Producer Support Estimate Research Articles

Producer Support Estimate Effects in Terms of Commodity Production – An Empirical Investigation

The agriculture sector has steadily enjoyed government support for a relatively long period, especially in developed economies. Considerations relate to strategic behavior of countries’ leadership, in that ensuring food security is essential to avoid dependence on other countries for food supply. However, recent decades’ objectives have been focused on farmers’ income stability as well as on the environmental impacts of agriculture. While there is a consensus on the depressing effects on consumers’ and taxpayers’ welfare, the discussions on the public policy impacts on the agricultural outcome are of a wider range. Empirical studies at the farm level doubt the positive effect of farm support on their technical efficiency. This paper provides an analysis of the role of Producer Support Estimate (PSE) as a source of assistance on a commodity basis in a group of OECD and other big agricultural traders. With a special focus on the Producer Single Commodity Transfer (PSCT) effect on the countries’ commodity production levels, the general finding is that the government intervention in specific commodities investigated here may not be efficient.

Quantitative Measurement of Agricultural Support in Ghana using Pse (Producer Support Estimate) Indicator

Averagely, agriculture accounted for 19.3% of the total GDP accrued to Ghana’s economy, and provided employment for 32.49% of the total population within the period 2015 – 2019. Agricultural land in general occupies the greater percentage of entire land area in Ghana (65.14%). Almost half of the total population (44.61%) in Ghana lives in the rural areas and majority of which are engaged in agriculture. The aim of this paper is to measure the level of government support to farmers’ income in Ghana, using the Producer Support Estimate (PSE) approach. Specifically, Single Commodity Transfers (SCT) and expression of % SCT for individual commodities, which account for about 70% of the total value of agricultural production in Ghana was used. Inasmuch as important data on market price and budgetary support to Ghana’s agriculture in the period 2015 – 2019 were still not inserted in the OECD database, data on market price were sourced from World Bank and FAOSTAT for the analysis. On the other hand, data on budgetary support to Ghana’s agriculture for 2015 – 2019 were not in existence. Inadequate literature on policy support to Ghana’s agriculture and lack of data on budgetary support to Ghana’s agriculture was a limitation and therefore limits the scope of this research. The study revealed that producers of agricultural commodities such as cocoa, maize and coffee received positive market price support, only with the exception of rice which received negative market price support in the period 2015 – 2019. The %SCT for cocoa, maize, rice and coffee were 57.83%, 37.73, -72.28 and 29.79 respectively. It is recommended that the government of Ghana would intensify production to secure enough food for its population and provide jobs initiative as a policy support to provide sustainable incentives for producers of agricultural commodities in the country. This refers especially to rice, since it was the most deprived with significant market price support during the period of the study.

Agricultural policy development in Moldova over one decade: recent estimates and an outlook towards EU accession

Public support for the agricultural sector of Moldova represents an essential priority of the bodies entitled to the development and implementation of public policies in the field of agriculture. Given the accelerated attempts to join the European Union, an alignment of the Moldovan agricultural policy to the EU’s Common Agricultural Policy (CAP) and broader EU green infrastructure with Green Deal and Farm to Fork, are receiving an increasing attention. In order to support the policy makers and the experts with input for the EU legal approximation and future EU accession negotiations, this article presents recent estimates of public support for the agricultural sector of the Moldova using the OECD methodology. More specifically, the Producer Support Estimate (PSE) results are presented for eleven products covering the period 2007-2018. Despite increasing budgetary support of agricultural producers from the Government of Moldova, PSE for most commodities is negative. Given the relatively low relevance of trade interventions, the calculated price differentials hint at non-policy-related barriers to price transmission between the border and the farm gate. Potential reasons are discussed, and policy recommendations are developed. Furthermore, the structure of public policies for agriculture and rural areas, approximated by the General Services Support Estimate (GSSE), are presented. The comparison with the current CAP reveals that the structure of instruments differs substantially. Funding for the current Moldovan agricultural policy is heavily concentrated on investment support and the inspection and control system. Although the CAP might be further reformed until Moldova joins the EU, environmental and rural development policy objectives will remain paramount within the EU, and the relevant ministries should start to develop suitable joint strategies.

