Food e Agricoltura

Food and Agriculture
Current Themes and Results
2010
Foreword
The remit of the OECDs Committee for Agriculture covers a vast range of topics relating to the physical, economic, market and social environment within which the agriculture and food sector has been and will continue to evolve in coming decades. This compilation summarises some of the most important results and policy conclusions of OECD work on agriculture, based on pioneering studies that exploit the Organisations unique capacity to generate dialogue among countries, and countries willingness to submit to peer review. The following papers are presented as background information for Ministers attending the Meeting of the Committee for Agriculture at Ministerial level at OECD headquarters in Paris, 25-26 February 2010.
Table oF ConTenTs
agricultures Physical environment
Water Resources in Agriculture: Outlook and Policy Issues ...................................................................... 5 Agricultures Environmental Performance: What Role for Agri-Environmental Policy ........................ 7 Agriculture and Climate Change: Impacts, Mitigation and Adaptation .................................................. 9
Policy and adjustment

Farming, Farm Families and the Rural Economy ...................................................................................... 11 How Can Policy Underpin Farmers Risk Management Strategies? ........................................................ 13 Smallholder Adjustment: Getting the Policy Mix Right ............................................................................ 15
Trade and agriculture

Liberalising Trade in Food and Agriculture: What is the Best Way Forward? ...................................... 17 The Challenge of Designing Non-Tariff Measures that Enhance Welfare and Trade .......................... 19
reforming agriculture Policy

Agricultural Policy Reform: How to Stay on the Reform Path ................................................................. 21 Agriculture Policies in OECD and Key Emerging Economies: Keeping the Momentum of Reform .............................................................................................................. 23
The Medium and longer-Term outlook for agriculture

The Financial Crisis, the Recession and the Beginnings of Recovery: Implications for Agriculture.......................................................................................................................... 25 Markets, Prices and Food Security: What Will the Future Bring? ........................................................... 27
References to OECD Publications and Websites ......................................................................................... 29
Photo credit: Cover illustrations, www.photo-libre.fr.
waTer resourCes in agriCulTure: ouTlook and PoliCy issues

world agriculture faces an enormous challenge over the next 40 years: to produce almost 50%more food up to 2030 and double production by 2050. This will probably have to be achieved with less water, mainly because of pressure from growing urbanisation, industrialisation and climate change. Hence, it will be important in future that farmers receive the right signals to increase water use efficiency and improve agricultural water management, especially as agriculture is the major user of water in most countries.
OECD Projected world water withdrawals from 2000 to 2050
By sector
6 500 6 000 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0
2000 2005 2010 2015 2020
% 100 90 Agriculture share in total water use
Share of agriculture in total water withdrawals

2000 2005 2030 2050
Manufacturing Electricity Domestic Agriculture
80 70 60 50 40 30 20 10 0 OECD North America OECD Europe Japan Australia Brazil and and Korea New Zealand China Africa India and South Asia
Water use (km3)
2025 Years
2030
2035
2040
2045
2050
water projections to 2050

OECD water use projections to 2050 highlight a number of issues that policy makers need to address. Among these include an increase to 47% of the worlds population living under severe water stress, mostly in developing countries, compared to 44% in 2005. Agricultures quantity and share of global water use may decline, reflecting improvements in water use efficiency. Many Asian, African and Middle Eastern countries will encounter the greatest pressure on water resources, largely due to growth in non-agricultural water use. Technology and better resource management can help. It is likely that OECD countries will continue to be major agricultural exporters to these countries, necessitating that the management of water resources in agriculture in OECD countries be improved, while ensuring water needs for the environment are met. If rising water and energy prices lead to higher food prices, they could stimulate more widespread adoption of modern irrigation technologies, saving water and raising yields. But this could also result in expansion of irrigation onto fragile lands.
Various farm management and technology approaches are being deployed to improve water resource management, for example, developing drought resistant cultivars. Emphasis is also being placed in establishing decision support tools to guide water management strategies, such as the computerised linking of soil moisture monitors to drip irrigation systems.
Climate change, agriculture and water

The Intergovernmental Panel on Climate Change, and many reports from OECD government agencies, project shifts and variability in hydrological regimes resulting from climate change. For agriculture this implies changes in the seasonal timing of rainfall and snow pack melt and the higher incidence and severity of floods and droughts. Mitigation and adaptation approaches to climate change in agriculture need to be strengthened. These approaches are likely to be more effective if they are embedded in longer term strategies closely linked to agricultural policy reform, risk management policy and market approaches. 5
water and agricultural support policies

Given the anticipated growth in demand for food and water and increasing pressures from climate change, agriculture will be a key target for policy makers as it consumes about 70% of the worlds freshwater withdrawals (45% in OECD countries). The level of charges for water supplied to farms has risen in OECD countries. Frequently, however, farmers are only paying the operation and maintenance costs for water supplied, with little or no recovery of agricultures share of capital costs for water infrastructure (see table below). Where countries have raised water charges to farmers, available evidence indicates that it has not led to reduced agricultural output. But water charges rarely reflect scarcity and social values or environmental costs and benefits. Groundwater policies usually involve licenses and other regulatory instruments. But illegal groundwater pumping is difficult to observe or control and remains a major challenge for the sustainability of farming. Agricultural support policies linked to production can encourage less efficient use of water, lead to off-farm pollution and exacerbate flooding. Isolating and quantifying the overall economic efficiency and environmental effectiveness of farm support on water resources, however, is difficult and further analysis on causation is needed. There has been some progress across OECD countries in lowering support levels and in decoupling support from production and inputs (including water and energy). These reforms
are leading to more efficient use of water, better adaptation to water scarcity, and lower off-farm pollution.
Future challenges
Future policies to address the management of water resources in agriculture will be influenced by many and diverse drivers. For OECD countries farm management and technology; climate change and climate variability; and energy costs for pumping water are particularly important. In Sustainable management of water resources in agriculture, the OECD analyses the challenges of moving towards more efficient management of water resources in agriculture and responding to growing food demands and the impacts of climate change. The OECD report suggests that it will be important for policy makers to: 1. Recognise the complexity and diversity of water resource management in agriculture, in the context of varying regional and national water resource supply and demand balances. 2. Strengthen institutions and property rights for water management in agriculture. 3. Ensure charges for water supplied to agriculture at least reflect full supply costs. 4. Improve policy integration and coherence between agriculture, water, energy and environmental policies. 5. Enhance agricultures resilience to climate change and climate variability impacts. 6. Address knowledge and information deficiencies to better guide water resource management.
Full supply cost recovery1 for surface water delivered on-farm across OECD countries2: 2008 100% cost recovery of operation and Maintenance and Capital Costs: Austria; Denmark; Finland; New Zealand; Sweden; United Kingdom 100% cost recovery of operation and Maintenance Costs, but less than 100% recovery of Capital Costs: Australia, Canada, France, Japan, United States less than 100% cost recovery of operation and Maintenance and Capital Costs: Greece; Hungary; Ireland; Italy; Mexico; Netherlands; Poland; Portugal; Spain; Switzerland; Turkey less than 100% cost recovery of operation and Maintenance Costs, with Capital Costs fully supported: Korea
1. Full supply costs for water deliveries to farms include: operation and maintenance costs (e.g. maintaining and repairing the irrigation infrastructure) and capital costs, both renewal capital costs (e.g replacing irrigation canals) and new capital costs (e.g. constructing dams). 2. No information is available on the following OECD countries: Belgium; Czech Republic; Germany; Iceland, Luxembourg, Norway, Slovak Republic.
More information is available at www.oecd.org/agriculture
agriCulTures environMenTal PerForManCe: wHaT role For agri-environMenTal PoliCy

agriculture has significant impacts on the environment, using on average over 40% of water and land resources in oeCd countries. impacts occur on and off farm, and include both pollution and degradation of soil, water and air, but also the provision of environmental services, such as biodiversity, flood and drought control, and a sink for greenhouse gases. oeCd countries use different mixes of policy instruments to achieve their environmental objectives, including regulations, cross-compliance, agri-environmental payments, taxes, tradable rights and technical assistance. The development and follow-up of indicators that are consistent over time and across countries, but which acknowledge the diversity of agri-environmenal conditions in the oeCd, is a powerful tool for policy evaluation. overall, environmental performance of agriculture across oeCd has improved, with a decrease in agricultural nutrient balance surpluses and a decline in pesticide use, but with significant variations across countries and increasing pressure on water. natural resources and agriculture
Agriculture is a major user of natural resources and its environmental performance needs to be monitored and evaluated. Many of its environmental effects are either negative or positive externalities or public goods. To a large extent these effects are determined by farmers choices of how and what to produce. Agrienvironmental policies attempt to incorporate these potential external effects on farming decisions. As indicated in the Inventory of measures addressing environmental issues in agriculture, developed by OECD, the member countries are using a wide set of measures. and application of chemicals and pesticides, prohibitions and requirements on waste and nutrient management, limits on the intensity of production, and buffer strips and green coverage requirements. Stricter regulations are applied in areas with higher environmental or resource conservation values. Over time, regulatory requirements have broadened in scope and have become more stringent. Cross compliance mechanisms require farmers to fulfil specific environmental requirements in order to be eligible for specific agricultural support payments. In the European Union, United States and Switzerland, cross-compliance is significant. Agri-environmental payments. Some OECD countries (EU countries, Norway, Switzerland and United States) have also developed a wide range of agri-environmental payments under voluntary programmes providing payments to farmers to adopt specific farming practices, with
Policy approaches
Regulatory requirements are the core of policies addressing environmental issues in agriculture. All OECD countries impose a complex set of regulations to prevent negative impacts on the environment. These include limits on the storage
Importance of the policy measures adressing environmental issues in agriculture

