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Agricultural Policies in Non-OECD CountriesMONITORING AND EVALUATION

Agricultural Policies in Non-OECD Countries MONITORING AND EVALUATION The agricultural sector and related support policies of many OECD trading partners are changing rapidly. This report monitors agricultural policy developments in Brazil, Bulgaria, China, India, Romania, Russia, South Africa and Ukraine following the same approach applied to OECD countries, providing a common benchmark for evaluating reforms and for facilitating international dialogue. A comprehensive statistical annex containing a wide range of contextual information for these countries is also included.

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OECD Review of Agricultural Policies: BrazilOECD Review of Agricultural Policies: ChinaOECD Review of Agricultural Policies: South AfricaEnvironment, Water Resources and Agricultural Policies: Lessons from China and OECD Countries

2007 A

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ISBN 978-92-64-03121-051 2007 03 1 P -:HSTCQE=UXVWVU: 2007

2007

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ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Agricultural Policies in Non-OECD Countries

MONITORING AND EVALUATION 2007

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The OECD is a unique forum where the governments of 30 democracies work together to

address the economic, social and environmental challenges of globalisation. The OECD is also at

the forefront of efforts to understand and to help governments respond to new developments and

concerns, such as corporate governance, the information economy and the challenges of an

ageing population. The Organisation provides a setting where governments can compare policy

experiences, seek answers to common problems, identify good practice and work to co-ordinate

domestic and international policies.

The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,

Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,

Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic,

Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of

the European Communities takes part in the work of the OECD.

OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and

research on economic, social and environmental issues, as well as the conventions, guidelines and

standards agreed by its members.

Also available in French under the title:

Politiques agricoles des pays non membres de l’OCDE

SUIVI ET ÉVALUATION 2007

© OECD 2007

No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent toOECD Publishing [email protected] or by fax 33 1 45 24 99 30. Permission to photocopy a portion of this work should be addressed to the Centre français

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This work is published on the responsibility of the Secretary-General of the OECD. The

opinions expressed and arguments employed herein do not necessarily reflect the official

views of the Organisation or of the governments of its member countries.

This document has been produced with the financial assistance of the European Union.

The views expressed herein can in no way be taken to reflect the official opinion of the

European Union.

mailto:[email protected]



FOREWORD

Foreword

A key objective of the OECD is to facilitate policy dialogue among policy makers with a view to

identifying good practices across a wide range of economic and social policy areas. The OECD places

a high priority on its dialogue with non-member economies (NMEs), recognising that such dialogue

contributes to the quality and relevance of our work and helps us collectively to address global

economic challenges. Effective dialogue depends on the wide dissemination of consistent and

comparable information, analysis and evaluation of current policy developments.

This monitoring exercise documents and evaluates the latest agricultural policy developments

in those NMEs for which the OECD has undertaken country reviews of agricultural policies. Eight

countries: Brazil, Bulgaria, China, India, Romania, Russia, South Africa and Ukraine are included in

this update. Definitions of support indicators together with a review of support measurement issues

and a comprehensive statistical annex, containing a wide range of contextual information for these

countries, are also incorporated in this report.

This monitoring exercise mirrors that carried out each year for OECD countries and provides a

common benchmark for international dialogue on agricultural policy reform. In particular, the

estimates of the level of support to producers (PSE), and to the agricultural sector as a whole (GSSE)

provide a much better understanding of the nature and functioning of agricultural policies by:

● Quantifying and categorising support policies.

● Comparing domestic to international commodity prices.

● Estimating taxpayer and consumer burdens.

The OECD approach to this policy monitoring process is unique. Local experts are engaged to

provide background information while governments of countries under review and OECD member

countries actively participate in the review of draft reports. This process helps ensure accuracy of the

results, awareness and “buy-in” by national policy makers and provides an important element of

capacity building. The report is published under the authority of the Secretary-General of the OECD.

AGRICULTURAL POLICIES IN NON-OECD COUNTRIES: MONITORING AND EVALUATION 2007 – ISBN 978-92-64-03121-0 – © OECD 2007 3

Acknowledgements. This report was prepared by the OECD Trade andAgriculture Directorate. The main authors were Morvarid Bagherzadeh(co-ordinator), Jonathan Brooks, Wayne Jones, Andrzej Kwiecinski, Wilfrid Legg,Olga Melyukhina, Catherine Moreddu and Václav Vojtech. Florence Mauclertprepared the statistical annex and graphics, with assistance from LaetitiaReille. Anita Lari formatted the document and, along with Anne Bertel andStefanie Milowski, provided administrative support for the Global Forum onAgriculture, where the draft country chapters were reviewed. A number of localexperts contributed valuable background material for the preparation of thecountry chapters, including: Vicente Marques (Brazil), Nedka Ivanova (Bulgaria),Xiande Li and Guoqiang Cheng (China), Mahendra Dev and Raghav Gaiha

(India), Camelia Gavrilescu (Romania), Eugenia Serova (Russia), Andre Jooste(South Africa) and Irina Kobouta (Ukraine).

TABLE OF CONTENTS

Table of Contents

List of Acronyms and Abbreviations ..................................................................................... 11

Executive Summary .................................................................................................................. 13

Chapter 1. Overview ................................................................................................................... 15Agriculture in the economy.............................................................................................. 16Policy context ..................................................................................................................... 21Evaluation of support ........................................................................................................ 25Policy observations and recommendations ................................................................... 32

Chapter 2. Brazil .......................................................................................................................... 35

Summary of key policy developments............................................................................ 38Policy context ..................................................................................................................... 38Domestic agricultural policies.......................................................................................... 41Agro-food trade policies.................................................................................................... 47Bibliography........................................................................................................................ 48

Chapter 3. Bulgaria ..................................................................................................................... 49


Chapter 4. China ......................................................................................................................... 63

Summary of key policy developments .................................................................................... 66Policy context ..................................................................................................................... 66Domestic agricultural policies.......................................................................................... 71Agro-food trade policies.................................................................................................... 77Bibliography........................................................................................................................ 79

Chapter 5. India........................................................................................................................... 81

