China spending helps lift farm aid from record low

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Agricultural subsidies as a share of farm income bounced back in 2012 from a record low the previous year, thanks to a dip in commodity prices and increased farm spending by China and others, the OECD said Sept. 18.

Public support for producers in 47 countries amounted to 17 per cent of gross farm receipts, up from an all-time low of 15 per cent in 2011, the annual assessment by the Paris-based think tank showed.

Despite the increase, the Organization for Economic Co-operation and Development said the long-term trend in support levels remained downward.

“This short-term change is partly related to developments in world prices for agricultural commodities, as opposed to explicit policy changes,” the report found.

Last year, the prices of commodities such as cereals and sugar fell back from their 2011 peaks, ensuring that public subsidies accounted for a higher relative share of farm incomes despite remaining stable in absolute terms in many countries.

But the total was also boosted by a jump in subsidy levels in non-OECD countries such as China and Indonesia — included in the report for the first time — where support as a share of overall income rose by four and 6.5 percentage points respectively.

China’s farm subsidies rose by almost $50 billion in 2012 to reach $165 billion, the report showed. The sharp increase means the share of subsidies in Chinese farm receipts is now approaching the OECD average.

“Growing minimum purchase prices for rice and wheat and an increasing range of other commodities covered by market interventions are major factors behind mounting transfers from consumers,” the report said.

Rising Chinese subsidies are a result of the government’s self-sufficiency policies, which can prove costly.

Levels of agricultural support vary widely. Subsidies as a share of farm income were less than four per cent in New Zealand, Australia and Chile, compared with more than 50 per cent in Japan, South Korea and Switzerland, the report showed.

In the European Union, support to producers rose slightly last year to 19 per cent of total receipts, while in the United States the share fell to seven per cent, from eight per cent in 2011.

The OECD is a club of the world’s wealthiest 34 countries but frequently conducts research into the wider global economy.

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