2017: A Year of Foreign Ag Subsidies

Farm Policy Facts - https://www.farmpolicyfacts.org/2018/01/2017-year-foreign-ag-subsidies

Foreign Ag SubsidiesAccording to the Chinese zodiac calendar, 2017 was the year of the “fire rooster,” which is also associated with the elements of gold and earth.  It was fitting considering all the foreign farm subsidies that were doled out.

From South America to Asia, foreign nations doubled-down on subsidies and market manipulation in 2017 to give their agriculture sectors a huge leg up on the competition.

Take China, for example.  The Chinese government announced the most ironic subsidy of the year in June, which was neatly summed up by Reuters:

China will spend almost twice as much this year on subsidies to encourage farmers in the northeast to reduce corn plantings as it intensifies its push to rebalance grain stocks.

The country will issue 2.56 billion yuan ($374.95 million) in funds [on top of other handouts] to pay farmers subsidies to rotate their corn plantings with other crops every other year as well as to leave some land fallow…

China started giving out the subsidies last year under an overhaul of its grains policy under which it had paid farmers artificially high prices for their corn.

That policy left it with a stockpile of 250 million tonnes of corn, more than one year’s worth of consumption.

In other words, China issued big subsidies to fix surplus problems created by China’s big subsidies.

How big?  Well, according to a complaint leveled by the U.S. against China in the World Trade Organization, in a single year, China over-subsidized just three crops by as much as $100 billion.  Put in perspective, it would take the entirety of U.S. farm policy about 8 years to rack up a tab equal to a single year’s illegal, excess spending by China.

And China wasn’t alone.

At the end of November, Brazil kicked off a new ethanol program designed to increase ethanol demand and boost domestic sugar prices.  Thailand continued to wrestle with the fallout of a failed scheme to corner the global rice market.  And India waived billions in farm debt, increased tariffs, and announced a slew of other programs to aid its country’s agriculture sector – goodies that are continuing with new subsidy announcements in 2018.

Given the importance of agriculture to the security and economies of most nations, some level of safety net is inevitable.  But, wretchedly excessive subsidies distort the global marketplace in which U.S. farmers and ranchers – who rank near the bottom among nations in terms of domestic support or protections – must compete.

In fact, the Organization for Economic Co-operation and Development (OECD), which tracks global subsidization in 52 countries, reports subsidies totaled $519 billion a year between 2014 and 2016.

And while many nations are ramping up spending, OECD noted in its 2017 update, “The level of support provided to agricultural producers in the United States has been consistently below the OECD average and shows a declining trend over time.”

As the United States has reformed its farm policies to be market oriented and to focus on risk management tools like crop insurance, OECD found that total U.S. support has declined from 21% of gross farm receipts (GFR) in the mid ‘80s to just 9% today.

That’s certainly food for thought as the U.S. Congress writes a new Farm Bill in 2018 and charts a course for America’s agricultural policies in a world market awash in foreign subsidization.

Will lawmakers deliver this year and keep U.S. farm policy strong?  It looks hopeful.  Remember, 2018 is the year of the “Dog,” which according to Chinese astrology, is associated with being communicative, serious, and responsible in work.