DESIGNING THE STRUCTURAL CONCEPT OF ESTIMATING THE INTERNATIONAL POSITION OF UKRAINE IN THE WORLD CONTEXT OF STATE FINANCIAL AND ECONOMIC SUPPORT TO THE AGRICULTURAL SECTOR

The article studies the problems of state financial and economic support to the agricultural sector in the world context and substantiates the structural concept of assessing the international position of Ukraine. It is confirmed that there is a connection between the annual values of indicators of total state support for the agricultural sector, support for producers and support for consumers and the international rating position of Ukraine. In the world context the ratings of countries are calculated on indicators of state financial and economic support to the agricultural sector: total estimate of support for the agricultural sector (TSE); producer support estimate (PSE) consumer support estimate (CSE); general service support estimate (GSSE). The international position of Ukraine in terms of ratings is determined, which is radically lower compared to the overall indicator of OECD member states and EU member states. It was confirmed that the dynamics of the ratings of Ukraine in the world context is insignificant, the variability is determined at the level of the 22nd – 24th place in terms of indicators of total estimate of support for the agricultural sector, estimate of support for producers and estimate of consumer support. The dynamics of the decrease in the gap of annual indicators of support for producers and consumers of the agricultural sector in Ukraine since 2018 has been determined. The best position of Ukraine in the international rating is confirmed by the indicator of estimate of general support for services. The analysis was the basis for designing the structural concept of estimating the international position of Ukraine in terms of state support trends for the financial and economic mechanism of state regulation of the development of the agricultural sector, the advantages of which are: determining the position of Ukraine in the world context in terms of state support trends for the agricultural sector; establishment of the level of connection of annual values of indicators of state financial and economic support to the agricultural sector; forming a comparative characteristic of the position of Ukraine to the overall indicator of the EU member states. The calculations confirmed the need to review the directions of state support for the mechanisms of state regulation of sustainable development of the agricultural sector for adaptation to European practices. It was established that within the framework of the implementation of state policy in terms of the development of support measures in the EU countries, seven categories of measures were introduced, among them: sector-wide and institutional measures; information and coordination measures; trade and commodity flow measures; labor measures; support for agriculture and food; general support; food aid and consumer support. It is determined that in the EU countries, the impact of economic cuts on food spending was mitigated thanks to government support, which partially compensated the loss of income, and the reduction in total income led to the maximum direction of food spending. The implementation of this approach confirmed the hypothesis that government support ensured the sustainability of food systems.

Review and analysis of agricultural support policies in OECD countries (1995-2015)

Supporting the agricultural sector is a topic that has been discussed for many years in the world and has been the governments’ focus more than other economic sectors for many reasons, such as the nature of the agricultural sector, higher risk than other sectors, food security and nutrition and so on. Accordingly, the support of agricultural sector by different countries has varied depending on its importance in different countries of the world. The present study reviews and analyzes important policy changes, assessments, and recommendations in the context of the research in order to evaluate agricultural support policies in the member countries of the Organization for Economic Co-operation and Development (OECD), including Turkey, Korea and Japan. In this study, the latest agricultural policies in OECD countries are examined through measuring the parameters of agricultural support policies and using library studies. According to the studies, the OECD uses indicators such as Producer Support Estimate (PSE), Market Price Support (MPS), Producer Nominal Protection Coefficient (Producer NPC), Producer Nominal Assistance Coefficient (NACP), Consumer Support Estimate (CSE), General Services Support Estimate (GSSE), Total Support Estimate (TSE), and other related indicators to measure and classify the agricultural support based on a comprehensive system.

The role of subsidies in stabilising farm income: Evidence from Estonia

This study examines the role of agricultural subsidies in the farm income (FI) variation in Estonia in the period 2006–2019 using data from a balanced panel of Farm Accountancy Data Network (FADN) farms. FI variability is decomposed to three components: market income, total subsidies, and the cost of external factors. The results reveal that subsidies have a larger share in income of smaller farms. Variability of FI differs in farm size quartiles and is significantly lower in case of largest 25% of farms. Revenues are the largest source of variation of FI. While subsidies reduce FI variation, there is no evidence that they are counter-cyclical. We argue that in addition to subsidies, smaller farms need advice on farm management to increase market income, improve its stability, and expand farm size, as larger farms have more stable incomes despite relatively lower producer support estimate (PSE) levels.

