South African effort below the  average

Amidst greater global food demand, higher food prices, more volatile markets and increasing resource pressures, government support to agriculture in countries which are members of the Organisation for Economic Cooperation and Development (OECD) fell on average to 18% of total farm receipts in 2010, a record low linked to high commodity prices, according to a new OECD-report. South Africa is one of the countries where support to agriculture is well below the average.

Support to producers stood at $227 billion  in OECD countries in 2010, confirming a longstanding trend toward falling farm support/ The report on Agricultural Policy Monitoring and Evaluation 2011 points out that most government support is still given in ways that distort production and trade while doing relatively little to improve productivity and competitiveness, ensure sustainable resource use or help farmers cope with risk.

“With tighter government budgets and farmers getting top prices for their crops, governments should begin to shift from payments that further support farm incomes and move to policies that have long-term benefits for the global food economy,” said OECD Director for Trade and Agriculture Ken Ash. “The time is ripe for reforming farm support.”

Support levels vary enormously among OECD countries. Over the 2008-10 period, New Zealand had the lowest level of support to farm receipts, at just 1% of farm income, followed by Australia (3%), and Chile (4%). The United States (9%), Israel and Mexico (12%), and Canada (16%) were also below the OECD average.

The European Union has reduced its level of support to 22% of farm income, but remains above the OECD average. At the other end of the scale, support to farmers remains relatively high in Korea (47%), Iceland (48%), Japan (49%), Switzerland (56%) and Norway (60%).

Farm support in emerging countries is generally well below OECD levels, but also varies over time and across countries. For the first time, Agricultural Policy Monitoring and Evaluation 2011 reviews policy developments in emerging economies that are key players in world agricultural markets. Brazil, South Africa and Ukraine generally support agriculture at levels well below the OECD average, while support in China is approaching the OECD average. In Russia, farm support now exceeds the OECD average.

The OECD said in a media release that growing global food demand, higher prices, more volatile markets and increasing resource pressures are arguments for moving beyond “status quo” policies. Countries should focus on improving farm productivity, sustainability and long-term competitiveness, rather than policies that distort markets. Farm policy should also offer greater support to research, innovation and education.

“With volatility expected to remain high and growing concerns about climate change, farmers will need comprehensive risk management systems that best address their specific needs. Governments should support the development of market-based tools while steering clear of actions that interfere with farmers’ management of normal business risk.

“While high farm prices create opportunities for farmers, the OECD recognises that high and volatile food prices have particularly severe impacts on the poorest people on the planet, who spend a large proportion of their available income on food. For this group of consumers, improved safety nets can help with immediate needs, but policies that improve agricultural productivity and long-term resilience will provide the long-term solution. To this end, the OECD recognises the importance of ongoing efforts in the G20 and in other international fora to improve policy coherence and strengthen global governance of the food system,” the release stated.

South Africa

About South Africa the report finds that the level of price distortions has been low and in current years domestic prices were almost aligned to world price levels as documented by the Nominal Protection Coefficient (NPC). Most of the budgetary payments are related to the implementation of  land reform and assistance to emerging farmers

About policy developments the report states:

• Policy changes from the mid-1990s resulted in deregulation of the marketing of agricultural products, liberalisation of domestic markets, and reduced barriers to agricultural trade. These reforms reduced market price support and budgetary support to commercial farming. In contrast, increased budgetary spending went to financing the land reform process and support for  its beneficiaries, and the smallholder sub-sector. The average level of support in South Africa, as measured by the Producer Support Estimate (%PSE), indicates a relatively low degree of policy intervention. The overall trend shows a reduction of this support between 1994 and 2010, although with some fluctuation due to Market Price Support variations;
• The main agricultural policy developments and the main challenges relate to the implementation of the land reform programme. During 2008-10, new policies were implemented to enhance the pace of land redistribution and to ensure the viability of the emerging farms. They include the Pro-Active Land Acquisition Strategy, and a new focus on bringing strategic partners from private stakeholders to assist in the capacity-building process and in the gradual implementation of rural development programmes in the provinces; and
• The black population in rural areas is the target of land redistribution, but adequate supporting infrastructure and human capital formation must also be in place if these new entrepreneurs are to survive. The government is striving to address these issues by implementing well targeted support programmes and services (including research and development) tailored to the needs of the emerging farmers. In this regard, the involvement of private stakeholders in the process of land reform may be an efficient way to engage resources and address weaknesses in supporting programmes and services from public authorities. Also the setting of rural development programmes can contribute to addressing the problems in rural areas in a broader perspective.

In global terms the report recommends that:

• Greater global food demand, higher prices, more volatile markets and increasing resource pressures are arguments for moving beyond “status quo” policies. Countries should focus on improving farm productivity, sustainability and long-term competitiveness, rather than policies that distort markets. Farm policy should also offer greater support to research, innovation and education;
• With volatility expected to remain high and growing concerns about climate change, farmers will need comprehensive risk management systems that best address their specific needs. Governments should support the development of market-based tools while steering clear of actions that interfere with farmers’ management of normal business risk;
• While high farm prices create opportunities for farmers, high and volatile food prices have particularly severe impacts on the poorest people on the planet, who spend a large proportion of their available income on food. For this group of consumers, improved safety nets can help with immediate needs, but policies that improve agricultural productivity and long-term resilience will provide the long-term solution. “To this end, the OECD recognises the importance of ongoing efforts in the G20 and in other international fora to improve policy coherence and strengthen global governance of the food system.”