Measure/Country regulatory requirements environmental cross-compliance Payments based on farming practices Payments based on land retirement Payment based on farm fixed assets environmental taxes/charges Tradable rights/permits Technical assistance/extension Community based measures aus XXX NA X NA X NA X XX X Can XXX NA X X X NA NA XX X eu XXX XXX XXX X X X X X NA JaP XXX X X NA X NA NA X NA kor XXX X X NA X NA NA X NA MeX XXX NA X X X NA NA X NA nZl XXX NA X NA X NA NA XX X nor XXX XX XX NA X X NA X NA swi XXX XXX XXX X X NA NA X NA Tur XXX NA X NA X NA NA X NA usa XXX XXX XX XXX X X X XX NA
Note: NA not applied or marginal; X low importance; XX medium importance; XXX high importance. The importance of the policy instruments in this table is related to the mix of the specific country. It is not designed to compare the importance of specific measures across countries.
positive environmental effects and/or providing public goods (such as landscape, biodiversity). Most payments support extensive forms of farming (extensive management of grassland, extensive pastures). Some measures go beyond offsetting environmental damage caused by agriculture and provide voluntary payments for additional environmental services (more or less precisely defined and targeted). Targets are typically defined in the form of a specific farming practice rather than specific (measurable) environmental outcomes that in many cases are not feasible or involve high transaction costs. Other economic instruments, such as tradable rights and quotas, are used in a limited number of countries. These include tradable rights for the development of wetlands in the United States, tradable water extraction rights (implemented on a state/regional basis in the United States), and improving market mechanisms to free up trade in water rights under implementation of tradable water rights in Australia. Tradable rights based on environmental quotas, permits and restrictions do not yet play a significant role in agri-environmental policy, despite the growing use of such measures for environmental policy in other sectors. In the broader context, however, where agrienvironmental policies offset the damaging environmental effects of input-linked and production-linked support policies, the opportunity costs of improving the environment are higher than they need to be.
towards improving the knowledge-base relating to environmental issues in agriculture in the past two decades, through increased spending on agrienvironmental research, often undertaken in cooperation with private sector. A number of OECD countries have developed agri-environmental indicators to track environmental performance. Greater emphasis has also been placed on communication to farmers on environmental issues via technical assistance and extension, in order to induce voluntary changes in farming practices to improve environmental outcomes. According to the OECDs Environmental Performance of Agriculture at a Glance (2008), the overall performance of agriculture across the OECD has improved due to the response from farmers, agro-industry and policy makers. Agricultural nutrient balance surpluses have decreased since the early 1990s, pesticide use has declined and soil erosion stabilised. Agricultural water use has grown more rapidly than total water use, mainly driven by an expansion in the total OECD irrigated area. However differences among countries are wide across all indicators.
Policy challenges
With rising food demand and the necessity to protect the environment, including biodiversity at local and global levels, and natural resources, OECD policy makers need to: 1. Recognise the complexity of the links of agricultural production to environmental issues, including their spatial dimension. 2. Internalise agricultural externalities (positive or negative) as much as possible to achieve expected environmental outcomes at the lowest cost to public finances. 3. Address knowledge and information deficiencies of farmers on environmental issues in order to induce voluntary changes in farming practices to improve environmental outcomes and resource management.
Methods and indicators

There is growing awareness of the need for methods and indicators to evaluate agrienvironmental policies. This is complex due to the site specificity of many environmental issues, difficulties in valuing and measuring environmental outcomes, and factors outside the control of farmers (e.g. weather). Recent OECD reports have shown that OECD countries have also directed greater attention
Gross nitrogen balance per hectare of total agricutural land (kg N/ha) 2002-2004
Korea Japan EU15 Norway Switzerland OECD New Zealand United States Canada Turkey Mexico Australia Iceland
Change in irrigated area percentage change 1990-92 / 2002-04

France Australia United States OECD Spain EU15 Greece Turkey Mexico Japan Korea
50
100
150
200
250 kg N/ha
-15
-10
-5
10
15
20
25
30 %
agriCulTure and CliMaTe CHange: iMPaCTs, MiTigaTion and adaPTaTion

agriculture is having to adapt to significant impacts of climate change, while at the same time providing food for a growing population. Meeting climate change, food security and trade commitments presents both challenges and opportunities for the agri-food sector. agriculture is one of the few sectors that can both contribute to mitigation and sequestration of carbon emissions and accounting for agricultures carbon footprint is necessary, particularly if agriculture is included in greenhouse gas reduction commitments. However, the range and variability of estimates, and the complexity and uncertainty of accounting for indirect land use change remain to be resolved. Policies will play a role in enhancing the ability of agriculture to adapt to climate change, while also contributing to other environmental goals. work in the oeCd will continue to support the process following the Copenhagen Climate Change Conference in december 2009.
Global GHG Emissions by Sector
Waste and wastewater 3% Forestry 17% Agriculture 14% Industry 19% Energy Supply 26% Transport 13% Residential and commercial buildings 8%
for the type and distribution of agricultural production worldwide. Climate change will also worsen the living conditions for many who are already vulnerable, particularly in developing countries because of lack of assets and adequate insurance coverage. These impacts highlight key policy issues, including the need to produce more food for an increasing population. Projections of more than 9 billion people in 2050 suggest that food production will need to double from current levels. At the same time, in order to limit future global warming to a 2C temperature increase as recommended by IPCC, anthropogenic GHG emissions will have to decrease globally by at least 50% by 2050 from 1990 levels. Agriculture is not currently subject to emissions caps, although several OECD countries are already implementing mitigation action plans. In addition to reducing its own emissions, carbon sequestration in agricultural soils can play an important role in offsetting emissions from other sectors. Some agricultural GHG mitigation options are cost competitive with a number of non-agricultural options in achieving long-term climate objectives. Quantifying GHG emissions from agricultural activities is complex. First, the atomistic nature of production (many individual farmers) in a wide range of geographic and climatic conditions means that emissions are not only highly variable but also difficult and costly to measure precisely. Second, there continues to be a great deal of scientific uncertainty as GHG emissions from agriculture are subject to a complex interplay of many factors such as climate, soil type, slope, and production practices. Accounting for the indirect land use changes arising from agricultural production is another important challenge. The recent global surge
In 2004 agriculture directly contributed about 14% of global anthropogenic greenhouse gas (GHG) emissions according to the Intergovernmental Panel on Climate Change (IPCC), although scientific uncertainty suggests it could be much higher. Land use, land use change and forestry account for a further 17%.
Impact of Climate Change on OECD agriculture
Temperature Impact change +1 to +2 Some increase in yield Cold limitation alleviated Yield reduction in some latitudes (without adaptation) Seasonal increase in heat-stress for livestock +2 to +3 Potential increase in yield due to CO2 fertilisation (but likely offset by other factors) Moderate production losses of pigs and confined cattle Increased heat stress Yields of all crops fall in low latitudes (without adaptation) +3 to +5 Maize and wheat yields fall regardless of adaptation in low latitudes High production losses of pigs and confined cattle Increased heat stress and mortality in livestock
Source: Adapted from IPCC AR4 Working Group II.
Agriculture is particularly vulnerable to climate change. Projections to 2050 suggest both an increase in global mean temperatures and increased weather variability, with implications
in food prices highlighted the importance of agricultural policies for world food and energy markets. In particular, the links between production of biofuels from feedstock (in many cases subsidised), consequent land use changes, and food prices demonstrate the importance of foreseeing the range of consequences.
Policy response
Government policy can play an important role in maintaining a viable agriculture in the face of climate change. Reforms of agricultural policies, in particular the shift to decoupling, have reduced specific commodity-related production distortions. Future reforms might better target specific environmental outcomes, such as encouraging production techniques with low GHG emissions or that minimise them. Mitigation and adaptation approaches will need to be strengthened. These are likely to be more effective if they are embedded in longer-term strategies linked to agricultural policy reform, risk management, research and development, and market-based approaches. Examples include crop and disaster insurance, research into crop varieties and breeds better adapted to changing climatic conditions, and incentives for more efficient use of water. In responding to the future challenges for agriculture of addressing climate change and increasing food demand, a coherent policy approach is needed that: 1. Ensures a stable policy environment that sends clear signals to consumers and producers about the costs and benefits of GHG mitigating/ sequestering activities. 2. Provides a real or implicit price of carbon to create incentives for producers and consumers to invest in low-GHG products, technologies and processes. 3. Fosters the application of existing technologies and invest in R&D for new technologies to reduce GHG emissions and increase productivity. 4. Builds capacity to better understand and measure the GHG impact of agriculture for monitoring progress relative to national and international climate change goals. 5. Facilitates adaptation by increasing producer resilience to climate change, and that compensate the most vulnerable groups. Following Copenhagen, the OECD will continue to examine the role of land use change in agriculture (and the links with forestry), develop tools to analyse the design and implementation of cost effective policies so that agriculture can adapt to and mitigate climate change, and facilitate the sharing of experiences amongst countries on policies to address climate change in agriculture.
Mitigation
Of the options to reduce GHG emissions in agriculture using currently available technologies, significant mitigation can be achieved through improved cropland and grazing land management, restoration of degraded lands, and land use change (e.g. agroforestry). Emissions from livestock production can be reduced through improved nutrition and better management of manure. In addition, crop and pasture lands can sequester significant amounts of carbon, and therefore contribute to offsetting emissions from other sources, while improving soil quality and health. More research is needed, notably to determine: The technical and the economic potential of various mitigation and sequestration options, including through life cycle analysis How the pressure of indirect land use can be addressed with second generation biofuels How emissions of GHG from crop and livestock production can be reduced.
adaptation
While some regions of the world may benefit from improved conditions, the overall effect of climate change is nonetheless expected to be negative for global agricultural production if no action is taken. Increased concentrations of GHGs in the atmosphere already lock-in a certain amount of climate change. Moreover, given the long time-lags that will be required for GHG mitigation efforts to have an impact, adaptation will have to occur. This may range from altering farm management practices to adoption of new varieties, crops, and animal breeds more appropriate to future climate conditions. As agricultural production increases, resource constraints, particularly water, will become tighter. Agriculture globally accounts for about 70% of the worlds freshwater withdrawals (45% in OECD countries). Climate change is expected to alter the seasonal timing of rainfall and snow pack melt and result in a higher incidence and severity of floods and droughts. Both rain-fed and irrigated agriculture will need to be managed more sustainably to reduce resulting production risks.
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FarMing, FarM FaMilies and THe rural eConoMy

