The Hindu Business Line : Huge Govt support still distorting farm trade: OECD

INCREASED decoupling of output from support to agriculture agreed to by the European Union ministers last year as part of reform to the Common Agricultural Policy (CAP) should reduce distortions to the international trade in agricultural commodities and held boost farm incomes, the OECD has noted.

Releasing report of a study containing the latest analysis of the EU agriculture reforms, the OECD said that the evaluation suggested only a modest fall in production of the main commodities covered by the reform in the EU, although net exports were expected to decline more sharply.

"The reform is expected to favour a more extensive use of land and a growth in pastures", the reported pointed out. Agriculture policy reforms agreed to by the EU ministers are an important step towards the "decoupling" of support to farmers so that the payments they receive are less dependent on what they produce. But the matter of concern is the revelation in the report that the CAP reform makes no significant cut in the overall level of support to the EU farmers nor does it open up the EU markets to the non-European producers.

In addition, because payments will still largely be linked to farm size, support will continue to favour richer farmers with most land, the OECD said.

Interestingly, the Government support to farmers across the OECD membership comprising 30 countries was 229 billion euros in 2003, accounting for 32 per cent of farm income.

This represented a slight rise from the 31 per cent recorded in 2002, but is down from the average of 37 per cent of farm income of the 1986-1988 period.

Although the level of farm support varies considerably between countries, the report critically highlighted the continuing widespread reliance on the State support linked principally to production and prices.

Another report (OECD Agricultural Outlook 2004-2013) that examines price, output and demand over a ten-year timeframe has forecast that growth in trade and increase in world prices will be moderated by an increase in global production of cereals, meat, cheese, sugar and vegetable oils.

Production is expected to outpace consumption. Specifically, world grain output is forecast to grow by 17 per cent by 2013, while growth in oilseeds output is expected to slow due mainly to some slackening in the pace of Brazil's output.

The report envisages overall consumption of agricultural produce to grow fastest in South America and Asia.