Agriculture trade policy measures and geopolitics in major regional trading blocs: Policy advocacy

AbstractTrading blocs are usually groups of countries in specific regions that manage and endorse trade activities. The present status of agricultural support, tariff, and non‐tariff measures of WTO members has critical issues for debate on trade policy. The study is a quantitative analysis and framework of geopolitical effects of WTO measures on the most significant regional trading blocs and global agriculture. The study found that the Association of Southeast Asian Nations (ASEAN) trading blocs were highly supporting the agricultural sector followed by South Asian Free Trade Area in terms of total support estimates, whereas reverse trends in terms of producer support estimates. North American Free Trade Agreement imposed the highest number of sanitary and phytosanitary measures, technical barriers to trade, anti‐dumping, countervailing, and special safeguards. However, ASEAN trading bloc imposed more number of safeguards and quantitative restrictions. European Free Trade Area and Common Market of the South, South American Regional Economic Organization trading blocs imposed higher tariff rate quotas and export subsidies, respectively. India gave more price advantage to domestic goods. The United States and the European Union imposed higher tariffs on both agriculture and non‐agriculture sectors. Globally, most of the countries' Agricultural Orientation Index (AOI) has less than unity indicating not giving priority to agriculture in budget allocation except for South Korea and Switzerland. These findings will have significant impact on world trade negotiations, world trading rules, designing WTO agreements or policies or programs, multilateral agreements.

Agricultural Support in OECD-Reported Countries from 2000 to 2019

Agricultural support is one of the main tools used by governments to achieve their domestic goals, especially since the food shortages during and immediately after World War II. However, specific agricultural support programs can affect agricultural production in various ways, and support programs can alter the allocation of natural resources domestically and abroad. In this study, we measured agricultural support in OECD-reported countries during the period 2000-2019 using Spearman´s correlation coefficient, time trend analysis and clustering procedures. Data from Organization for Economic Co-operation and Development (OECD) from 2000 to 2019 were employed, specifically the Producer Support Estimate (PSE) and Consumer Support Estimate (CSE). We compared the results of two agglomerative clustering methods and identified groups of similar countries on the basis of their consumer support and producer support estimates behavior during the period studied. Some countries, such as Switzerland, South Korea, Turkey and Canada, displayed specific support behavior, while other groups of countries shared similarities such as China, Indonesia and the Philippines; the European Union, Japan and Norway; and Brazil, South Africa and Chile. Policies implications are discussed and further research is recommended, including analyses of top-down geographical unities, crop-specific programs, and the effects of the COVID-19 pandemic on agricultural support worldwide, as more data becomes available.

Impact of agricultural supports on competitiveness of agricultural products

The agricultural sector is being supported in Turkey, as well as in the world. The issue of competitiveness is observed in agriculture, despite supports. This study aims at investigating the impact of agricultural supports in Turkey on competitiveness of agricultural products. Vector autoregression (VAR) model has been adopted in the study. The internal terms of trade (TOT), percentage producer support estimate (PSE), and the producer nominal protection coefficient (NPC) variables have been included in the model. The internal terms of trade in Turkey have developed over time against the benefit of agricultural sector. PSE has had a significant impact on TOT. Therefore, the use of PSE as a political variable has been concluded as a significant. Means of support must be discussed in Turkey more than the amount of supports. In particular, supports that will provide farmers with competitive advantage and boost up product farmyard prices will be more efficient and beneficial for farmers.

Agriculture trade restrictiveness in Canada: How important are the cross effects?