The complex, multifaceted role of farm households emerges in Impact of agricultural policies on rural community well-being and other oeCd analyses. while the average share ofagriculture in rural employment and gdP is low and decreasing in oeCd countries, agriculture is a large land user and plays an important role in many environmental and other land use issues. Farm households provide agricultural and related products and services, participate in local labour markets, use local services, and purchase and consume local products. a significant share of farm household incomes comes from non-agricultural sources, which means that for many farm households, a vibrant, diversified rural economy is crucial to survival on the farm. rural and farm policy has to reflect these realities.
Share of agriculture in the economy
60 50
OECD average, 1995 OECD average, 2005 OECD rural regions, 2005 OECD intermediate regions, 2005
% 80 70 60 50 40 30
Regional spread in the share of agriculture in rural employment
in % of the total
40
30 20
OECD urban regions, 2005
20
10 0
Tu rk ey Ko re a Po lan d M ex ico Gr ee ce Sp ain Cz ec J a p a h Un Rep n i te u d K blic ing do m Fin lan d Ita ly F S w r a nc it z e er lan Ca d na Au da s tr a De lia nm a G e rk rm an No y rw a Sw y Un e ite den dS ta te s
10 0
Population
Land use
Employment
GDP
The OECD defines three regional types: predominantly urban, intermediate, and predominantly rural regions.
in a majority of OECD countries over the last decade (by 2.5% on average), with declines over 10% in some Central European countries, Italy and Korea. The importance of farm-based environmental services, pressures for land conversion, and whether conversion relates to afforestation, conservation or urban sprawl, vary by region, notably with distance to urban areas. In some regions where farmland use has declined or may do so, there are concerns about impacts on environmental and socio-economic viability from: Under-provision of land-based amenities where they are instrumental in regional development or in some high-value-nature rural areas. Alternative uses of farmland and water and alternative sources of income and employment. Urban sprawl in peri-urban areas.
a multiple role for agriculture in the rural economy

In general, primary agriculture plays a small and declining role in employment and GDP, whatever the type of region, and farm households account for a modest share of the population. The importance of the agri-food system as a whole may be greater, but cannot be measured in general for lack of data. In regions defined as predominantly rural, primary agriculture usually accounts for a larger, though still mostly modest, share of employment and GDP. Nevertheless, there are some regions where a significant proportion of the population is dependent on agriculture. At the same time, a significant share of farming takes place in regions that are not defined as rural. For example, less than half of the farms and half of the farmland is in predominantly rural areas, as defined by OECD. Agriculture is an important land user and provider of rural amenities in rural and other areas. Land used in agriculture has decreased
Farm household diversification

A range of economic and social factors and policies, such as financial motivation, education, and family status affect the attitude of farm households towards diversification. The increasing participation of women in the work
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Diversification of income sources among farm households

Narrow definition of farm households Broad definition of farm household Share in total farm household income of income from:
Farm
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Off-farm labour
Property
Transfers
Other
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Farm
Off-farm labour
Property
Transfers
Other
ay
re
la n
ar
la n
do
rw
pa
te ta dS
Ko
nm
in g
F in
Ire
Ja
No
r ia
ds
li a
ce
ic o
an
dK
De
la n
ra
la n
la n
an
st
ex
ite
rm
Po
er
st
Au
Fr
er
Au
Ge
th
Average of the three most recent years available. Data are not comparable across country as definitions of farm households differ.
force, or the wish to be more integrated in the local community, are also important. Data on the extent to which farm households are engaged in diversification activities, the nature of those activities, whether they are located in rural areas, and on the income they generate are scarce, often incomplete and out-of date. Generally, however, we know that farm households derive a significant share of their income from non agricultural sources, mainly off-farm labour activities, and that the importance of their nonfarm income tends to increase over time in most countries. This is important information for those deciding on the proper balance of agricultural, rural and regional policies.
Ne
Sw
it z
Regional multi-sectoral approaches that respond to specific problems and build on specific attributes and assets of individual rural areas are needed. A panoply of policies covering domains such as mobile telephone and internet access, infrastructure, training, and information is required to foster business in rural areas. Farm tourism can provide an opportunity to diversify for some farm households and successful initiatives can also promote local products, preserve the natural and agricultural environment, and enhance a regions reputation, but these positive outcomes will be limited to specific regions attractive to tourists and will not be possible everywhere. Grants, training and facilitation and other targeted measures are more likely to be helpful in enabling farm households to diversify than broad agricultural support. Removing unintended obstacles to diversification is important. Some policies may be inadvertently creating obstacles to farm household diversification and rural development generally, for example, if parttime farmers lose entitlement to certain types of farm-based subsidies. In other cases, however, this may reflect government concerns that certain forms of diversification could also have negative implications, for instance on the provision of public goods. Tax, social security, land zoning, and labour market regulations may also complicate diversification if agriculture is treated differently from other sectors, for example if the social security regime is specific to farming. Governments should try to ensure that all rural actors are able to participate fully in the development of rural areas on an equal basis.
How can farm and rural policies reflect these realities?

The role of farm households in the rural economy goes far beyond the supply of agricultural goods. They also provide environmental and recreational services, participate in the off-farm labour force and sustain demand for consumer goods and services locally. Thus viable farms, with or without diversified sources of income, contribute to rural development. But a healthy and diversified rural economy which provides off-farm work opportunities and services is essential to the survival and welfare of a large proportion of farm households. The role of agricultural policy in contributing to rural development has to be seen in this light. With the share of primary agriculture in employment low and decreasing the extent to which agricultural policies can foster general economic development in rural areas is often limited, but varies by region and needs to be considered for each specific case.
12
Un
Un
ite
Ca
na
da
How Can PoliCy underPin FarMers risk ManageMenT sTraTegies?

risk management is part of farmers business strategy since production is subject to many uncertainties that could threaten returns or even the viability of farms. The prevalence of sources of risk that affect many farmers at once, such as weather-related hazards, is specific to agriculture. Managing these risks typically includes the use of a range of instruments such as production diversification, irrigation, futures markets, insurance and production/marketing contracts, as well as off-farm activities and assets. as argued in Managing Risk in agriculture: a holistic approach, governments have a role to play in facilitating access to market and non-market strategies, while empowering farmers to take responsibility for managing their own business risk. The role of government
Risk management policies should be targeted at specific market failures and well-defined equity concerns. Some risk management markets are incomplete and therefore not all agricultural risks can be insured, pooled or transferred through market instruments. This is not a proof of market failure, and the appropriate role of government depends on the whole risk management system . Normal risk is frequent but not too damaging, and is typically managed at the farm or household level. General tax, health and social systems help to manage such risks. Catastrophic risks are infrequent, but cause great damage for many farmers. The significant uncertainties associated with these events and the possibility of substantial losses make it difficult to find market solutions, and market failure is more likely. Between these two extremes, there is a category of risk that, because of its intermediate frequency of occurrence and magnitude of losses, is potentially insurable. If policies responding to catastrophic or normal risks are broad, they occupy part of the insurable fringe and may crowd out market and on-farm strategies. Defining the boundaries between types of risk is thus a major policy challenge.
risk related policies in oeCd countries

Agricultural policy measures have an impact on risk management. In several OECD countries, agricultural support is high. This additional revenue helps to manage farming risk and needs to be taken into account before implementing any new risk-related policies. Some measures are designed to prevent the occurrence of risks (risk reduction) or to limit their effect on income or consumption (risk mitigation and coping). To reduce risk, most OECD countries offer market price support through border measures that typically stabilise domestic prices. They may also offer technical or investment support, such as water management and inspection services. Ex ante measures for risk mitigation, in particular income tax smoothing systems for agriculture, are also used. Some countries go further by providing payments that are countercyclical with respect to prices or revenue, and provide subsidies for insurance policies or future contracts. Support for income diversification strategies is rare.
Risk layers and the potential role of government

Catastrophic Type of risk examples role of Policy Equity Efficiency * Disaster/social relief * Compensate if externalities * Progressive tax system. Health and social protection * Facilitate the creation of markets by targeting potential market failures Low frequency High damage Significant losses for many farmers, e.g. due to climatic events or contagious disease insurable Medium frequency Medium damage Significant falls in returns of some farmers, e.g. due to hail, non-contagious disease normal High frequency Low damage Normal fluctuations of prices and production
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Ex post risk-related measures, such as disaster relief, social policy, and other ad hoc assistance like debt relief and labour replacement are also available in most countries. Typically countries with lower levels of price support have larger shares of risk-related payments.
Generous disaster assistance may displace other risk management strategies. Good risk management policies for the agricultural sector need good risk governance through: Creation of markets by addressing market failures such as missing /asymmetric information. Avoidance of rent seeking incentives in support and disaster assistance. Accounting for trade-offs between different government objectives: - Policies that most reduce risk may not have the largest positive impact on farmers welfare. - Risk-related measures tend to have significant impacts of production, conflicting with the objective of minimising trade effects.
oeCds holistic approach to risk management

A great diversity of sectoral and non sectoral policies, sometimes addressing part of the risk, affects agricultural risk management. This may have unintended effects due to important correlations between different sources of risk, policy instruments and risk management strategies. Countercyclical payments may discourage farmers from taking advantage of natural hedging due to negative production/price correlations; make market instruments less attractive; and contribute to the incompleteness of markets. Insurance subsidies may discourage farmers diversification strategies.
Recent price volatility: a role for policy? Since 2007, agricultural commodity markets have experienced increasing volatility, particularly in daily quotations of futures markets. This may be linked to increased participation of non-commercial investors, but the evidence is unclear. In the last two years, volatility of monthly wheat cash prices has been high but lower than after the economic crises of 1929 and 1973 that implied adjustments to lower and higher prices, respectively. In both cases volatility remained high for some years until a new, less volatile price level was found. With high volatility, prices may not capture good information on costs, and market outcomes are more likely to be inefficient. Is there a role for government? Existing studies cannot confirm that price stabilisation is welfare enhancing, while there is evidence that domestic price stability is purchased at the expense of larger international price instability. But the major economic costs of price stabilisation are due to the political economy of picking a wrong price that does not reflect economic opportunity costs, particularly in a period of high volatility. This is part of the experience of the international commodity agreements developed in the 1970s and that have gradually abandoned price stabilisation. The economic implications of price stabilisation are far reaching, depend on the nature of the institutional arrangements, and require in-depth analysis of costs and benefits in a holistic framework.
Wheat prices: level and volatility 1908-2009