Policy context ..................................................................................................................... 82Domestic agricultural policies.......................................................................................... 87Agro-food trade policies.................................................................................................... 92Bibliography........................................................................................................................ 94

Chapter 6. Romania .................................................................................................................... 97



TABLE OF CONTENTS

Chapter 7. Russia ........................................................................................................................ 111


Chapter 8. South Africa.............................................................................................................. 129

Summary of key policy developments............................................................................ 132Policy context................................................................................................................................ 132Domestic agricultural policies.......................................................................................... 137Agro-food trade policies.................................................................................................... 138Bibliography........................................................................................................................ 141

Chapter 9. Ukraine...................................................................................................................... 143


Annex A. Measuring Agricultural Support ............................................................................ 157

1. Definitions of the OECD indicators of agricultural support .................................... 1582. Recent developments in the OECD producer support estimates ........................... 1593. Agricultural support in non-OECD economies: some measurement issues ........ 164

Annex B. Statistical Annex ...................................................................................................... 173

Boxes

1.1. Land reforms ..................................................................................................................... 231.2. Measuring agricultural support ...................................................................................... 261.3. Evaluating policies in non-OECD countries .................................................................. 283.1. The EU SAPARD in Bulgaria............................................................................................. 593.2. Introducing the Common Agricultural Policy in Bulgaria........................................... 603.3. Bulgaria’s trade agreements............................................................................................ 624.1. Why do Chinese farmers overuse chemicals?.............................................................. 694.2. Construction of the new socialist countryside in China ............................................. 725.1. India: the transition to the Eleventh Five Year Plan, (2007-12) .................................. 915.2. India’s recent trade agreements ..................................................................................... 936.1. The EU SAPARD in Romania............................................................................................ 1076.2. Introducing the Common Agricultural Policy in Romania.......................................... 1096.3. Romania’s trade agreements .......................................................................................... 1107.1. National Priority Project for Development of Agro-Industrial Complex: Russia ..... 1227.2. Russia’s regional and bilateral trade relations ............................................................. 1268.1. South Africa’s trade agreements .................................................................................... 1409.1. Ukraine’s trade agreements ............................................................................................ 155A.1. Previous classification of PSE and related support indicators ................................... 160A.2. Definitions of categories in the current PSE classification ......................................... 161A.3. New PSE classification...................................................................................................... 162A.4. Definitions of categories in the new PSE classification............................................... 163A.5. Agricultural debt rescheduling in Brazil and Russia.................................................... 168A.6. Programmes combining social assistance and agricultural support......................... 170

AGRICULTURAL POLICIES IN NON-OECD COUNTRIES: MONITORING AND EVALUATION 2007 – ISBN 978-92-64-03121-0 – © OECD 20076

TABLE OF CONTENTS

Tables

2.1. Brazil: Estimates of support to agriculture.................................................................... 372.2. Brazil: Volume of purchases of agricultural commodities, by instrument, 2003-06 ..... 433.1. Bulgaria: Estimates of support to agriculture .............................................................. 514.1. China: Estimates of support to agriculture ................................................................... 654.2. Tariff quota utilisation in China, selected commodities, 2002-05 ............................. 786.1. Romania: Estimates of support to agriculture .............................................................. 996.2. Evolution of payment rates in Romania, 2001-06 ........................................................ 1046.3. Use of SAPARD funds in Romania by March 2005........................................................ 1087.1. Russia: Estimates of support to agriculture ................................................................. 1137.2. Share of top 100 producers in livestock production in Russia ................................... 1177.3. Consolidated budgetary expenditures on agriculture in Russia in 2001-06 ............. 1237.4. Russia’s meat import quotas in 2005-09........................................................................ 1248.1. South Africa: Estimates of support to agriculture........................................................ 1318.2. Land transferred within the process of land reform in South Africa........................ 1389.1. Ukraine: Estimates of support to agriculture................................................................ 145B.1. Population, mid-year estimates...................................................................................... 174B.2. Share of agriculture in total employment ..................................................................... 174B.3. GDP growth ........................................................................................................................ 174B.4. Share of agriculture in GDP ............................................................................................. 175B.5. Inflation, end year changes in consumer prices .......................................................... 175B.6. Agricultural input price index......................................................................................... 175B.7. Agricultural output price index ...................................................................................... 176B.8. Retail food price index ..................................................................................................... 176B.9. Exchange rate, annual average ....................................................................................... 176B.10. Merchandise trade balance ............................................................................................. 177B.11. Agriculture and food trade balance................................................................................ 177B.12. Agriculture and food exports .......................................................................................... 177B.13. Agriculture and food imports.......................................................................................... 178B.14. Share of agriculture and food exports in total exports ............................................... 178B.15. Share of agriculture and food imports in total imports .............................................. 178B.16. Top five agro-food export commodities by country ................................................... 179B.17. Top five agro-food import commodities by country ................................................... 181B.18. Top five export destinations .......................................................................................... 183B.19. Top five import origin countries .................................................................................... 185B.20. Gross Agricultural Output, total ..................................................................................... 187B.21. Gross Agricultural Output, crops .................................................................................... 187B.22. Gross Agricultural Output, livestock .............................................................................. 187B.23. Total cereal production.................................................................................................... 188B.24. Wheat production............................................................................................................. 188B.25. Coarse grain production .................................................................................................. 188B.26. Total meat production ..................................................................................................... 189B.27. Beef and veal production ................................................................................................. 189B.28. Pigmeat production .......................................................................................................... 189B.29. Milk production................................................................................................................. 190B.30. Production of selected commodities ............................................................................. 191B.31. Average share of household income spent on food .................................................... 193B.32. Daily food consumption .................................................................................................. 193B.33. Annual consumption of grain and grain products....................................................... 193


TABLE OF CONTENTS

B.34. Annual consumption of meat and meat products....................................................... 194B.35. Annual consumption of milk and dairy products........................................................ 194B.36. Total area sown, crops ..................................................................................................... 194B.37. Grain sown areas .............................................................................................................. 195B.38. All cattle inventories ........................................................................................................ 195B.39. Pig inventories ................................................................................................................... 195

Figures

1.1. Agriculture’s share of total employment against GDP per capita,2003-05 average................................................................................................................. 17

