Governmental subsidy paid to farmers and agribusinesses
An agricultural subsidy (also called an agricultural incentive) is a government incentive paid to agribusinesses, agricultural organizations and farms to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.
Examples of such commodities include: wheat, feed grains (grain used as fodder, such as maize or corn, sorghum, barley and oats), cotton, milk, rice, peanuts, sugar, tobacco, oilseeds such as soybeans and meat products such as beef, pork, and lamb and mutton.
A 2021 study by the UN Food and Agriculture Organization found $540 billion was given to farmers every year between 2013 and 2018 in global subsidies. The study found these subsidies are harmful in numerous ways. In wealthy countries, they damage health by promoting the overconsumption of meat.
In under-developed countries they encourage overconsumption of low-nutrition staples, such as rice. Subsidies also contribute to the climate crisis, by encouraging deforestation; and they also drive inequality because smallholder farmers, many of whom are women, are excluded. According to UNDP head, Achim Steiner, redirecting subsidies would boost the livelihoods of 500 million smallholder farmers worldwide by creating a more level playing field with large-scale agricultural enterprises. A separate report, by the World Resources Institute in August 2021, said without reform, farm subsidies "will render vast expanses of healthy land useless".
History.
On the earliest known interventions in farming markets was the English Corn Laws, which regulated the import and export of grain in Great Britain and Ireland for centuries. The laws were repealed in 1846. Agricultural subsidies in the twentieth century were originally designed to stabilize markets, help low-income farmers, and aid rural development. In the United States, President Franklin D. Roosevelt signed the Agricultural Adjustment Act, as part of the New Deal in 1933. At the time the economy was in a severe depression and farmers were experiencing the lowest agricultural prices since the 1890s. The plan was to increase prices for a range of agricultural products by paying farmers to destroy some of their livestock or not use some of their land - known as land idling. This led to a reduction in supply and smaller agricultural surpluses. Initially seven products were controlled: (corn, wheat, cotton, rice, peanuts, tobacco and milk). Unlike traditional subsidies that promote the growth of products, this process boosted agricultural prices by limiting the growth of these crops.
In Europe, Common Agricultural Policy (CAP) was launched in 1962 to improve agricultural productivity. According to the European Commission, the act aims to
By region.
Canada.
Canadian agricultural subsidies are currently controlled by Agriculture and Agri-Food Canada. Financial subsidies are offered through the Canadian Agricultural Partnership Programs. The Canadian Agricultural Partnership began in April 2018 and is planned to take place over five years with a combined federal, provincial and territorial investment of three billion dollars. Some programs offered surround issues including AgriAssurance, agricultural leveraging programs, promoting diversity in agriculture, crop and livestock insurance, marketing activities, risk mitigation, and more. Before the Canadian Agricultural Partnership, agricultural subsidies were organized under the Growing Forward 2 partnership from 2013 to 2018.
European Union.
In 2010, the EU spent €57 billion on agricultural development, of which €39 billion was spent on direct subsidies. Agricultural and fisheries subsidies form over 40% of the EU budget. Since 1992 (and especially since 2005), the EU's Common Agricultural Policy has undergone significant change as subsidies have mostly been decoupled from production. The largest subsidy is the "Single Farm Payment".
Malawi.
Increases in food and fertilizer prices have underlined the vulnerability of poor urban and rural households in many developing countries, especially in Africa, renewing policymakers' focus on the need to increase staple food crop productivity.
A study by the Overseas Development Institute evaluates the benefits of the Malawi Government Agricultural Inputs Subsidy Programme, which was implemented in 2006–2007 to promote access to and use of fertilizers in both maize and tobacco production to increase agricultural productivity and food security. The subsidy was implemented by means of a coupon system which could be redeemed by the recipients for fertilizer types at approximately one-third of the normal cash price. According to policy conclusions of the Overseas Development Institute the voucher for coupon system can be an effective way of rationing and targeting subsidy access to maximize production and economic and social gains. Many practical and political challenges remain in the program design and implementation required to increase efficiency, control costs, and limit patronage and fraud.
New Zealand.
New Zealand is reputed to have the most open agricultural markets in the world after radical reforms started in 1984 by the Fourth Labour Government stopped all subsidies.
In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives. This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment. Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today. And New Zealand farming was marred by the same problems caused by U.S. subsidies, including overproduction, environmental degradation and inflated land prices.
As the country is a large agricultural exporter, continued subsidies by other countries are a long-standing bone of contention, with New Zealand being a founding member of the 20-member Cairns Group fighting to improve market access for exported agricultural goods.
United States.
The Farm Security and Rural Investment Act of 2002, also known as the 2002 Farm Bill, addressed a great variety of issues related to agriculture, ecology, energy, trade, and nutrition. Signed after the September 11th attacks of 2001, the act directs approximately $16.5 billion of government funding toward agricultural subsidies each year. This funding has had a great effect on the production of grains, oilseeds, and upland cotton. The United States paid allegedly around $20 billion in 2005 to farmers in direct subsidies as "farm income stabilization" via farm bills. Overall agricultural subsidies in 2010 were estimated at $172 billion by a European agricultural industry association; however, the majority of this estimate consists of food stamps and other consumer subsidies, so it is not comparable to the 2005 estimate.