Monthly data of All Wheat, US season average price from 1908-09 to 2008-09 from USDA/ERS data
80% 70% 60% 50% 40% 30% 20% 10% 0% 50 0
1940-49 1965-69 2007 -09 1929-35
Annualized volatility in % (monthly data)

1973 -75
Price level (USD/t.)
USD/t. 300 250 200 150 100
29
69
89
8/ 49
99
09
39
59
19
79
19 18 /
8/
8/
8/
8/
8/
8/
19 78 /
8/
19 2
19 4
19 5
19 6
19 0
19 8
19 3
19 9
14
20
08
/0
sMallHolder adJusTMenT: geTTing THe PoliCy MiX rigHT

agricultures share of output and employment tends to diminish with economic development. smallholders with limited resource endowments often struggle to compete, or find that they have improved income prospects in other sectors. a strategic framework for smallholder adjustment needs to acknowledge that the long-term future for the majority of smallholders cannot lie exclusively in farming. The most important policies for improving both agricultural competitiveness and income prospects outside the sector may not in fact be agricultural policies. it is therefore important that smallholder policies are framed in an economy-wide context, with agricultural policies a component of the overall policy mix.
Recent price volatility: a role for policy?
% 80 India 70 Indonesia China Korea 60 Mexico Brazil 50 Russia South Africa 30 Uruguay Argentina Israel New Zealand 10 UK 0 USD 2 000 GDP per capita PPP Current USD, 2005 USD 42 000 Germany Poland Spain Finland Chile Italy Japan Austria AGRICULTURAL EMPLOYMENT (%) 1961 Turkey AGRICULTURAL EMPLOYMENT (%) 2005
40
20
France
Canada Australia Netherlands Belgium
Switzerland USA
agriculture in the overall economy

The importance of agriculture to the overall economy tends to diminish over time. The experience of agricultural adjustment varies from one country to the next, but has some universal aspects. For countries with a per capita GDP of USD 2000 or less, it is not uncommon for agriculture to account for 30% or more of GDP, whereas the share is typically no more than 2%-3% in high income OECD countries. This relative decline is associated with a substantial release of labour from the agricultural sector. Over the past 50 years, all emerging countries have shed labour from farming. Moreover, the pace of adjustment is speeding up. In Korea, agricultures share of employment fell from 40% to 16% in just 14 years a transition which took 53 years in the United States and 68 years in the United Kingdom. Why do these changes occur? Income elasticities of demand for food tend to be less than for other consumption, so that the demand for food does
not grow as fast as demand for other goods. On the supply side, total factor productivity typically rises faster in agriculture than in other sectors of the economy. Moreover, technical innovation associated with agricultural productivity growth has tended to be labour saving. These combined developments permit the release of resources, especially labour, to other sectors. In most cases, the agricultural sector nevertheless continues to expand. Pressures for farm resources to shift into other sectors may be lessened by the scope for increased exports in countries with a comparative advantage in agricultural activities, or reinforced by pressure from imports in the case of countries with a comparative disadvantage.
Pressure on smallholders
These changes put pressure on resource-poor smallholders who cannot compete with efficient domestic agricultural businesses or with imports. With technology improving, and more efficient use being made of scarce resources,
15
including the exploitation of scale economies, smallholders who do not participate in sectoral cost improvements will inevitably be subject to pressures on their incomes. Faced with this pressure, there are two options: join the ranks of efficient commercial producers, or seek to bridge the gap by obtaining additional income from other sources either by diversifying the households income sources or by exiting the sector altogether. Policymakers need to acknowledge that the first option is not a realistic one for many smallholders. A framework which acknowledges two things is needed. First, the long-term, i.e. intergenerational, future for the majority of smallholders cannot lie exclusively in farming, hence there is a need for policies that enhance households opportunities outside the sector as well as within it. Second, in order to improve both agricultural competitiveness and the prospects for earning more outside the sector, the most important policies may not in fact be agricultural. It is therefore important that smallholder policies are framed in an economywide context, with agricultural policies a component of the overall policy mix. Different types of agriculture-dependent households will have different potential pathways to improved incomes over the long term and correspondingly different policy requirements. Improving farm households competitiveness. Farm support, such as price guarantees or input subsidies, pre-supposes a development pathway within agriculture and treats the symptoms of uncompetitiveness rather than the causes. By contrast, investment in public goods does not bias the choice of development pathway. Policies to improve competitiveness need to be targeted at those smallholders with a realistic chance of succeeding within the sector. Income diversification is a very important strategy for many farm households, particularly the poorest, for which it is likely to provide some
insurance. For other farm households, having a family member drawing income from outside agriculture may be the start of a successful move to more remunerative activities. Key policies for diversification are the improvement of human capital and the development of regional and rural infrastructure. Leaving the sector will ultimately be the best strategy for the majority of households. Labour market policies have an important role in ensuring that core standards of employment are met inside and outside agriculture and in reducing informality. Regional development programmes may also have a role in stimulating balanced development. Social policies can lift those households that are unable to adjust out of poverty, even if they cannot deliver development.
Policy Challenges
The main challenge is to establish targeted policies that correspond to viable adjustment pathways for different types of household. For instance, policies to improve competitiveness could target potentially competitive regions, and farmers could be required to apply for assistance, rather than just receive it. Policymakers need to have a realistic view of which smallholders are potentially viable (competitive) within the farm sector. Policies to improve productivity stimulate the transformation and need to be accompanied by broader investments that create wider opportunities in non-agricultural sectors. Rural development needs to be balanced in order to avoid the social tensions associated with the release of labour from agriculture. Getting the policy mix right is not easy: there are trade-offs and complementarities between government spending in different areas.
development pathways Help farmers become more competitive within agriculture Diversify income sources Within agriculture Outside agriculture Leave the sector for off-farm work Social protection for those unable to adjust
Potential policy instruments Price policies Input subsidies Credit polices Investment in human capital Investment in infrastructure Research & development and extension Labour market reforms Cash transfers (possibly conditional) Regional Policies Develop Producers associations
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Land policies and property rights
liberalising Trade in Food and agriCulTure: wHaT is THe besT way Forward?
The 153 members of the wTo have not yet managed to reach an agreement in the on-going negotiations of the doha development agenda (dda) despite widespread evidence of its potential to contribute to global well-being. Trade in agriculture has been at the heart of the negotiations and one of the stumbling blocks that has proven difficult to overcome. Meanwhile there has been a proliferation of regional Trade agreements (rTas). whether such agreements ultimately help or hinder the multilateral trading system and how to harness them to promote multilaterism is hotly debated. Many developed countries grant preferential access to developing countries to facilitate expansion of the developing countries export sectors and increase their welfare. although the objective is laudable, there are questions about the effectiveness of preferential agreements in helping developing countries. Multilateralism versus regionalism
Trade is an important contributor to globalisation which has spurred world-wide economic growth, raising incomes and living standards. Through multilateralism and successive negotiations first at the GATT and now the WTO, average tariffs on manufacturing products have fallen drastically, contributing to large increases in international trade. Extensive analyses, both inside and outside the OECD, have shown that multilateral trade liberalisation offers the prospect of global economic benefits that go well beyond the scope of any regional trade accord. These results underpin the advantages of enhancing a solid rules-based multilateral trading system. Tariffs and subsidies to agriculture began to be disciplined for the first time in the Uruguay Round concluded in 1994, but are still high relative to manufacturing. OECD work finds that a further 50% reduction in all tariffs and domestic support could increase global welfare by some USD 44 billion per annum, although some countries may not gain. Most of the gains would be a result of tariff reductions in agriculture.
Annual Global welfare gains from multilateral 50% reduction in tariffs and domestic support
45 40 35 30 25 20 15 10 5 0
with all countries moving together. In contrast to multilateral liberalisation the global welfare effects of a potential RTA between OECD countries and any of the BRIICs (Brazil, Russia, India, Indonesia and China) tend to be much smaller. If countries are active in seeking and concluding RTAs it is because they potentially generate welfare gains for the countries that participate in them. There are 421 RTAs and 230 of these were in force as of the end of 2008. Most of them are Free Trade Agreements or non-reciprocal agreements, Custom Unions account for less than 10%. About 35% to 50% of total trade is among countries belonging to RTAs.
impact of rTas
Although these agreements can provide deeper and broader liberalisation among participating countries, by nature they are discriminatory against other countries. The non-discriminatory most favoured nation clause is a major argument for multilateralism as a first best approach for efficient allocation of resources and freer trade in the world economy. In contrast, RTAs can reduce global welfare through trade diversion: while new or increased trade flows are generated within the regions covered, trade with nonparticipants may be hampered. Other concerns have been raised about RTAs: lack of transparency (e.g. RTAs are not always notified to WTO or are not always well-publicised to traders); poor implementation and lack of predictability because agreements are not well understood or conditions are too burdensome (e.g. rules of origin may be very complex); lack of consistency due to overlapping memberships and rules; and power asymmetries that may result in developing or small countries being at a disadvantage.
-1 5 JP N
X TU R US A BR A CH N
IN D
ID N TH L
Furthermore, the scale of these gains depends on the fact that the liberalisation is multilateral
ZA F OC N O DE NOC DE W LD
NZ
AU S-
EU
ME
CA
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On the other hand, RTAs may, in addition to their primary effect of increasing market access for the participating countries, help to promote or lock-in domestic reforms. They can also lay the ground for further liberalisation and improved regulatory co-operation in ways that go beyond WTO provisions, and they may constitute testing grounds for international progress in new policy areas such as services or the environment. Agricultures treatment in RTAs differs significantly depending on the countries involved. In some instances agriculture is effectively omitted or very long transition periods are built in, and RTAs have the same difficulty in overcoming deeply entrenched sensitivities as the multilateral system. In other cases, RTAs have provided some impetus to market opening efforts in agriculture or to reducing tariff escalation. In agriculture as well as more generally, the challenge is to identify those aspects of RTA design and implementation that have opened the way for further liberalisation, and to investigate how these features can be generalised to the benefit of the multilateral trading system.
Problems with programme implementation that prevent developing countries from fully benefitting from these schemes include inconsistent rules of origin, and uncertainty about programme eligibility. Some programmes may have encouraged countries to specialise in products for which they may not have comparative advantage. How big a problem is preference erosion likely to be when the DDA is concluded? According to OECD studies, overall average tariff rates suggest that preference erosion could be a considerable problem. But much of agricultural imports (30% to 46%) into Canada, Japan, the EU and the United States are duty-free on an MFN basis anyway so preference erosion is not an issue for this group of products. At the other extreme, some sensitive products with relatively large tariff rates are excluded from many of the preferential schemes, hence for these products preference erosion is again not an issue, and multilateral liberalisation would benefit all exporters. In fact, serious loss from preference erosion would be confined to a relatively small number of countries exporting a narrow basket of commodities such as sugar, bananas and tobacco. Specific targeted efforts to help these economies diversify and adjust is an alternative that may be preferred to the negotiation of complex exemptions and exceptions, which may in the end not be in the long-term development interests of the countries in question. A way forward could include: 1. A speedy conclusion to the DDA, locking in reforms that are non-discriminatory thus maximizing global welfare. 2. Utilise the Aid for Trade Initiative to provide targeted aid to improve the competitiveness of the export sector of developing countries harmed by preference erosion.
Preference and preference erosion