1.2. Agriculture’s share of GDP against GDP per capita, 2003-05 average........................ 171.3. Share of agriculture in total employment ..................................................................... 181.4. Share of agriculture in GDP ............................................................................................. 181.5. Gross Agricultural Output................................................................................................ 191.6. Evolution of GDP ............................................................................................................... 191.7. Agricultural and food trade balance .............................................................................. 201.8. Share of agriculture and food exports in total exports ............................................... 201.9. Share of agriculture and food imports in total imports .............................................. 211.10. Inflation, end year changes in consumer prices, per cent.......................................... 221.11. Composition of Producer Support Estimates ................................................................ 301.12. Producer Nominal Protection Coefficients .................................................................... 311.13. Composition of Total Support Estimate ........................................................................ 322.1. Brazil: PSE level and composition over time................................................................. 362.2. Brazil: Producer NPC by commodity, 2003-05 average ................................................ 362.3. Brazil: TSE composition over time.................................................................................. 362.4. Evolution and annual changes of agricultural output in Brazil, 1995-2005.............. 392.5. Agro-food trade in Brazil, 1996-2005 .............................................................................. 413.1. Bulgaria: PSE level and composition over time ............................................................ 503.2. Bulgaria: Producer NPC by commodity, 2003-05 average............................................ 503.3. Bulgaria: TSE composition over time ............................................................................ 503.4. Evolution and annual changes of agricultural output in Bulgaria, 1995-2005 ........ 533.5. Agro-food trade in Bulgaria, 1996-2005 ......................................................................... 554.1. China: PSE level and composition over time ................................................................ 644.2. China: Producer NPC by commodity, 2003-05 average .................................................. 644.3. China: TSE composition over time ................................................................................. 644.4. Evolution and annual changes of agricultural output in China, 1995-2005 ............. 674.5. Agro-food trade in China, 1995-2005.............................................................................. 704.6. Rural household income per person in China, 1995-2005........................................... 715.1. Evolution and annual changes of agricultural output in India, 1995-2005............... 835.2. Agro-food trade in India, 1995-2005 .............................................................................. 866.1. Romania: PSE level and composition over time ........................................................... 986.2. Romania: Producer NPC by commodity, 2003-05 average........................................... 986.3. Romania: TSE composition over time ........................................................................... 986.4. Evolution and annual changes of agricultural output in Romania, 1995-2005 ....... 1016.5. Agro-food trade in Romania, 1995-2005 ....................................................................... 1037.1. Russia: PSE level and composition over time ............................................................... 1127.2. Russia: Producer NPC by commodity, 2003-05 average............................................... 1127.3. Russia: TSE composition over time ................................................................................ 1127.4. Evolution and annual changes of agricultural output in Russia, 1995-2005 ............ 115


TABLE OF CONTENTS

7.5. Russia’s agricultural terms of trade: ratio of index of prices received over index of prices paid .......................................................................................................... 116

7.6. Agro-food trade in Russia, 1996-2005 ............................................................................ 1198.1. South Africa: PSE level and composition over time..................................................... 1308.2. South Africa: Producer NPC by commodity, 2003-05 average .................................... 1308.3. South Africa: TSE composition over time...................................................................... 1308.4. Evolution and annual changes of agricultural output in South Africa,

1995-2005 ........................................................................................................................... 1338.5. Agro-food trade in South Africa, 2000-05 ..................................................................... 1369.1. Ukraine: PSE level and composition over time............................................................. 1449.2. Ukraine: Producer NPC by commodity, 2003-05 average ............................................ 1449.3. Ukraine: TSE composition over time.............................................................................. 1449.4. Evolution and annual changes of agricultural output in Ukraine, 1995-2005 ......... 1479.5. Agro-food trade in Ukraine, 1996-2005 ......................................................................... 150


LIST OF ACRONYMS AND ABBREVIATIONS

List of Acronyms and Abbreviations

AMS Aggregate Measurement of Support

APMC Agricultural Produce Marketing Committee (India)

CAP Common Agricultural Policy (EU)

CEFTA Central European Free Trade Agreement

CES Common Economic Space

CET Common External Tariff (Mercosur)

CIS Commonwealth of Independent States

CPI Consumer Price Index

DoA Department of Agriculture (South Africa)

EAEC Eurasian Economic Community

ECA Essential Commodities Act (India)

EFTA European Free Trade Agreement

ESU European Size Unit (EU)

EU European Union

Eurostat Statistical Office of the European Communities

FAO Food and Agriculture Organization of the United Nations

FEZ Free Economic Zone

GAO Gross Agricultural Output

GDP Gross Domestic Product

HS Harmonised System of Trade Classification

IMF International Monetary Fund

LFA Less-Favoured Area (EU)

MAFISA Micro-Agricultural Finance Schemes of South Africa (South Africa)

MFN Most Favoured Nation

MOFCOM Ministry of Commerce (China)

MSP Minimum Support Prices (India)

NBSC National Bureau of Statistics of China

NDRC National Development and Reform Commission (China)

NIS Newly Independent States

NME Non Member Economies

OECD Organisation for Economic Co-operation and Development

PCA Partnership and Cooperation Agreement

PDS Public Distribution System (India)

PPP Purchasing Power Parity

PRONAF Programme for Strengthening of Family Farming (Brazil)

SACU Southern African Customs Union

SADC Southern African Development Community

SAPARD Special Accession Programme for Agriculture and Rural Development (EU)


LIST OF ACRONYMS AND ABBREVIATIONS

STE State Trading Enterprise

TRQ Tariff Rate Quota

UN United Nations

URAA Uruguay Round Agreement on Agriculture

VAT Value Added Tax

WTO World Trade Organisation

OECD indicators of support

CSE Consumer Support Estimate

GSSE General Services Support Estimate

MPS Market Price Support

NACc Consumer Nominal Assistance Coefficient

NACp Producer Nominal Assistance Coefficient

NPCc Consumer Nominal Protection Coefficient

NPCp Producer Nominal Protection Coefficient

PSE Producer Support Estimate

TSE Total Support Estimate

Currencies

BGN Bulgarian lev

BRL Brazilian real

CNY Chinese yuan renminbi

EUR Euro

INR Indian rupee

ROL Old Romanian leu

RON Romanian leu

RUB Russian rouble

UAH Ukrainian hryvnia

USD United States dollar

ZAR South African rand


ISBN 978-92-64-03121-0Agricultural Policies in Non-OECD Countries

Monitoring and Evaluaton 2007© OECD 2007

Executive Summary

The agricultural sectors of many developing countries have changed dramatically in the pasttwo decades, due to rapid policy reforms. This report describes and analyses governmentsupport to agriculture in eight non-OECD nations: Brazil, India and South Africa (three largedeveloping economies); Bulgaria, Romania, Russia and Ukraine (four formerly plannedeconomies); and China, which combines features of both groups.

