July 5, 2010

 

EU cuts farm subsidies in 2009

Europe's agriculture subsidies fell by more than US$8 billion last year, bucking an international trend of rising support, and continuing a trend which has removed almost entirely farmers' cushion from market prices.

 

Agricultural support in the major industrialised nations rose last year for the first time since 2004 led by the US, where the fall in global world prices triggered a "sharp increase" in dairy subsidies, the OECD said.

 

US subsidies rose by 13.1%, or more than US$3.5 billion.

 

However, farm support in the EU fell by 6.3%, a drop which reflected the end of the region's repurchase of sugar quotas amid the opening up of the market to foreign suppliers, but also continued a longstanding decline in subsidies.

 

Much of the revamp has centred around the switch in payments from being based in production to supporting environmental criteria, such as uncultivated breaks around fields which provide cover for ground-nesting birds.

 

The prices that farmers received for produce were only 9% higher last year than market levels, compared with 71% two decades ago, the intergovernmental group said.

 

However, the bill for farm support has fallen on overall measures too, comprising 0.86% of the region's economic output last year, compared with 2.6% in the late 1980s.

 

Nonetheless, the EU remains the world's biggest payer of farm subsidies, at US$120.8 billion last year, compared with US$46.5 billion in second-ranked Japan.

 

The round of budget cuts by major countries offered an opportunity to reassess farm support, which the OECD blamed for fuelling "higher price variability in world prices" of food if wrongly targeted.

 

"In the context of the financial crisis and the fiscal belt-tightening currently underway, the cost of agricultural policies to consumers and taxpayers calls for a fresh look," said the organisation, which has more than 30 member countries, including Australia, the UK and the US.

 

The OECD singled out US dairy supports for criticism, saying that the "sharp rise in the market price support for dairy, including use of export subsidies, exacerbates market distortion in the sector".

 

The US Farm Act passed two years ago shows little progress towards market orientation, the organisation added.