Preference erosion has been raised as an issue during the DDA negotiations because some developing countries that have benefitted significantly from preferences fear the consequences when general tariff cuts erode the value of their preferential margins. Canada, Japan, the European Union, and the United States are the largest providers of preferential schemes to developing countries. Least developed countries (LDCs) receive the largest preferential margins. An OECD study shows that at the beginning of the decade these preferences were worth almost USD 1.4 billion, 80% of which originated in preferences granted by the EU.
Value of preferential margins to developing countries

Three-year average 01-03 Rent Quad
USD 1 429 Million
Canada
USD 24.4 Million 1.7% of total rent
Japan
USD 44.8 Million 3.1% of total rent
EU
USD 1140.5 Million 80% of total rent
US
USD 219.2 Million 15% of total rent
GSP
USD 268.6 Million 24% of EU rent
EBA
USD 3.2 Million 0.3% of EU rent
GSP Drug
USD 102.6 Million 9% of EU rent
Mauritius, Guyana, Fiji, Swaziland
Sugar
USD 440 Million 57% of ACP rent
ACP
USD 766 Million 67% of EU rent
Mauritius USD158 Million 21% of ACP rent
of which sugar 99%
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Top product
Top country
THe CHallenge oF designing non-TariFF Measures THaT enHanCe welFare and Trade
governments are increasingly called upon to respond to a variety of concerns raised by society in many areas, including some related to agriculture such as the environment, animal welfare and food safety. Corrective actions are expected when markets either do not exist or fail and hence result in inefficient outcomes. if market solution is not satisfactory, governments have a number of options available to intervene, and these polices often have implications for international trade. given the lowering of classical import barriers such as tariffs, non-tariff measures (nTMs) are becoming an increasingly important instrument governments use to safeguard domestic societal concerns. Many technical measures may restrict trade but improve welfare in the presence of market failures. other measures can expand trade as they enhance demand for a good through better information about the good or by enhancing the goods characteristics. despite the challenges involved, systematic quantification and analysis of cost and benefits for all different economic actors through an evidence-based approach can yield a solid basis for identification of least-cost solutions.
Distribution of NTMs by purpose
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Distribution of number of different NTMs by number of affected products

Number of affected products (HS6)
100 80 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
10.5 6.29 18.4 19.62 45.18
Protection of human health Protection of plant health Protection of animal health and life Protection of wildlife Protection of environment
Number of different NTMs
rationale behind nTMs

Growing societal concerns with implications for agriculture such as environment protection, animal welfare and food safety are leading governments to respond in a variety of ways. Regulatory, subsidy or tax-based responses offer countries wide scope to address these concerns. The response may be a purely local or national matter with little or no incidence on trade or trade policy. But for societal concerns related to traded goods, NTMs are becoming an increasingly important policy tool, particularly against the background of continued trade integration and the lowering of classical barriers to trade, such as tariffs and quotas. Protection of human, plant and animal health motivates most non-tariff measures. Imports can carry invasive species such as pathogens, pests, or weeds, foreign to a countrys ecology. Different trade partners may have different food safety standards and institutional capacity to enforce these standards. This may lead to imports of food that do not meet domestic requirements. Imperfect monitoring at the border can compound the health or environmental risk.
Comprehensive data on NTMs are lacking but available UNCTAD data show that only 8 out of 777 agri-food products traded in the OECD are not subject to any NTM, and individual products are faced with many overlapping measures, so that half of the products are subject to between 9 and 12 different measures. The measures are very heterogeneous, with labelling and product characteristics requirements among the most common. Many NTMs associated with domestic regulations are a consequence of differences among national regulatory frameworks, such as in monitoring and enforcement of compliance. These differences often lead to trade frictions. Concerns about the appropriateness of certain NTMs, particularly sanitary and phytosanitary (SPS) measures, are frequently brought to WTO, and developing countries have increasingly been active in raising concerns about the trade restrictiveness of NTMs. However, developing country concerns do not only apply to their exports to OECD markets. About one third of the specific trade concerns raised by developing countries at the WTO SPS
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committee since 1995 relate to trade among developing countries, while two-thirds relate to exports to OECD countries.
create barriers to market entry, and may thus exclude foreign producers from competing in the market. Analysis of measures put in place by governments is complicated further by the increasing use of private standards in the food supply chain (see Box). Ongoing OECD work on NTMs in agri-food aims at systematic analysis of the different costs and benefits of NTMs for consumers, producers and governments, domestically as well as abroad. Through a comparative analysis of different policies to address the same issue, this work provides an evidence-based approach for identifying least-cost and most trade-friendly policy options. Availability of good information represents a key challenge for this comparative analysis. Overall, responding to the challenges of designing NTMs will require OECD policy makers to: 1. Recognise the important role NTMs play in addressing a wide array of societal concerns. 2. Recognise the complexity of the economic impacts of NTMs. 3. Recognise that NTMs can potentially be trade enhancing as well as trade restrictive. 4. Identify the least-cost and most trade-friendly policy options.
economic impacts of nTMs

Preliminary OECD analyses show that assessing the economic effects of NTMs poses significant challenges. Many technical measures may restrict trade but improve welfare through reduction in negative externalities (e.g. through reduced risk of importing pests or diseases) or information asymmetries (e.g. through product labelling). Other measures can expand trade as they enhance demand for a good through better information about the good or by enhancing the goods characteristics. The efficiency costs of NTMs are hence much less evident than the welfare losses associated with tariffs and quotas. They do not necessarily embody the economic inefficiencies that are associated with classical trade barriers, unless they discriminate between sources of supply, and they may be the least trade-restricting policies available in the face of market imperfections. It is therefore not clear a priori that less stringent NTMs would always lead to efficiency gains that would exceed the losses from weaker regulation. However, higher fixed and variable costs related to compliance with standards may
Trade and Private Standard Schemes Private standards can be viewed as a key management tool that permits firms to ensure that a wide range of consumer demands are met and government regulations satisfied, whether sourcing domestically or globally. Lead retailers have harmonised private standards through collectively defining core attributes and procedures in order to facilitate global sourcing. Compliance with these private standard schemes has become a requirement for doing business with lead retailers, making them important instruments in determining the what, how, where and by whom of food production. These schemes impose specific procedures for compliance which can make them more demanding than those of the government, as retailers themselves attest in the figure below. The switch from purely product standards (e.g. a given maximum residue level, MRL) to combined process and product standards (e.g. MRL plus requirements on the storage facilities of agro-chemicals) along with quality management systems presents new challenges for public and private governance of the food system at the local and global levels. While harmonised standards can promote trade flows, suppliers differ in their capacity to meet these standards. Satisfying these requirements may weigh more heavily on the small and medium sized farms/firms that lack the management skills or physical and human capital to meet stringent technical conditions. They can also be exclusionary for producers in developing countries, which lack the well-developed infrastructures in telecommunications, testing facilities, energy and transport to support implementation of the standards. These factors have given rise to discussions in international arenas about the legitimacy of the use private standards schemes by retailers as requirements in sourcing products and what the role of governments might be.
Retailers view of own standard compared to government standards in %

60 50 40 30 20 10 0
The same as Slightly higher Signicantly higher

Food safety Environmental Animal welfare Labour
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agriCulTural PoliCy reForM: How To sTay onTHe reForM PaTH

in 1987 and 1992, oeCd agriculture ministers made a commitment to policy reform that would allow for a greater influence of market signals. The basis for reform was further developed in 1998, when it was agreed that the best policies to achieve shared policy objectives would be: transparent, having easily identifiable objectives, costs, benefits and beneficiaries; targeted to specific outcomes and as far as possible decoupled; tailored, to provide transfers only as necessary in order to achieve identified outcomes; and flexible and equitable. Progress has been uneven. while for some countries the issue today is how to move from decoupled to targeted policies, other countries have barely begun to decouple support. a move away from broad-based market interventions to policies that directly address economic, social and environmental objectives is a big step. staying on the path to better policies requires evidence-based actions at each stage of the policy cycle. 1. Formulate objectives: Make policy objectives explicit and quantifiable, andsequence them right
Policy objectives have evolved greatly in the past decade. While farm income is still a prominent issue, agricultural policies today explicitly address issues related to society at large, such as environmental quality, landscape, animal welfare and food safety. Despite the diversity of policy objectives, in general they relate to equity and income distribution, or to correcting market failures. Market failures should be addressed first, thus having an effect on incomes, and only then should the remaining income issues be tackled. Greater precision in formulating policy objectives allows for better targeted policies and helps to measure progress. For example, the relatively straightforward objective to achieve an acceptable level of farm household income is imprecise. A better approach would be to achieve within a given number of years average farm household income levels that are at least as high as the average in the national economy. OECD countries continues to be captured by the large producers.
Policy cycle
1. Formulate objectives
5. Evaluate/monitor
2. Check performance of current policies
4. Implement/enforce
3. De ne characteristics of new policies
Improving competitiveness: broad-based productivity improvements may be inconsistent with existing policies to maintain farming where it might not continue otherwise; long-standing government involvement in R&D is more justified. Objectives related to consumers: agricultural policies in OECD countries have been successful in assuring the provision of abundant, safe and high quality food, but generally, at prices above prevailing world market levels. Societal demands: markets may fail to provide non-commodity outputs, such as cultivated landscapes, and to limit negative externalities, such as environmental costs, but price support and unconditional income support are instruments that are not well-suited to address these issues, as shown by recent OECD studies.
2. Check performance of current policies: do current policies meet objectives?