Major findings

Agricultural policy reforms during the past decade have resulted in levels of governmentsupport to producers, as measured by the Producer Support Estimate (PSE), generally wellbelow the OECD average. For the 2003-05 period, estimates of government support toproducers as a per cent of gross farm receipts (% PSE) were: Ukraine (3%), Brazil (5%), SouthAfrica (8%), China (8%), Bulgaria (8%), Russia (17%) and Romania (27%); compared with theOECD average of 30%. Producer support estimates for India are not yet available but wouldappear to be slightly below the OECD average.

Support to agriculture is dominated by market price support (MPS) and input subsidies,the least efficient and most distorting ways of providing agricultural assistance. WhileOECD countries generally reduced MPS during 2003-05, the levels of MPS in the non-OECDcountries under review have generally increased or remained unchanged.

More targeted forms of support not linked to production are increasingly being sought topursue specific goals, such as raising the incomes of poor farm households, promoting ruraldevelopment and protecting the environment. Such policies are to be preferred as economicgrowth alone is unlikely to solve, and can sometimes exacerbate, economic and socialdivisions.

The ad hoc nature of many recent policy developments does not provide the predictablepolicy environment that is essential for growth and adjustment. There are severalexamples in this report of ad hoc and unsustainable agricultural expenditures being used tosupport markets. While all the countries in this report have demonstrated that profoundagricultural policy reform is both possible and beneficial, inconsistency in policyimplementation has in some cases undermined the effectiveness of current policies andcompromised further reforms.

The countries in this report provide relatively little General Services Support (GSS), whichfunds activities such as research and development, marketing and infrastructureimprovements. While there is a strong case to be made for the benefits of increased GSS,budgetary resources have instead often been used in inefficient ways to support producerincomes. A somewhat worrying development is that the share of GSS in total support hasbeen declining for several countries in this report, while producer support has risen.

13

EXECUTIVE SUMMARY

The long-term future for most semi-subsistence farming households lies outsideagriculture, so there is a need for measures that facilitate income diversification and theexploitation of non-farm activities, such as improved access to education in rural areas,better health care, pension and other social security services, enhanced land propertyrights and rural tax reforms.



Monitoring and Evaluation 2007© OECD 2007

Chapter 1

Overview

15

1. OVERVIEW

This Overview is intended to first provide a general appreciation of the relative

importance of the agriculture sector in the eight non-OECD economies under review. These

comprise three large developing countries (Brazil, India and South Africa), four formerly

planned economies (Bulgaria, Romania, Russia and Ukraine) and China, which combines

some features of both groups. Next, a discussion of the main driving forces for change sets

the policy context. The political response to these forces in terms of policy reforms and

new government initiatives is then evaluated, based on the OECD standard measures

of support (PSEs/TSEs, see Annex A for more details). Finally, some general policy

observations and recommendations are offered. It is these last two elements that are

generally of most interest to decision-makers – an assessment of different approaches to

addressing what are often similar problems and economic circumstances. The OECD

experience with policy reforms in OECD countries, and a growing number of non-members,

suggests that the effectiveness, efficiency and spill over effects of different agricultural

policy measures vary a great deal.

Agriculture in the economyThe relative importance of the agricultural sector in the overall economy is one of the

critical factors in the ranking of agricultural policy reform on a government’s political

agenda. For the countries under review, the structure of the sector has changed

enormously over the last couple of decades and continues to evolve at a rapid pace,

compared with the majority of OECD countries. This makes the examination of the

performance of the sector and the effectiveness of associated policies on a regular basis all

the more important.

The eight countries under review account for 44% of world population and 30% of the

agricultural output. They produce over 40% of cereals and meat, and over one-half of all

fruits and vegetables. Most production is consumed domestically, with the group

accounting for less than 10% of world agro-food trade. The following graphical highlights

provide a brief overview of the relative importance of the respective agricultural sectors

(see Annex B for more details).

Agriculture is still a major employer

Comparing the share of agriculture in total employment and in GDP against GDP per

capita across a large number of countries provides a rough index of development

(Figures 1.1 and 1.2). Generally, the more developed a country (higher GDP per capita), the

lower the relative importance of agriculture. Typically, for the countries under review,

agriculture has a disproportionate share of employment indicating low levels of labour

productivity and the buffer role of agriculture in labour markets. This reflects the dualistic

nature of farming in all these countries, with a few large-scale operations and a large

number of small, relatively unproductive producers.


1. OVERVIEW

As a consequence, the countries under review contrast strongly with OECD members

with a much higher share of agriculture in total employment (Figure 1.3). There has been,

however, labour shedding from agriculture which has been particularly rapid in China and

India, where strong economic growth and some labour market reforms have opened off-farm

employment opportunities. Still, agriculture remains a much more important source of

employment in all these countries. Contrary to the downward trend in most of these

countries, increasing shares of agricultural employment in Bulgaria, Romania, and Ukraine

reflect a slow economic readjustment process as well as specific government policies of

land reform and small farm development.

