Tag Archives: agricultural price support

How Agricultural Subsidies Remain Important in the Industrial World

In 2012, approximately $486 billion in agricultural subsidies were available to farmers in the top 21 food-producing countries worldwide. According to research done by the Worldwatch Institute, today,  governments continue to provide nearly $500 billion worth in farm subsidies annually.  A common type of subsidy is a direct payment which is paid regularly to farmers who produce designated crops. This means that farmers are able to produce as much or as little as they want while still receiving the subsidy.

The main issue, however, is that these agricultural subsidies are not equally distributed around the world. As a matter of fact, Asia spends more money than the rest of the world combined. China, alone, provides $165 billion in subsidies to farmers. Europe also contributes a large amount of money to agricultural subsidies due largely to the Common Agricultural Policy (CAP) of the European Union (EU). In 2011, at over $50 billion, CAP accounted for about 44% of the entire EU budget. In total, the EU spent over $106 billion on agricultural subsidies. Meanwhile, North America provides $45 billion worth in subsidies, with the US spending a little over $30 billion, Canada spending $7.5 billion and Mexico spending $7 billion.

Fotosearch_k6076052 (1)Another component of subsidies besides direct payment is price support, which is intended to keep domestic crop prices high enough so that farmers will want to grow crops even throughout periods of overproduction. These price supports help the industry because, instead of letting oversupply go to waste, crops are traded on the market at lower prices.