It is essential to assess the degree to which existing policies achieve their objectives and identify their desired or undesired side-effects. OECD analyses such as those in Agricultural policy design and implementation suggest that policies which currently prevail in OECD countries are not always the most effective in achieving the stated policy objectives, as the following examples show. Farm income objectives: price support is inefficient in transferring income to farmers, distorts production, and may increase world price volatility. In addition, the majority of support in
3. define characteristics of new policies: decouple and target support, and look for market solutions
Once the policy objectives have been well established, there may be a need to look for alternative policies. Which features should these new policies have? Agricultural support
21
coupled to production is known to have many undesirable side-effects and a new policy set might want to minimise these by decoupling and targeting support, as well as through greater reliance on market solutions (see Box).
4. implement/enforce: Prepare the ground and design adjustment and compensation measures
Policy reform and adjustment may have adverse effects on some households, sectors, or regions. Moving towards targeted policies has distributional consequences, both in terms of income and wealth. This may justify designing accompanying adjustment policies and compensation packages that should be time limited and should not impede adjustment. The costs of these policies should not outweigh the potential benefits of the reform. Compensation should be fully portable, allowing the recipient (and the farm assets) to leave the sector. Adjustment and compensation measures could not only prepare the ground for reform, but also facilitate its implementation. For local public goods, both decision-making and financing should be devolved to regional or local bodies.
In any reform process, governments should take into account the potential of stakeholders to adjust. There is a natural tendency for those representing vested interests to exaggerate the costs for their constituents. But governments have often underestimated the dynamism of this sector and its capacity to adjust. They should ensure that any obstacles that might get in the way of the sectors own adjustment efforts be removed. These obstacles might relate to regulations affecting land use, transfers or sales, tax provisions, the availability of credit, or any other legal or institutional impediment to the adjustment process.
5. evaluate/monitor: Monitor and assess policies to ensure they are on the right track
The effectiveness of policies relative to their objectives, and their efficiency, need to be monitored. Implementation and evaluation of targeted policies is particularly demanding in terms of information. Information systems should be embedded in the policy design cycle from the start, so that information is generated at each step. Economic analysis can help to disentangle the effects of policy from other factors.
How to move to less distortive, less costly and more effective policies? Shift to decoupled support Policies that are more decoupled from production or prices interfere less with production decisions and markets. They are generally preferable to commodity programmes because they are economically more efficient. It should be clear though that any agricultural support has some impact on production and trade. Usually, the implementation of decoupled payments is linked to farm assets, such as land, with a fixed historical base. If, however, commodity production is required, or the payment is determined by current land use, instead of the historical base, policies become less decoupled. A problem associated with all area-based payments is that they tend to be capitalised into existing farm assets, making it more costly for new entrants to acquire agricultural assets and discouraging exit. If based on historical entitlements, decoupling can maintain any inequities associated with production-linked support rewarding larger farms more than smaller ones. and target policies better Decoupling is certainly not the end of the story. After agricultural support has been at least partially decoupled from production, additional gains can be reaped by directly targeting the specific objective and tailoring the amount of outlay to the problem at hand. An optimal policy response to a specific problem, which may be of a local nature or confined to a specific portion of the population, requires appropriate intervention with targets that are as close to the desired outcome as possible. Targeting reduces leakages compared to broad market interventions and also has the potential to increase economic efficiency. Targeted policies may lead to larger and more visible implementation costs. The challenge is to balance the economy-wide efficiency gains against the implementation costs associated with targeted and tailor-made policies. Implementation costs can be reduced by targeting variables and eligible recipients; use of information revealing mechanisms, such as auctions, in obtaining information about the private costs of compliance; or reliance on modern administrative techniques and technologies for managing information. Tap into the potential of non-agricultural policies and look for market solutions. Not all objectives can best be met by agricultural policies. Income objectives could be pursued also through general tax and social policies already in place. Problems of rural areas would be better addressed through multi-sector policies, embracing areas such as transport, education and training, while market-based mechanisms may be used to reward positive or penalise negative environmental externalities of agriculture.
22
agriCulTure PoliCies in oeCd and key eMerging eConoMies: keePing THe MoMenTuM oF reForM
oeCd and emerging economies have gradually reformed their agriculture policies over the past two decades. agricultural support levels in oeCd countries have declined and governments have shifted to more decoupled programmes, although progress differs across countries. key emerging economies have eliminated many policy distortions, but current low support levels disguise taxation of some sectors and protection of others. Much remains to be accomplished and the recent food price fluctuations and economic crisis may become a challenge for further policy reform. The oeCd continuously monitors these developments and evaluates progress in policy reform using its internationally comparable agricultural support indicators, published in the regular reports Agricultural Policies: Monitoring and Evaluation for both oeCd and key emerging economies.
Producer support estimate
OECD total PSE as % of gross farm receipts
40 35 30 25 20 15 10 5 0
19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08
PSEs as % of gross farm receipts, 2006-08 average

70 60 50 40 30 20 10 0
No rw ay Sw Kor ea itz er lan Ice d lan d Ja pa n EU 2 Tu 7 rk Ca ey na d Un Me a ite xic dS o ta A tes Ne ustr w ali Ze a ala nd OE CD Ch ile So Br * ut azi h A l* fri ca Ch * i Uk na* ra in Ru e* ss ia*
Most distorting support
Other support in the PSE
* 2005-07 average
oeCd governments have made a commitment to agricultural policy reform

Reforms have been driven by a shared understanding that domestic policy objectives need to be achieved more effectively, at a lesser cost and with fewer distortions to world markets (1998 Communiqu of OECD Agriculture Ministers). Undesired spillovers of OECD agriculture policies on world markets, in particular on developing countries, have marked the on-going round of multilateral trade negotiations and provided much of the impetus to advance agricultural policy reform across the OECD area. The level of support to farmers in OECD countries has declined. As measured by the Producer Support Estimate (PSE), policy transfers fell from 37% of farmers total receipts in 1986-88 on average to 23% in 2006-08. Nevertheless, the pace of reform has been relatively slow. In the most recent years, the reduction of support levels resulted more from high world prices than from explicit policy changes decided by governments.
Policies that interfere less with producer incentives gain importance

The ways in which support is provided have also changed. OECD governments are gradually shifting to support that is more decoupled from current production and which gives greater freedom to farmers in their production choices. Support is increasingly being tied to parameters other than commodity output, such as area or animal numbers, and with respect to noncurrent levels of these parameters. Some recent new programmes (e.g. US Direct Payments and the EUs Single Payment Scheme) go even further in that they do not oblige farmers to produce in order to receive the support. Support is becoming increasingly conditional. Producers, if they want to receive support, are now more often obliged to contribute to improvements in the environment, rural amenities, or better treatment of animals. In 2006-08, nearly one third of support to OECD farmers had some such conditions attached, whereas in 1986-88 this share was only 4%.
23
despite notable progress, policy distortions in the oeCd area remain large
In 2006-08, around 44% of total support transfers to producers (PSE) in OECD countries were provided in relatively less distortive forms, i.e. they were not based on production or nonconstrained use of inputs. 24% of transfers imposed no requirement for recipients to produce agricultural commodities. However, 56% of support in OECD countries continues to be provided in ways shown to create substantial distortions to producer incentives, and also least efficient in transferring income to producers.
Nevertheless, these aggregate low support levels disguise in many cases negative support to some sub-sectors and high protection to others.
The momentum for reform should be maintained

According to OECD analysis, in the long-run perspective, OECD and emerging economies have taken important steps towards less distortive policies. However, recent food price instability has revived protectionist pressures, which is being reinforced by the current economic crisis. Advancing towards less distorted agricultural policies should not be undermined, and the momentum for reform should be maintained by: 1. Continuing to reduce policy interventions in markets; for emerging economies this also means the elimination of policy disincentives to production where these still exist. 2. Development of the policy frameworks and instruments to facilitate farmers management of risks, as well as safety nets, in the context of increased levels of instability. 3. Changes in the delivery of support to farmers by decoupling support from production and targeting it to well-defined objectives, outcomes and constituencies. 4. For the emerging economies, a change in the delivery of support also involves focussing support to development and long-term growth, rather than interfering in prices received and paid by producers. 5. Emerging economies also face the difficult task of making agricultural growth inclusive for the rural poor, while also helping the poor reap economic opportunities outside agriculture.
in emerging economies, reforms in agriculture followed broader economic reforms

Emerging economies have also changed their agricultural policies, with the strongest impetus coming from their own broad economic reforms. These reforms often meant changes in the whole national development paradigm from import substitution industrialisation to free market. Economic liberalisation implemented in the 1990s in key emerging economies involved large privatisations, and deregulation of domestic markets, trade, and exchange rate regimes. Liberalisation of agricultural policies was largely a corollary of these broader reforms, with the result that much of the earlier policy distortions in the agricultural sector were eliminated. Sustained growth in the 2000s has strengthened agricultural prices and increased fiscal resources available to governments. The levels of agricultural support in emerging economies monitored by the OECD have tended to rise, but they remain far below those observed in the majority of OECD countries, varying from 4% of producer receipts in Chile to 14% in Russia.
Agricultural indicators (2006-2008 average)

Agriculture in % of Employment1 GDP1 3 3 2 2 2 5 6 6 1 4 3 7 4 13 5 7 1 3 1 4 9 25 1 1 6 18 4 12 11 41 5 10 3 9 7 17 Nominal Protection Coefficient2 1.00 1.11 1.15 2.14 1.87 2.44 1.05 1.01 1.97 1.83 1.21 1.03 1.03 1.01 1.04 1.10 1.05 1.04 PSE in % of gross farm receipts 6 18 27 58 49 61 13 1 62 60 21 10 6 4 9 14 6 10 Total support3 to agriculture in % of GDP 0.33 0.66 0.95 1.28 1.06 2.92 0.73 0.24 0.96 1.30 2.17 0.72 0.67 0.31 2.23 0.99 0.59 2.47
Australia Canada European Union Iceland Japan Korea Mexico New Zealand Norway Switzerland Turkey United States Brazil4 Chile 4 China4 Russia4 South Africa4 Ukraine4
24
1. Average of last three available years; 2. Ratio of domestic-to-border prices. 3. Includes PSE, financing for research, education, infrastructure and other general services to agriculture, and subsidies to consumers. 4. For Brazil, Chile, China, Russia, South Africa and Ukraine support indicators are the averages for 2005-2007.