Figure 1.1. Agriculture’s share of total employment against GDP per capita, 2003-05 average

Source: World Bank, World Development Indicators, 2006.1 2 http://dx.doi.org/10.1787/760173233606

Figure 1.2. Agriculture’s share of GDP against GDP per capita, 2003-05 average

Source: World Bank, World Development Indicators, 2006.1 2 http://dx.doi.org/10.1787/837513563103

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1. OVERVIEW

The economic importance of agriculture is declining

Agriculture is a much more important component of Gross Domestic Output (GDP) in

the majority of countries under review than it is for OECD countries (Figure 1.4). However,

this share is rapidly declining as growth in the service and industry sectors outpaces that

of agriculture. With the exception of Brazil and South Africa, the share of agriculture in GDP

has virtually halved over the 1990-2005 period for the countries under review, suggesting

that agriculture’s traditional high priority in the policy agenda may diminish in coming

years. Brazil is the only country in the group where agricultural growth has been strong

enough for the sector to maintain its relative importance in the economy.

Gross agricultural output has increased steadily since 2000 but generally not kept pace

with the rate of growth in the overall economies (Figures 1.5 and 1.6). The long-term upward

trends are the result of more input-intensive production, improved technology, and increased

livestock production. With the exception of Brazil, the land area used for agriculture has

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Figure 1.3. Share of agriculture in total employment

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Figure 1.4. Share of agriculture in GDP


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1. OVERVIEW

conditions which affect production. Crop yields, for example, have been highly variable over

the last five years in Romania, Russia and Ukraine. This has led to some short-term policy

responses intended to counterbalance volatile market conditions. In contrast, Brazil and China

have managed steady annual gains in agricultural output since 2000.

In terms of trade balances, Romania, Russia and, recently, China are net agriculture

and food importers with a growing food trade deficit as rising incomes and currency

appreciation reduce the cost of imports and consumer demand outpaces growth in

domestic food production (Figure 1.7). For the first time since the late 1970s, China’s agro-

food balance changed from a net export to net import position in 2004 as the government

purchased 7 million tonnes of wheat to replenish stocks and imports of soybeans and

cotton increased sharply. Except for Bulgaria, exports are expanding for the other net

Figure 1.5. Gross Agricultural Output, index 2000 = 100

Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.1 2 http://dx.doi.org/10.1787/173556407828

Figure 1.6. Evolution of GDP, index 2000 = 100


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1. OVERVIEW

exporting countries in this group with Brazil far and away the most significant and fastest

growing exporter of agriculture and food products (13.5% growth in 2005).

In five of the eight countries reviewed, the share of agriculture and food exports in

total commodity exports declined (Figure 1.8). Conversely, this share increased in Romania,

South Africa and Ukraine. Romania’s agro-food exports grew 2.5 fold between 2000 and

2005. South Africa is one of the world’s leading exporters of wine, fresh fruits and sugar and

a major trader in the African region. Agro-food exports for Ukraine reached a record level

of USD 1.7 billion in 2005. Agro-food exports remain particularly important for Brazil,

where they accounted for over one-quarter of all exports in 2005.

There was little change in the share of agriculture and food in commodity imports

over the 1990-2005 period at about 5-7% for India, South Africa, Bulgaria and Ukraine

(Figure 1.9). The large declines in the share of agriculture and food imports for China,

Brazil, Romania and, to a lesser extent Russia, reflect the rapid growth in non-food imports

Figure 1.7. Agricultural and food trade balance

Source: OECD Secretariat, 2006; UN, UN Comtrade database, 2006.1 2 http://dx.doi.org/10.1787/865703168844

Figure 1.8. Share of agriculture and food exports in total exports


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1. OVERVIEW

associated with rising consumer incomes. For these countries, currency appreciation,

higher wage rates and reduced unemployment fuelled the growth in consumer

expenditures on non-food imports.

Policy contextThis section examines some of the driving forces for change in the agricultural policies

of the countries under review. With agriculture occupying a prominent role in each of these

economies, and closely linked to such concerns as rural development, poverty alleviation

and resource sustainability, decision-makers often seek at least partial solutions to broader

social and economic problems through agriculture. There are many similarities but also

several important differences in the pressures faced, and objectives pursued, by the

governments of these eight countries.

A common catalyst for major reform in most of these countries was a deteriorating

macroeconomic condition often stemming from public and foreign deficits, and associated

increases in indebtedness and inflation. In China, there were structural concerns over general

economic inefficiency. In some cases, major political changes provided the political will for

reform such as the end of military rule in Brazil, a fundamental change in leadership in China,

the end of apartheid in South Africa and the liberalisation of formerly planned economies.

The direction of long-term economic reforms was similar with a move from closed

economies focused on self sufficiency and import substitution to more open economies.

Economic liberalisation was generally broad and swift in the countries under review

although more gradual in China and India. Reforms encompassed measures aimed at

deregulation of domestic markets and prices, trade liberalisation and privatisation. Tighter

fiscal and monetary policies, often combined with a depreciation of the domestic currency,

established the fundamentals for economic stability and growth. Substantial investments

in infrastructure have in several cases allowed the private sector to capitalise on new

economic opportunities, although until recently, rural areas were somewhat neglected.

The countries under review have benefited from sound macroeconomic policies

throughout the 2000s, which have resulted in improved fundamentals, including lower

levels of public debt, budget surpluses or modest deficits and, in most cases, positive

Figure 1.9. Share of agriculture and food imports in total imports


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1. OVERVIEW

current account balances. Much of the economic growth has come from services and

industry rather than agriculture. Recent economic growth in these countries has often

outpaced that for OECD countries as a whole, with China and Ukraine the strongest

performers (Figure 1.6). Both China and Russia posted record high current account

surpluses in 2005, driven largely by positive trade balances. However, recent conditions

have been less favourable. High oil prices caused a downturn in economic growth for most

countries in 2005-06, although as an energy exporter Russia also benefited to some extent

from higher oil prices. Growth slowed in Brazil where investment and consumption were

dampened by high real interest rates, while in Bulgaria and Romania deteriorating foreign

trade balances led to sharp increases in current account deficits.

A common characteristic of the countries under review is the impressive progress

made in bringing inflation under control since 2000 (Figure 1.10). Still, the generally strong

economic performances over this period continue to exert inflationary pressures and

exchange rate appreciation. Russia and Ukraine saw double digit inflation rates in 2004-05

with a more moderate 5-6% in Brazil and South Africa. In 2005, China adopted a new

exchange rate regime to moderate appreciation of the Yuan. Despite the overall positive

economic situation, unemployment rates remained very high in Bulgaria (18%) and South

Africa (26%), with large regional disparities and hidden unemployment, particularly in

agriculture, common to all these countries.