Agricultural policies of the United States are changed, incrementally or more radically, by Farm Bills that are passed every five years or so. Statements about how the program works might be right at one point in time, at best, but are probably not sufficient for assessing agricultural policies at other points in time. For example, a large part of the support to program crops has not been linked directly to current output since the Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104–127). Instead, these payments were tied to historical entitlement, not current planting. For example, it is incorrect to attribute a payment associated with the wheat base area to wheat production now because that land might be allocated to any of a number of permitted uses, including held idle. Over time, successive Farm Bills have linked these direct payments to market prices or revenue, but not to production. In contrast, some programs, like the Marketing Loan Program that can create something of a floor price that producers receive per unit sold, are tied to production. That is, if the price of wheat in 2002 was $3.80, farmers would get an extra 58¢ per bushel (52¢ plus the 6¢ price difference). Fruit and vegetable crops are not eligible for subsidies.
Corn was the top crop for subsidy payments prior to 2011. The Energy Policy Act of 2005 mandated that billions of gallons of ethanol be blended into vehicle fuel each year, guaranteeing demand, but US corn ethanol subsidies were between $5.5 billion and $7.3 billion per year. Producers also benefited from a federal subsidy of 51 cents per gallon, additional state subsidies, and federal crop subsidies that had brought the total to 85 cents per gallon or more. However, the federal ethanol subsidy expired 31 December 2011. 
Asia.
Farm subsidies in Asia remain a point of contention in global trade talks.
China.
In 2016, China provided $212 billion in agricultural subsidies. In 2018, China increased their subsidies for soybean farmers in their northeastern provinces. Corn farmers, however, received reduced subsidies due to Beijing's 2017 policy that set out to reduce its huge stockpile. Soybean farmers in Liaoning, Jilin, Heilongjiang, and Inner Mongolia provinces will receive more subsidies from Beijing than corn farmers. The cutting of corn acreage and the lifting of soybean acreage came in 2016 as a push from China to re-balance grain stocks. Subsidies for agriculture machinery and equipment will also be provided by Beijing to farmers.
Indonesia.
In 1971, as a method of expanding the rice supply in Indonesia, the government began subsidizing fertilizer to farmers after the discovery and introduction of new, high-yielding rice varieties. In 2012, Indonesia provided $28 billion in agricultural subsidies.
Japan.
Over the 2000s, Japan has been reforming its generous agricultural subsidy regime to support more business-oriented farmers. Yet, subsidies remain high in international comparison. In 2009, Japan paid US$46.5 billion in subsidies to its farmers, and continued state support of farmers in Japan remains a controversial topic. In 2012, Japan provided $65 billion in agricultural subsidies.
South Korea.
South Korea has made attempts to reform its agricultural sector, despite resistance from vested interests. In 2012, South Korea provided approximately $20 billion in agricultural subsidies.
India.
Agricultural subsidy in India primarily consists of subsidies like, fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy etc. Subsidy on fertilizers is provided by the Central government whereas subsidy on water and irrigation is provided by the local State governments. Drawing on the most recent estimates, annual central government subsidies to farmers would be of the order of () as the sum of fertilizer subsidies ( (), 2017/18), credit subsidies ( (), 2017/18), crop insurance subsidies ( (), 2018/19) and expenditures towards price support ( () estimated for 2016/17). Total subsidies to farmers in India is in the range of $45 billion to 50 billion, to the tune of 2%-2.5% of GDP. But per farmer the subsidy just about touches $48 in India, compared to over $7,000 in the U.S.
Armenia.
Direct subsidies, of the Ministry of Agriculture, include subsidies for fertilizers, improved seed, agricultural chemicals, and fuel. The purpose of subsidies is to aid the smallest farmers in the sector. In particular, the maximum loan size for interest subsidies is minimal, and only farms with less than 3 ha are eligible for fuel, fertilizer, chemical, and seed subsidies. For loans of up to 3 million drams (about US$6,185 at current exchange rates), subsidies decrease interest rates from 10%–12% to 4%–6% in an effort to support Armenia's smaller farms.
Impact of subsidies.
Global food prices and international trade.
Although some critics and proponents of the World Trade Organization have noted that export subsidies, by driving down the price of commodities, can provide cheap food for consumers in developing countries, low prices are harmful to farmers not receiving the subsidy. Because it is usually wealthy countries that can afford domestic subsidies, critics argue that they promote poverty in developing countries by artificially driving down world crop prices.
Generally, developing countries have a comparative advantage in producing agricultural goods, but low crop prices encourage developing countries to be dependent buyers of food from wealthy countries. So local farmers, instead of improving the agricultural and economic self-sufficiency of their home country, are forced out of the market and perhaps even off their land. This occurs as a result of a process known as "international dumping" in which subsidized farmers are able to "dump" low-cost agricultural goods on foreign markets at costs that un-subsidized farmers cannot compete with. Agricultural subsidies often are a common stumbling block in trade negotiations. In 2006, talks at the Doha round of WTO trade negotiations stalled because the US refused to cut subsidies to a level where other countries' non-subsidized exports would have been competitive.
Others argue that a world market with farm subsidies and other market distortions (as happens today) results in higher food prices, rather than lower food prices, as compared to a free market.
In 2002 Mark Malloch Brown, former head of the United Nations Development Programme, estimated that farm subsidies cost poor countries about US$50 billion a year in lost agricultural exports:
It is the extraordinary distortion of global trade, where the West spends $360 billion a year on protecting its agriculture with