THe FinanCial Crisis, THe reCession and THebeginnings oF reCovery: iMPliCaTions ForagriCulTure
The influence of macroeconomic factors on world agriculture has been profound over the last three years. The financial crisis, the severe economic recession and the emerging prospects for a sustained recovery transcend agriculture and geographical boundaries and are likely to require longer-term structural adjustments. Credit scarcity, contraction of demand and rising unemployment have impacted agricultural activities and regions, even though this sector is less affected than some others. economic downturn less severe for agriculture
The 2008 financial crisis broke out at a time when many nominal commodity prices had reached historical highs. As a result of a strong global supply response, prices of these products declined rapidly in 2008, a trend reinforced by the global economic downturn and the associated slowdown in demand and contraction in trade. The OECD Interim Economic Report for March 2009 concluded that the world economy was in the midst of its deepest and most synchronised recession in the post-war period. To a large extent, the impact of the economic crisis on specific sectors varied according to their exposure to tighter credit conditions and to falling demand. Agriculture in OECD countries is likely to have fared better than other sectors for a number of reasons. It has a relatively smaller financial exposure; demand is less sensitive to falls in income; the existing set of support policies cushioned the blow; and revenue had been accumulated during the recent period of high prices, despite important differences across subsectors and farms. The recovery that began in a number of nonOECD economies in 2009 has now spread to the OECD area (OECD Economic Outlook November 2009) and should be sustained this year and next. However, the slow recovery in consumer spending means that growth in the OECD area is likely to fluctuate around 1.9% in 2010, although growth is expected to rise to 2.5% in 2011. Demand for agricultural goods and trade is expected to mirror the performance of the global economy. The resulting changes in consumption are likely to be less for high-income consumers with a low income elasticity of demand for most agricultural products, than for lowincome consumers. The impact can also differ
Macroeconomic Indicators
Quarterly World Trade Growth (annualized) % 14 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 -14
n Ap r Ap r t Ap r Ju l Ju l t n Ap r Ju l n Ap r Ju l n Ju l Oc Oc n t t Oc Ja Oc Oc Ja
Monthly Consumer Price Growth (annualized) Consumer Condence Index (right scale) Index 102 101 100 99 98 97 96 95 94 -24
t Ap r n
Quarterly GDP Growth (annualized)
93 92
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Ja
Q1
Q2
Q3
Q4
Ja
Q1
Q2
Q3
Q4
Ja
Q1
Q2
Q3
Q4
Ja
Q1
Q2 Q3 2009
2004
2005
2006
2007
2008
Commodity Price Indexes (Jan 04 = 100)

Index 500
450 400 350 300 250 200 150 100 50 0 Meat Dairy Cereals Rice Crude Oil
Ju l
Ju l
Ja n
Ju l
Ja n
Ju l
Ja n
Ju l
Ja n
Ju l
Ja n
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Ja n
Oc
Oc
Oc
Oc
Oc
Ap
Ap
Ap
Ap
2004
2005
2006
2007
Ap
2008
significantly among the various agricultural commodities. Specific meat and dairy products which have a higher income elasticity may see more variation in demand. Agriculture may have fared relatively well in the recession, but it is not immune to economic contraction and slow recovery. The major impact will be in lower farm profitability as lower GDP dampens demand for agricultural products and prices. Agricultural households will also suffer from declining income derived from off-farm jobs as rising unemployment ripples through to rural economies. 25
Ap
2009
Oc
Food processing, distribution, export-oriented sectors, and vertically integrated cooperatives are likely to be more sensitive to any continuing credit scarcity
around 10%. Livestock producers are negatively affected by higher energy prices through the increase in crop prices that in turn raises feed costs.
oeCd agricultural outlook expects the recession to impact livestock sectors the most
The 2009-2018 Agricultural Outlook analyses the effect of lower incomes leading to a slower recovery of agricultural prices, production and consumption. The impact, in general, is likely to be moderate if economic recovery gets underway quickly as seems to be the case. Livestock producers are expected to face greater impacts than crop producers from demand adjustments and these will also be greater in developing countries than in the OECD area. Demand and prices for livestock products, such as beef, butter and cheese, will be the most seriously affected. Among cereals, the Outlook finds maize prices to be the most responsive to changes in GDP growth, reflecting its primary use as a feed ingredient.
Tight credit availability impacting parts of agri-food sector

A broader examination of issues arising from the financial crisis based on a small survey of enterprises suggests that the agri-food sector has weathered the recession fairly well. However, downstream sectors have initially experienced difficulties in gaining access to credit. Trade finance constraints have a significant impact on firms dependent on lines of credit for their businesses and should tight credit markets persist, the viability of such firms could be in peril. Access to credit is viewed as the key issue, particularly by smaller agrifood firms in both OECD and non-OECD countries. For policy makers, as the crisis abates and recovery spreads, it may be time to reflect on: 1. What further structural reforms would make agriculture more resilient in the face of economic downturn and shocks. 2. The need to resist protectionist measures and maintain open agricultural markets to facilitate recovery. 3. How to ensure that financial resources remain available to viable agrifood enterprises and for trade facilitation. 4. How to facilitate the adaption of agriculture to structural changes in the evolving credit and financial market environment. 5. The implications for the sector of upcoming prolonged fiscal consolidation.
and examines closer links to oil prices

Linkages between crop and energy prices are now stronger. The crude oil and energy markets have long influenced the supply side of crop production by their direct effect on the price of fertiliser, pesticides and other chemicals, transportation, and processing costs. However, the demand side is now also linked to a certain extent. The emergence of biofuel sectors based on agricultural feedstocks, particularly in the important crop production and exporting markets of OECD countries, has generated a more dynamic link to crude oil markets, particularly for grains, oilseeds and sugar, but also indirectly to other crops competing for land. The return to high oil prices of around USD 100 per barrel would raise crop prices by an additional 20% to 30% and livestock prices by
Negative GDP growth in 2009, recovery has already begun

10 8 6 4 2 0 -2 -4 -6 -8 -10 2008 2009 2010 2011
Expected prices in 2009-10 vary depending on the scenario

50 40 30 Per cent 20 10 0 -10 -20 Slow recovery High Oil Price Depreciation USD
Per cent
26
Australia
EU-13
Japan
USA
OECD
Brazil
China
India
Russia
Wheat
Maize Oilseeds
Raw sugar
Beef
Poultry
Butter
Cheese Ethanol

MarkeTs, PriCes and Food seCuriTy: wHaT will THeFuTure bring?
The sharp rise in most commodity prices in 2007-08, combined with high levels of poverty and growing populations have highlighted concerns about food security. Commodity prices have come down from their 2007-08 record highs, but prices are expected to strengthen with economic recovery. according to the OECD-FAO Agricultural Outlook to 2018, for the next ten years prices in real terms are still projected at, or above, the levels of the decade prior to the 2007-08 peaks. The issue of food security will remain high on the international political agenda. a successful remedy will require greater investment in agriculture and measures aimed at poverty reduction.
Prices in real terms to fall from peaks: but to remain above 1997-2006 average
Per cent change relative to 1997-2006 average
160 140 120 100 Average 2007-2008 Average 2009-2018
Highest growth in exports expected in developing countries

Export growth from 2006-08 average to 2018 (%)
60 50
OECD
Non-OECD
World
Per cent
he at s ce lse ed s ar ) ic ) ter oil r l
80 60 40 20 0 -20
40 30 20 10 0
-10
at ain s s r y t
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m ea
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Bu t
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gr
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ac
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Cr u
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Pig
Main market developments

The dramatic increase in international agricultural commodity prices was followed by a rapid decline driven by increased production responding to earlier price rises, and by weaker demand intensified by the start of the global economic crisis. Continued weakness in the general economy will restrain commodity prices over the next 1 to 2 years, which should then strengthen with economic recovery. The situation varies by commodity, but average prices in real terms (adjusted for inflation) for the next ten years are still projected at or above the levels of the decade prior to the 2007-08 peaks. Average crop prices are expected to be 10-20% higher in real terms, while for vegetable oils, real prices are expected to be more than 30% higher. Meat prices in real terms are not expected to surpass the 1997-2006 average, while reduced consumer incomes at the beginning of the projection period will tend to encourage substitution to cheaper meats, favouring poultry over beef. Average dairy prices in real terms are likely to be slightly higher to 2018, notably for butter, due to rising energy and vegetable oil prices.
Sk
im
Worldwide production of vegetable oils is expected to be more than 40% greater in 2018 than the 2006-08 average, while that of oilseeds, oilmeals, poultry, butter and whole milk powder is expected to be more than 30% higher. Other than wheat and coarse grains, the OECDFAO Outlook foresees agricultural commodity production increasingly shifting away from developed countries towards developing regions, especially emerging and middle income countries. This shift is particularly pronounced for meat and dairy products.
growth in consumption and trade