With improved budget situations, governments are tempted to address social and

economic problems with increased spending on agricultural programmes. In Brazil, policy

initiatives in 2005-06 were designed to mitigate a price-cost squeeze in agriculture and

transfer cash to poor families. Alleviating poverty, combined with food security, is the main

priority of India’s current five year plan. China’s government has been allocating more

budgetary resources to rural areas, while increased budgetary support to agriculture is

provided for in a new Ukraine law introduced in 2005. South Africa increased spending on

programmes to reduce poverty and unemployment. Russia introduced a two-year National

Project stepping up support to the agro-food sector, in particular to boost domestic

livestock production. Land reforms are another common policy focus (Box 1.1).

Figure 1.10. Inflation, end year changes in consumer prices, per cent


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1. OVERVIEW

Box 1.1. Land reforms

Land reforms in the countries under review have been undertaken within very differenteconomic and social contexts and are guided by varying objectives. Constraints –historical, economic, political, social and institutional – vary from one country to the next.

However, a common feature of land reforms in all countries is an initial attempt to transferrights to all or part of the agricultural land from large scale private or collective units to

smallholders. In the developing countries (Brazil, South Africa and India) such transferswere put forward as a means of improving social equity and alleviating poverty. In theformerly planned economies (China, Russia, Ukraine, Bulgaria and Romania), thesetransfers were part of a broader transition to a market economy.

While in all formerly planned economies expected efficiency gains from a betterdesignation of land rights played an important role, each country differed in the manner

by which it implemented land reforms. In China, reforms were based on equal distributionof land use rights to all rural families, in Bulgaria and Romania on the restitution of landownership rights to former owners, and in Russia and Ukraine on equal distribution ofland ownership rights to rural workers and retirees, with large scale farms preserved viathe renting of land from new landowners. In some cases – India, China, Romania and tosome extent Bulgaria – reforms resulted in a fragmentation of agricultural holdings,leading governments to consider measures encouraging consolidation of farms into moreviable economic enterprises. Below is a brief synopsis of the record of land reforms in thecountries under review with the special focus on Brazil and South Africa, where landreform initiatives have been undertaken most recently.

Brazil has one of the world’s most unequal land distributions. Towards the mid-1990s theissue assumed increased prominence, as the pressure from landless peasants mounted.Brazil is currently implementing its second National Agrarian Reform Plan, the broadobjective of which is to integrate the poorest households into the general process ofeconomic development. The main actions include settlement of landless peasants on landsconfiscated, purchased or reclaimed by the government; provision of low-interest loans toacquire land; and funding community and infrastructure-related investments. A related

activity is the Programme for Strengthening of Family Farming (PRONAF), targeted to smallland farmers and providing varied support for agricultural activities, such as a large numberof preferential credit lines for investments and working capital, processing and marketing.This programme also incorporates education and extension components. Expenditures onland reform and the support of family farming have increased since 2003 when the newlyelected government declared eradication of poverty its main political priority.

Land Reform in South Africa foresees the restitution of land to people dispossessed inthe past by discriminatory legislation. The restitution is done either in the form of physicalland allotments, financial compensation, or through alternative remedies. Over600 000 land claims had been made by 2004, of which more than one-half concerned ruralland. Another component of the Land Reform is land redistribution, aiming in particular tosettle small and emerging black farmers on viable farming operations in the commercialfarming areas. It is planned to redistribute around 25 million hectares by 2015. Differentmodalities are foreseen under the redistribution programme, including the acquisition ofpart of the equity in existing agricultural enterprises, and the purchase of farms usingcapital grants. There also exists a Comprehensive Agricultural Support Programme (CASP),providing investment grants to farmers settled through the land reform, as well as Micro-Agricultural Finance Schemes providing micro-credit for agriculture on communal lands.

In addition to these activities, other programmes targeted to address social disparities are


1. OVERVIEW

In all countries under review, the governments are committed to increasing the

welfare of large numbers of small farmers. The specific policy objectives vary, and include

raising farm incomes, reducing poverty, developing commercially viable operations,

integrating small farms into rapidly changing domestic supply chains, and expanding rural

non-farm opportunities.

Box 1.1. Land reforms (cont.)

implemented. For example, Agricultural Black Economic Empowerment is a comprehensiveprogramme for skills development of the black rural population and their integration intomainstream economic activity.

The current farm structure in India, dominated by small-scale farming, is inherited frompost-independence land reform originally aimed at distributing land to the poor andlimiting the size of land ownership. A stated objective of Indian land policy is theconsolidation of farms into larger, more viable units. Yet, the fragmentation of agriculturalholdings becomes more acute with each succeeding generation, due to customs andinheritance laws under which a holding is divided among family members. Localinitiatives have met with some success in the northern states, notably Punjab, Haryana,and Western Uttar Pradesh.

In China, while past reforms shifted agricultural production from collectives to a family-based farming system, farmland is owned by village collectives and leased under contractto individual households. Farmers’ land rights have been formally strengthened with theextension of land lease contracts up to 30 years, but in practice remain weak. In particular,as urbanisation and industrialisation advance, low compensation for lost access to landhas become one of the main reasons for peasants’ discontent. The government has tried to

tighten control over the conversion of farmland to non-agricultural uses and severallegislative initiatives have been undertaken to protect farmers’ economic rights, but theirimplementation remains weak.

In Russia and Ukraine, the early process of decollectivisation based on the distribution ofland ownership rights among rural workers and retirees has been completed. Eligiblecitizens received land share certificates and the vast majority of them obtained state acts

confirming their land property rights. However, while in Ukraine the process of physicaldelimitation of specific land plots has almost been finished, in Russia such delimitation isenvisaged only in cases where a land owner wants to create a separate family-run farm.Land market transactions are to a varying degree limited by existing legislation. Althoughthe sale of agricultural land in Russia is permitted, the regulations and procedures arecomplicated, lack clarity and are constantly amended, while in Ukraine, agricultural landsales are subject to a moratorium, now extended until the end of 2006. There are also upperlimitations on land ownership by individuals or legal entities both in Russia and Ukraine.

