The ag industry's fight for government support

Wednesday, October 16, 2019

The long-term trend in American support payments to farmers has shifted

by Jim Algie
Better Farming

Until U.S. President Donald Trump began working trade policy in earnest in 2018, the trend for government support payments to farmers in both the United States and Canada had shown a 30-year period of almost continual decline, Organisation for Economic Co-operation and Development (OECD) analysis showed.

A 36-nation Paris-based intergovernment organization formally established in 1961, the OECD grew out of post-war reconstruction in Europe to stimulate economic progress.

Both in absolute dollars and as a percentage of gross domestic product, annual support to Canadian producers fell from about US$6.14 billion in fiscal 1986-88 to about US$4.2 billion in 2018, the OECD's 2019 Agricultural Policy Monitoring and Evaluation report said. During the same period, the total value of Canadian farm production more than tripled.

OECD calculations include an estimate for consumer supports by comparing domestic and world prices. As a result, the organization identifies regulated consumer prices under Canada's supply-management system for milk and poultry among the nation's farm supports.

    matthewleesdixon/iStock/Getty Images Plus photo

Even so, direct producer support as a share of gross farm income in Canada dropped by 50 per cent between 1986 and the 2001-2002 fiscal year. That decline was mainly because of the 1995 end to market price supports for grain, the report said.

OECD analysis of U.S. policy showed a similar decline in support payments until 2018 when the trend changed sharply.

The Paris-based OECD estimates U.S. producer support payments for 1986-88 at US$35.337 billion. The organization tracks the decline in support from 1986 to 2017 when estimated producer support stood at US$33.813 billion. However, preliminary 2018 figures show a dramatic 31 per cent increase to US$44.308 billion.

That increase is mainly because of payments under three new trade mitigation programs announced in 2018 and continuing in 2019 at a higher funding rate.

The American government designed the programs as a "relief strategy" to help farmers "while the administration continues to work on free, fair and reciprocal trade deals," said a July release from the U.S. Department of Agriculture. The programs respond to complex disruptions to agricultural trade amid frequently rancorous talks and an exchange of reciprocal tariffs between the U.S. and China.

In July 2018, U.S. officials announced details of direct-to-farmer MFP payments to exceed US$8 billion that year. As well, government representatives announced a purchase and distribution program for "surplus" commodities distribution and an agricultural trade promotion effort.

In July 2019, Perdue announced details of an additional US$16-billion aid package that included authorization for direct payments to farmers of "up to US$14.5 billion" for the year to be paid in three installments.

As of Sept. 23, the U.S. government had paid nearly US$4.7 billion to farmers under market facilitation programs, a U.S. Department of Agriculture statement said.

The OECD report issued in July is part of an annual project tracking agricultural policies among 53 economies. BF