Growth of consumption of agricultural products is also expected to be centered in the developing world, driven by growing populations and rising incomes, and also urbanisation and trends towards western diets high in animal protein. Oilmeal use (for animal feed) in developing countries will be almost 60% greater in 2018 than the 2006-08 average, while consumption of butter and poultry will be some 50% greater and that of vegetable oils about 40% more. Changing global production and consumption will underpin the anticipated growth in trade, which will also bridge the gap between the rising appetite for increased product variety and
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ain
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27
the ability of local producers to deliver these in terms of quantity, quality and price. For almost all commodities, projected growth in imports and exports of developing countries exceeds that of the OECD area. Continued expansion of South-South trade is a key feature of the Outlook. Nevertheless, OECD countries will still dominate exports of wheat, coarse grains and all dairy products.
Food price contribution to inflation

While commodity prices have fallen dramatically food prices have remained high in many countries. The weight of the food component in the Consumer Price Index CPI varies significantly across countries. In high income countries, this share ranges from 10% to 20% but in low and middle income countries it is substantially higher, often in the 40-60% range. As seen in the figure below, the food price contribution to overall inflation even in times of rising food prices remains relatively limited in OECD countries, but is quite significant in lower income countries such as Kenya, India and Brazil.
increased price fluctuations

Over the medium term, expected low levels of stocks imply that any supply or demand shock would have greater impact than in the past. In thin markets (low volumes, few actors), policy decisions (such as export restrictions) can severely reduce global supplies and drive up prices. Agricultural commodity prices are also being increasingly integrated into global financial markets and could be potentially subject to speculation activities. Moreover, there have always been important links between energy and agricultural prices. The emergence of the biofuel sectors has now forged a more dynamic link to crude oil markets, particularly for crops.
Food security
In terms of the capacity to increase production, there is substantial additional land available for use in agriculture, but bringing more marginal land into production can involve considerable investment and lower yields, while possibly incurring increased social and environmental costs. The potential for future improvements in agricultural productivity, particularly in developing countries, is high, but it requires continued investment in research, extension and infrastructure. In summary, the recent episode of high food prices refocused attention on agricultural production and markets. Challenges and critical factors for policy makers include: 1. Keep markets open and improve price transmission to local producers (from international markets but also along the food supply chain). 2. Address the need for continued investment in agricultural research, extension and infrastructure. 3. Improve agricultural support, energy and water use policies to ensure that policy actions are best suited to policy goals and contribute to an efficient use of resources. 4. Support good risk management policies enabling farmers to deal with future increased price volatility.
Food contribution to % change in CPI
25 20 15 Per cent 10 5 0 `08 `09 `08 `09 India `08 `09 Brazil `08 `09 `08 `09 `08 `09 -5 Kenya France Japan United States CPI % change Food contribution to % change in CPI
expansion of biofuels
Biofuel markets depend to a large extent on government mandated use and other support measures. A projected rapid expansion of biofuel production to meet mandated use would continue to put upward pressure on prices for feedstocks such as wheat, maize, oilseeds and sugar. However, uncertainty remains due to possible changes in policy interventions and other unpredictable factors like crude oil prices and developments in second-generation technology. Brazil will continue to be the market leader. Growth in domestic fuel ethanol use is driven mainly by the expanding fleet of flex-fuel vehicles (expected to account for almost twothirds of the spark-ignition fleet in Brazil by 2018). Increased exports will maintain Brazils position as the worlds largest supplier, with net exports reaching almost 12 billion litres by 2018, or 90% of global ethanol exports.
Brazil ethanol market projections
60 Production 50 Billion of litres 40 30 20 10 Total use Net trade
28
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
reFerenCes To oeCd PubliCaTions and websiTes

The Background Notes are based on a wide range of OECD data, analyses and policy documents. The main sources for each Note are given below. In addition to the references presented here, books, working papers, statistics and glossaries related to agriculture can be found in the OECDiLibrary www.oecdilibrary.org/agriculture. More details of OECD work on agricultural policies, agricultural trade, sustainable agriculture, biosafety and pesticides, as well as fisheries, can be found at www.oecd.org/agriculture.

1. Water resources and agriculture: outlook and policy issues www.oecd.org/water and www.oecd.org/tad/env OECD (2009 forthcoming), Sustainable management of water resources in agriculture OECD (2009), Managing water for all: an OECD perspective on pricing and financing OECD (2008), Environmental performance agriculture in OECD countries since 1990 of
5. Risk management systems for agriculture: the role of government www.oecd.org/agriculture/policies/risk OECD (2009), Managing Risk in agriculture: a holistic approach 6. Smallholder adjustment in emerging economies: getting the policy mix right Cervantes-Godoy, D. and J. Brooks (2008): Smallholder Adjustment in Middle-Income Countries: Issues and Policy Responses, OECD Food, Agriculture and Fisheries Working Papers, No. 12.
OECD (2008), OECD Environmental Outlook to 2030. 2. Agricultures environmental performance: what role for agri-environmental policy? www.oecd.org\tad\env\indicators OECD (2008), Environmental Agriculture at a Glance Performance of

7. Liberalising trade in food and agriculture what is the best way forward? OECD (2009), Ongoing consideration of regional trade agreements: main issues and possible further work OECD (2008), Globalisation and emerging economies: Brazil, Russia, India, Indonesia, China and South Africa Liapis, Peter S. (2007), Preferential trade agreements: how much do they benefit developing economies? OECD (2006), Agricultural policy and trade reform: potential effects at global, national and household levels 8. The challenge of non-tariff measures in food and agricultural trade OECD (2009), Report on trade and trade policy implications of different policy responses to societal concerns OECD (2008), Interaction of public and private standards in the food chain
OECD (2009), Agricultural Policies in OECD Countries: Monitoring and Evaluation, Chapter 2. 3. Agriculture and Climate Change: Impacts, Mitigation and Adaptation OECD (2009): Climate change and agriculture: impacts, adaptation, mitigation and options for the OECD [COM/TAD/CA/ENV/EPOC(2009)13] Note: Access to this document requires an OLIS account. http://olisweb.oecd.org/

4. Farming, farm families and the rural economy OECD (2008), Farmland Conversion: The Spatial Dimension of Agricultural and Land Use Policies OECD (2009), Methods to monitor and evaluate the impacts of agricultural policies on rural development. OECD (2009), The role of agriculture and farm household diversification in the rural economy: Evidence and initial policy implications OECD (2010), Agricultural Policies and Rural development A synthesis of recent OECD Work www.oecd.org/agriculture/policies/rural

9. Agricultural policy reform how to stay on the reform path www.oecd.org/agriculture/decoupling OECD (2008), Agricultural policy implementation design and 29
OECD (2006), Decoupling: policy implications
10. Agricultural policies in OECD and key emerging economies: keeping the momentum of reform www.oecd.org/tad/support/psecse OECD (2009), Agricultural policies in OECD countries: monitoring and evaluation OECD (2009), Agricultural policies in emerging economies: monitoring and evaluation
The Medium and longer Term outlook for agriculture

11. Financial crisis and recession: implications for agriculture OECD (2008), OECD Economic Outlook, Volume 2008/2, no 84. December. OECD (2009), OECD Economic Outlook Interim report, March. OECD (2009), Agricultural Policies in OECD Countries: Monitoring and Evaluation, Chapter 1 OECD (2009), OECD-FAO Agricultural Outlook 2009-2018, www.agri-outlook.org 12. Markets, prices and food security: What will the future bring? www.agri-outlook.org OECD (2009), OECD-FAO Agricultural Outlook 2009-2018, OECD (2008), Biofuel support policies: an economic assessment
30
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 PRINTED IN FRANCE (00 2010 01 1 P) No. 89545 2010
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Food and Agriculture

Current Themes and Results

Policy and adjustment

Trade and agriculture

reforming agriculture Policy

The Medium and longer-Term outlook for agriculture

References to OECD Publications and Websites ......................................................................................... 29

Photo credit: Cover illustrations, www.photo-libre.fr.

agricultures Physical environment

waTer resourCes in agriCulTure: ouTlook and PoliCy issues

Share of agriculture in total water withdrawals

Manufacturing Electricity Domestic Agriculture

Water use (km3)

water projections to 2050

Climate change, agriculture and water

water and agricultural support policies

More information is available at www.oecd.org/agriculture

agricultures Physical environment

agriCulTures environMenTal PerForManCe: wHaT role For agri-environMenTal PoliCy

Importance of the policy measures adressing environmental issues in agriculture

Methods and indicators

Change in irrigated area percentage change 1990-92 / 2002-04

More information is available at www.oecd.org/agriculture

agricultures Physical environment

agriCulTure and CliMaTe CHange: iMPaCTs, MiTigaTion and adaPTaTion

More information is available at www.oecd.org/agriculture

Policy and adjustment

FarMing, FarM FaMilies and THe rural eConoMy

Regional spread in the share of agriculture in rural employment

OECD urban regions, 2005

a multiple role for agriculture in the rural economy

Farm household diversification

Diversification of income sources among farm households

How can farm and rural policies reflect these realities?

More information is available at www.oecd.org/agriculture

Policy and adjustment

How Can PoliCy underPin FarMers risk ManageMenT sTraTegies?

risk related policies in oeCd countries

Risk layers and the potential role of government

oeCds holistic approach to risk management

Wheat prices: level and volatility 1908-2009

Annualized volatility in % (monthly data)

Price level (USD/t.)

USD/t. 300 250 200 150 100

More information is available at www.oecd.org/agriculture

Policy and adjustment

sMallHolder adJusTMenT: geTTing THe PoliCy MiX rigHT

Canada Australia Netherlands Belgium

agriculture in the overall economy

Land policies and property rights

More information is available at www.oecd.org/agriculture

Trade and agriculture

Preference and preference erosion

Value of preferential margins to developing countries

Mauritius, Guyana, Fiji, Swaziland

Mauritius USD158 Million 21% of ACP rent

of which sugar 99%

More information is available at www.oecd.org/agriculture

Trade and agriculture

Distribution of number of different NTMs by number of affected products

10.5 6.29 18.4 19.62 45.18

Number of different NTMs

rationale behind nTMs