Land reforms in Bulgaria and Romania involved two different processes: decollectivisation,mainly through the restitution of land used by cooperatives to previous owners; andprivatisation of state owned land through sales, leases and concessions. While in Bulgariathe two processes are completed, in Romania legislative gaps led to procedural delays andthe finalising of land reform is one of the government’s primary objectives. In particular,land market legislation has been changed to accelerate legal actions in court on landrestitution. SAPARD, the pre-accession EU-funded programme, and EU structural policieswithin the EU Common Agricultural Policy are expected to help stronger farm unitsemerge in the two countries.


1. OVERVIEW

There are several driving forces for change that are particular to certain countries. The

main developments in Bulgaria’s and Romania’s agricultural policy, for example, were

related to preparation for accession to the EU in January 2007, and to emergency measures

that address weather disasters and animal disease outbreaks. Russia and Ukraine are

entering the final stages of WTO accession, requiring harmonisation of their legislative

frameworks with WTO rules and standards. Accession in 2007 is anticipated but some

agricultural issues related to domestic support, export subsidies and border protection

remain unsettled. In the interest of expanding trade and with the absence of substantive

progress in WTO negotiations, all the countries under review have continued to pursue a

range of bilateral and regional trade agreements.

Not surprisingly with over one-third of the world’s population, food security is a major

policy challenge in China and India. Grain security has been a top priority in China in recent

years with the emphasis on increasing production capacity. Specific targets of 103 million

hectares and 500 million tonnes of grains (including soybeans) have been set for 2010. India’s

primary agricultural policy objectives are food self-sufficiency and poverty reduction (to

improve access to food). The Green Revolution brought about large gains in production but,

in recent years, food crops in particular have reached a plateau with deteriorating land

quality and water shortages posing serious problems for future increases in output.

Finally, agro-environmental issues are a growing policy concern in Brazil, China and

India. Policy makers in Brazil confront a difficult trade-off between the economic benefits

from agricultural expansion and the environmental benefits from forest preservation. But

the fate of the Amazon rainforest is just one environmental issue linked to agriculture,

albeit the one that attracts the greatest international interest. The impact of agricultural

water use on resource levels and pesticide use on water quality are other concerns raised

by farming systems in Brazil.

China is searching for ways and means of better aligning resource use with societal

interests and environmental sustainability. China’s endowment of water resources is

extremely low and badly distributed while input-intensive agronomic practices are taking

their toll in land degradation. Agro-environmental issues with a special focus on water, as

identified in the 2005 OECD Review of Agricultural Policies in China, were seen as an urgent

priority of the Ministry of Agriculture; and will be a central issue in the on-going OECD

Environmental Review of China.

Similarly, in India the sustainable management of water and land resources are two of

the most important agro-environmental issues. India has only 4% of world water resources

for 16% of the population, and the lack of water is a serious issue in many parts of the

country. Moreover, the demand for water is rising rapidly for both non-agricultural and

agricultural uses. Several serious conflicts have arisen between states over water use in

agriculture and the development of irrigation through multi-purpose hydroelectric dams.

Land degradation is a widespread problem from direct erosion due to flooding and surface

run-off as well as from the excessive use of water, resulting in salinity and/or alkality.

Evaluation of supportSupport estimates (Box 1.2) are presented here for seven of the eight countries covered

in this report (not available for India). These estimates form the basis for a comparative

evaluation of policy developments in each country, the foundations of which are discussed

in Box 1.3.


1. OVERVIEW

Box 1.2. Measuring agricultural support

The Producer Support Estimate (PSE) measures the annual monetary transfers to farmersfrom three broad categories of policy measures that:

● Maintain domestic prices for farm goods at levels higher (and occasionally lower) thanthose at the country’s border (market price support).

● Provide payments to farmers based on, for example, the quantity of a commodityproduced, the amount of inputs used, the number of animals kept, the area farmed, anhistorical reference period, or farmers’ revenue or income (budgetary payments).

● Provide implicit budgetary support through lowering farm input costs, for example forinvestment credit, energy, and water (budgetary revenue foregone).

The measurement of support resulting from agricultural policies is based on howpolicies are actually implemented – and not on the intended objectives or impacts of thosepolicies. A crucial point to emphasise is that the estimates of support not only comprisesbudget payments that appear in government accounts (which is often the popularunderstanding of support), but also budgetary revenues foregone, and the gap betweendomestic and world market prices for farm goods – market price support. The latterelement represents in many countries the largest component of the PSE, but has beendecreasing as a share of overall support in many countries in recent years.

Consumer Support Estimate (CSE) is the annual monetary transfers to consumers frompolicy measures that:

● Maintain domestic prices paid by first consumers (measured at the farm gate) at levelshigher (an implicit tax on consumers) or lower (an implicit subsidy to consumers) thanthose on world markets at the country’s border. It is the mirror image of market pricesupport to farmers.

● Provide subsidies to keep prices of commodities consumed by certain groups in theeconomy lower than would otherwise be the case, such as cheap food for poor people,public institutions and some processors.

● In general the CSE is negative because the implicit tax on consumers from market pricesupport more than offsets that from consumer food subsidies.

General Services Support Estimate (GSSE) is the annual monetary transfers to agriculture

but not to individual producers that:

● Provide budgetary-financed expenditures for the provision of such services as research,development, training, inspection, marketing and promotion.

Total Support Estimate (TSE) is the overall monetary cost of the transfers in a country

from policy measures calculated by:

● Adding the PSE, the taxpayer cost of consumption subsidies and the provision of generalservices, and subtracting import tariff receipts.

Nominal Protection Coefficient (NPC) is the ratio between producer and border prices.

Nominal Assistance Coefficient (NAC) is the ratio between farm receipts (includingsupport) and those generated in the market without support.

The PSE indicators are expressed in both absolute monetary terms (in national currencies,in US dollars and in Euros) and in relative terms – in the case of the %PSE as a percentage ofthe value of gross farm receipts (including support payments) in each country for which theestimates are made. The %PSE shows the amount of support to farmers irrespective of thesectoral structure and inflation rate of a country, making this indicator the most widelyacceptable and useful indicator for comparisons of support across countries and time.


