Farming support around the world – what can the UK learn from other countries?
As Ministers begin to piece together a new agricultural policy for the UK, Abi Kay uses an AHDB report – Agricultural policy models in different parts of the world – to sketch out some possible future options.
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Abi Kay
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UNITED STATES
The 2014 Farm Bill moved the US from direct payments towards an insurance-based system.
Initially the focus was upon crop yield insurance, but new models were quickly developed which allowed American farmers to insure revenue.
The Agricultural Risk Coverage scheme uses average revenue for the previous five years as an insurance basis, guaranteeing 85 per cent of the amount for the following year.
In 2015, ‘Whole-Farm Revenue Protection’ was made available which allowed whole farms as opposed to single commodities to be insured.
CONS
- Expensive – projected cost from 2014-18 is £376 billion
- Insurance pay-outs are unpredictable which causes problems for budget management
- Requires accurate data which can be time-consuming for farmers to provide
PROS
- The amount of money from the Farm Bill budget spent on farm support is relatively small, so variable amounts can be absorbed easily
- Promotes a strong public-private partnership. US insurance schemes are publically regulated but delivery is driven by the private sector
CANADA
Canada has reduced agricultural support significantly since the 1980s, but does still have market price support for dairy, poultry and eggs – making prices 7 per cent higher in 2013-15 than those on world markets.
Canada also provides four support programmes though its ‘Going Forward 2’ (GF2) policy.
- AgriInvest – A savings scheme where, to a limit, government matches deposits made by farmers. Designed to deal with ‘small’ income declines.
- AgriStability – Designed to deal with large margin declines. Very similar to US revenue protection schemes and based on the previous rolling five-year history.
- AgriInsurance – Helps protect farmers from the effects of natural hazards.
- AgriRecovery – Provides relief to producers that incur extraordinary costs as a result of disasters.
CONS
- Chemical and fertiliser use may be higher than it would be without the programs
- Policies which target specific environmental issues may have greater impact
PROS
- It is cheap – just $3 billion has been spent on agriculture over the past five years, of which 2/3 supported farm incomes
- The programs have modest impacts on production
AUSTRALIA
Support to producers in Australia has been continuously reduced and now amounts to just 0.1% of GDP. In 2014, the Australian agricultural budget was $830 million.
Very low tariffs on imports mean the Australian farming industry is now strongly market-oriented with domestic prices equivalent to world prices.
Australian agricultural policy is mainly focused on preventing severe income losses for farmers through disaster assistance and tax concessions.
PROS
- It is simple. Australia uses the tax system to manage variable income
- It is very cheap.
NEW ZEALAND
New Zealand is one of the few countries in the world to abandon price support systems for its agricultural sector and embark on a free trade policy.
The programme has improved productivity in the agricultural sector and encouraged growth in the rest of the economy.
Although there were short-term adjustment problems, New Zealand has shown farmers can adjust to lower subsidies and maintain incomes at reasonable levels.
Many activities such as market research and development, quality assurance, and plant and animal health protection are funded by producer levies.
PROS
- Farming incomes reduced initially but began to rise after adjustments
- Lower cost of Government intervention
CONS
- Exchange rate changes unpredictable, increasing uncertainty in planning decisions
- Reforms could have been planned better
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