from policy measures that support agriculture, regardless of their nature, objective or impact on farm production or income.
Complementing this indicator, the Consumer Support Estimate (CSE) reflects the annual monetary value of gross transfers to consumers of agricultural commodities, measured at the farm gate level, arising from policy measures that support agriculture, regardless of their nature, objective or impact on consumption of farm products.
On the other hand, the General Services Support Estimate (GSSE) is used to estimate the annual monetary value of gross transfers arising from policy measures that create enabling conditions for the primary agricultural sector through development of private or public services, and through institutions and infrastructures regardless of their objectives and impacts on farm production and income, or consumption of farm products. It includes policies where primary agriculture is the main beneficiary, but does not include any payments to individual producers. GSSE transfers do not directly alter producer receipts, costs, or consumption expenditures.
Taken together, the Total Support Estimate (TSE) provides an overall estimate of the annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures that support agriculture, net of associated budgetary receipts, regardless of their objectives and impact on farm production and income, or consumption of farm products.