AbstractA trade restrictiveness index (TRI) aggregates an entire protection structure into a single uniform measure that is consistent with trade theory and reflects the extent of policy interventions on trade or welfare. Although there are several variants of a TRI, all approaches aggregate protective measures using weights that depend on import demand and export supply elasticities; some studies ignore cross‐price effects while others account for them. This study measures the degree of bias introduced by ignoring cross effects. It provides a practical approach to account for demand‐ and supply‐side cross‐price effects in a multi‐commodity TRI setting. This approach is illustrated with a case study of distortions in the Canadian crop and livestock sector. Domestic demand and supply cross effects are approximated using a “constant differences of elasticities of substitution” functional form. On average, over the period 1996–2016, we find that cross‐price effects do make a difference, and that including them makes the TRI 27% higher than an approach which ignores them. Furthermore, both TRI approaches produce indices that are higher and more variable than the OECD's percentage Producer Support Estimate (PSE) that measures policy transfers as a share of gross farm receipts. The fundamental differences between a TRI and PSE% is driven by market price support for milk.

Measuring the Trade Restrictiveness of Domestic Support using the EU Common Agricultural Policy as an Example

AbstractWe develop an index that measures the overall trade effects of domestic support payments. Our index is based on the Mercantilist Trade Restrictiveness Index (MTRI) and is capable of analysing the development of the trade restrictiveness of domestic support payments over time and across countries. It facilitates the evaluation of agricultural policy reforms introducing changes in the composition of domestic support payments. We conduct this analysis with a computable general equilibrium model that is extended to depict detailed agricultural policies using the Common Agricultural Policy of the European Union (EU) as an example. For the representation of agricultural policies, we updated the underlying database by incorporating detailed EU domestic support payments taken from the OECD Producer Support Estimate (PSE) tables and reconcile PSE data with the WTO classification scheme. Our index confirms a decrease in trade distortion stemming from the implementation of decoupled support in the EU. In addition, the trade‐equivalent protection rate shows that the trade restrictiveness of domestic support payments depends on the assumptions made with regard to the degree of decoupling of those payments.

Domestic Support Measures for Olive Farmers: Case of the Municipalities of Birine and Benhar Wilaya of Djelfa

The Olive Producer Support Estimate Approach in two communes of Djelfa has been applied to explain the economic parameters favoring the state of Internal Support Measures (ISM). Following a 4-month survey involving 150 individuals, the SPSS model processed the data by calculating the Market Price Support (MPS), the Nominal Support Coefficient (NSC) and the NPC (Nominal Protection Coefficient). The distribution of MSI in favor of these producers was mainly favored by one of the factors of production, the agricultural area, which spread rapidly to the detriment of productivity. The total SPM (96324438457 DA) (100 DA, Algerian Dinar = 1.16 Euro) and the NSC were strongly correlated with it, which showed that there is a strong effect of the area on the distribution of the ISM. For yield, there was a significant negative relationship with the NPC (-223.2 to -1.80). The only payments for acreage could not encourage intensification or increase in productivity will be the best precept to be observed by policy makers.

Serbian Agriculture Policy: Economic Analysis Using the PSE Approach

The purpose of the research is to identify the level of Government support to farmers’ income in the Republic of Serbia. This support is based on market measures and budgetary transfers directed towards producers. As budgetary transfers are defined in the agricultural policy, by applying the producer support estimate (PSE) methodology, it is indirectly evaluated whether agricultural policies have a positive or negative impact on farmers’ income and their economic status and the economic sustainability of farms. Producers of more significant agricultural commodities covered by the analysis in the period between 2012 and 2016 did not get any significant support from the state. Namely, most of the analyzed commodities had negative values of single commodity transfer (SCT) indicators, which means that agricultural producers received more taxes than incentives. In addition to the modest budgetary transfers, variations in their forms further negatively affect producers’ income. Low share of budgetary transfers in the support structure to farmers leads to the conclusion that the support to farmers’ income through higher prices on the domestic market is paid by consumers.

Оценка эффективности государственной поддержки сельского хозяйства: методика ОЭСР и предложения по ее совершенствованию

Существенный вклад в развитие аграрного сектора России может внести государственная поддержка сельскохозяйственных предприятий. На развитие данного сектора экономики государством были направлены субсидии в размере 164 млрд руб. Представлен сравнительный анализ государственной поддержки сельскохозяйственного сектора различных стран мира. В качестве метода исследования использована методика, предложенная Организацией экономического сотрудничества и развития (ОЭСР). При анализе предлагаемых показателей по России выявлено, что значительная доля расходов на поддержку аграрного сектора приходится на потребителей за счет высокого уровня цен на сельскохозяйственные продукты. При этом качественные сельскохозяйственные товары становятся недоступными для слоев населения, имеющих доходы ниже среднего уровня. Для решения этой проблемы со стороны государства необходимы новые меры, например, разработка и внедрение программы продовольственных талонов для населения с доходами ниже прожиточного минимума, субсидирование детского питания в образовательных учреждениях и т.д. На основе выводов по результатам анализа разработаны рекомендации по совершенствованию данной методики. Для более объективного анализа целесообразно дополнить ее новыми показателями, такими как совокупная оценка поддержки сельского хозяйства страны (TSE), оценки поддержки производителей (PSE), потребителей сельскохозяйственного сырья и продовольствия (CSE) и общих услуг (GSSE) на душу населения. Значения и динамика показателей, предложенных автором, способствуют более точной оценке состояния аграрного сектора и позволяют более детально провести сравнительный анализ с другими странами, дополняя показатели TSE, PSE, CSE, GSSE, предложенные ОЭСР.

Agricultural Policies in Vietnam: Producer Support Estimates, 1986-2002

Since 1986, Vietnam has moved from a centrally planned towards a market-oriented system through several major economic and trade reforms. First positive results of the reform process became visible in the early 1990s when poverty declined significantly. The Vietnamese agricultural sector has also experienced high growth and impressive export achievements. The country changed from a food importer to one of the major exporters worldwide. The question arises to what extent support policies contributed to this growth, especially of the agricultural sector. To answer this question, domestic and trade policies in the agricultural sector are analysed and the market price support (MPS) and producer support estimates (PSEs) are calculated. To account for the special conditions in Vietnam, adjustments for country- and commodity-specific factors like transportation costs, marketing margins and the quality difference of exportables (or importables) at the border and domestically are included. Selected agricultural commodities for MPS and PSE calculation comprise rice, coffee, tea, rubber, pepper, sugar, groundnut, cashew nut and pig meat. Their shares in total output exceed 70% allowing for a generalization of the calculated PSEs, thus roughly representing the whole agricultural sector. The finding is that most agricultural products were taxed in the mid 1980s until the mid 1990s. This was mainly due to the dominance and monopoly position of the state-owned sector, restrictive trade policies like import and export quotas and licenses, and distorted markets and prices in the country. The domestic reform process and the opening of the economy since the early 1990s, however, impacted on the gaps between the domestic and international prices. Thus, since the mid 1990s, the net support of agriculture became positive and increased - but still reaching only rather moderate levels. This study of Vietnam is the third comprehensive review conducted within an IFPRI project on understanding and assessing domestic and trade policies in the agricultural sector in developing countries. The data are meant to deliver a basis for further trade-related research to be conducted in the future.

THE STATE FINANCIAL SUPPORT OF AGRICULTURAL PRODUCERS IN UKRAINE

In the article we have considered the necessity to support agriculture producers of Ukraine on terms of agrarian market functioning and efficient use of financial resources. Methods of mathematical statistics and regression analysis have been used during the justification for producer support estimate and consumer nominal protection coefficient. Established that support for agricultural production on the state level can be regarded as one of the ways regulation to redistribute of financial resources, enabling to prevent financial losses and ensure efficiency of the branch financing. It has been proved that fundamentally new approaches to forming of long-term national course of agrarian policy and its comparison with alternative variants of agricultural production financing, implemented in the world, must take into consideration changes in external environment and acceleration of globalization processes, which demand adequate reaction, enabling to minimize negative consequences.

Comparative Analysis of Support to Agriculture in the QUAD Countries in 1986-2014

The purpose of this paper is a comparative analysis of support provided to agriculture sector by the QUAD countries in 1986-2014. The authors examined the changes in levels and structures of this support and tried to assess it from the point of view of its impact on the QUAD economies and markets. In the analysis conducted there were used especially the OECD data and indexes measuring state support to agriculture including: Total Support Estimate, Producer Support Estimate, General Services Support Estimate and Consumer Support Estimate. In the last three decades in all the examined economies, there has been a reduction in agricultural support in relation to GDP, although no distinct change has occurred in terms of the amount of aid in absolute terms (in the US its value even increased almost twice). As regards the changes in structure of support, the most favorable tendencies took place in the European Union where the market price support (MPS), i.e. the most distorting aid to the functioning of the market mechanism, was significantly reduced. One can also positively assess the support structure in the United States where about half of the agricultural budget is earmarked to consumers. Canada has very good economic outcomes as regard the agriculture sector even though it allocates the least amount of financial resources to support agriculture in relation to GDP among all the QUAD economies. However, despite a large part of this support is in the form of general services (GSSE), the country is characterized by an unfavorable trend of increasing expenditure on price support. Throughout the period considered the most harmful support policy from the point of view of market competition was led by Japan though it has affected to a lesser extent the functioning of international agri-food markets due to the lower importance of Japanese agricultural production and exports in the world economy in comparison to the EU and the US.

How Much Government Assistance Do European Wine Producers Receive?

AbstractThe European Union's (EU) long-standing financial support for its wine industry has been nontrivial but very difficult to estimate. The Organization for Economic Cooperation and Development's (OECD) generic producer support estimate methodology has been able to capture some of the supports, but it excludes such measures as subsidized distillation of low-quality wine, grants to promote wine generically, protection via import tariffs, and grubbing-up premiums. Nor does the OECD disaggregate EU supports to individual member countries. This article provides a new set of more complete estimates of support to EU wine producers. It also reveals how unevenly those supports are spread across EU member countries. The new estimates suggest that during 2007–2012, annual assistance amounted to approximately 700 euros per hectare of vines or 0.15 euros per liter of wine produced in the EU as measured at the winery gate. That is equivalent to a nominal rate of direct plus indirect producer assistance of approximately 20%. (JEL Classifications: F14, H25, L66, Q18)

IMPACTS OF AGRICULTURAL SUPPORTS ON EXPORTS OF INDIVIDUAL AGRICULTURAL PRODUCTS IN TURKEY

Our paper empirically investigates the effects of agricultural supports on the exports of eighteen Turkish agricultural commodities to 72 countries over the 1965 - 2010 period. As we use PSE (Producer Support Estimate) and NRA (Nominal Rate of Assistance) as indicators of agricultural supports, our study considers not only agricultural subsidies but also all the efforts of government to support agriculture through both domestic and border measures. Our estimation results show that agricultural supports alon g with border measures have mixed effects on the export of Turkish agricultural commodities, and agricultural supports are as important as exchange rates in the determination of the export patterns of Turkish agricultural commodities. We also investigate t he effects of real exchange rate and its volatility on the exports of Turkish agricultural commodities. Although they are generally positive, our estimated coefficients on real exchange rates in the analysis exhibit mixed results.

EVOLUTION AND LEVEL OF AGRICULTURAL SUPPORT IN TURKEY AND IN THE EUROPEAN UNION

The developments of agricultural support policies in Turkey and in the European Union are different from each other. When the EU was applying protectionist policies, Turkey was on the way of liberalising its economy in 1980s. After Uruguay Round (1995), developed countries took steps for reducing protectionist policies in agriculture for the first time. As Turkey and European Union were signatories of the Uruguay Round Agreement on Agriculture, they reduced their support levels. Despite the successful reforms and WTO (World Trade Organization) commitments, support level in the European Union remained high. Only in the last years, producer support estimate had a decreasing trend. Instead, Turkey increased the support policy that requires production and so producer support estimate increased after 2000. While the support level is not as high as in the EU, producer support estimate is at EU and OECD levels in the last years. This paper, so as to contribute to the literature, examines the agricultural support policies and levels in Turkey and in the European Union for better understanding the differences between them. In this regard, the aim of the paper is to develop an approach to comment on the differences in agricultural policies by comparing them and on the protection levels between Turkey and European Union by using Producer Support Estimate of OECD.