1. OVERVIEW

Producer support is relatively low but has risen in several countries

In all cases, producer support as a share of farm receipts (%PSE) is lower than the

OECD average of 30% in 2003-05 (Figure 1.11) – only in Romania and Russia is the %PSE

more than half the OECD average. Net agricultural exporters (Bulgaria, Brazil and Ukraine)

have lower rates of support than net importers, but there is pressure for protection in all

cases, as each country has import-competing producers who are not competitive at world

market prices. In the majority of cases, support has increased from the mid-1990s, the

exceptions being Russia and South Africa, where support was already high and has fallen

modestly. In the cases of Brazil and Ukraine, there was a switch from a significant taxation

of producers (implying a negative PSE) to support. The evolution of support thus contrasts

with the slight decline in producer support across the OECD area as a whole. A stronger

macroeconomic environment explains this general trend, as higher food prices are more

readily tolerated by consumers when their incomes are higher, and there is more scope for

budgetary transfers when public finances are under reduced strain. A specific factor in the

case of Bulgaria and Romania has been the need for policy convergence with the EU.

Market price support dominates

As in most OECD countries, market price support (MPS) is the dominant way in which

support is delivered to producers. This form of support is provided via domestic price

interventions and border measures that create a wedge between domestic and world

prices. MPS is a relatively inefficient way of delivering support to producers (Box 1.3), but is

often attractive in countries with lower incomes, as it does not require the use of (and can

be a source of) scarce budgetary funds. The use of MPS and output subsidies in OECD

countries has been declining in both absolute terms and as a proportion of producer

support (Figure 1.11). In the seven countries for which PSE results are presented, the

pattern is almost the opposite. Brazil and Ukraine both had significantly negative MPS in

the 1995-97 period; this discrimination against agriculture had been essentially removed by

2003-05 and in the case of Brazil replaced by modest support. In Bulgaria and Romania,

MPS was close to zero in 1995-97, but had increased sharply by 2003-05. In China, there was

a rise in MPS which mirrored the increase in the PSE, while in South Africa there was a

decline which reflected the drop in producer support. MPS rose in Russia at the same time

that the PSE fell, indicating an increased reliance on this instrument as other subsidies

(notably those linked to debt restructuring) have become less important.

Box 1.2. Measuring agricultural support (cont.)

The main purpose of the calculations is to show the estimates and composition of supporteach year, and to compare the trends across countries and through time, in order to monitorand evaluate the extent to which OECD countries are making progress in policy reform towhich all OECD governments are committed. This monitoring and evaluation exercise iscomplemented by integrating the indicators of support in models to inform policy makers

about the efforts made to meet their various objectives, and to analyse the effects of differentpolicy instruments on production, trade, farm incomes and the environment.


1. OVERVIEW

Box 1.3. Evaluating policies in non-OECD countries

The OECD has undertaken a wide range of analysis which considers the effectiveness ofalternative agricultural policy instruments in addressing their objectives. These objectivesfall within two broad categories: raising the incomes of agricultural households, andcorrecting market failures of various kinds (for example by providing a cleaner environmentthan would occur otherwise). A general finding is that the policies which work best are those

that address their objectives directly, and disrupt the functioning of markets as little aspossible. Such policies are described as “market oriented”. Thus targeted payments notlinked to production and consumption decisions can deliver support to farm householdsmuch more effectively than sectoral solutions such as price supports and credit subsidies,and they enable support to be linked to a clear rationale, be that facilitating adjustment orproviding income safety nets for farmers who face major difficulties in adapting tocompetitive markets. Similarly, market failures are generally tackled more efficiently atsource, for example by charging for social costs such as pollution, and by paying for socialbenefits that the market alone may under provide, such as a well maintained countryside.

The principles of market orientation have been affirmed on several occasions by OECDmember countries. In 1987, OECD Ministers recognised the need for a reduction inagricultural support, and for a restructuring of support in favour of measures that wereless market distorting. In 1998, they agreed on a set of principles for agricultural policyreform and a set of operational criteria for putting those principles into practice. In 2002, aPositive Reform Agenda for agricultural policies in OECD countries was agreed, conformingto the principles of market orientation, and linking those principles to a range ofsupporting analytical work. Most recently, in 2005, member governments acknowledgedthat the policies which help countries to achieve their domestic objectives are fully

reconcilable with a commitment to facilitating agricultural trade.

The principle of market orientation is reflected in the way in which agricultural supportis measured and classified by the OECD. The breakdown of the PSE according to the criteriaof policy implementation corresponds to different levels of distortiveness (divergence frommarket orientation). The most distorting producer support policies are input subsidies and

price supports, which directly stimulate production; while other forms of support causefewer distortions according to the extent to which they are “decoupled” from productiondecisions. Thus payments linked to current area or animal numbers are less distorting thatprice support, but more distorting than payments based on some fixed historicallyestablished entitlement. Support for the agricultural sector that is not provided toproducers appears in the General Services Support Estimate (GSSE), and includes manyexpenditures that can be considered as public goods (such as spending on ruralinfrastructure). The PSE and the GSSE, together with transfers to consumers fromtaxpayers, sum to the Total Support Estimate (TSE). Market orientation is associated witha low PSE, a composition of the PSE that is oriented towards decoupled payments, and aGSSE that contains legitimate expenditures on public goods.

The PSE and related indicators were originally developed for OECD countries. Themethodology and a range of economic analysis based on this system of measurement(including that linking the classification of support within the PSE to measures ofdistortiveness), has been accepted by OECD countries. However, there is no similar formalprocess of recognition by countries outside the OECD area, and some arguments have beenadvanced suggesting that analysis based on the PSE indicator, in particular theprescription in favour of less distorting instruments may be less relevant for poorer

developing countries. What truth is there in this argument?


1. OVERVIEW

Input subsidies are also prominent

Payments based on input use tend to account for a smaller share of producer support

than MPS, but are the next most important category of support, and in fact dominate in

Brazil and Ukraine. In the case of Brazil, subsidised credit to farmers also includes the

deferral of debt repayments and additional credit to compensate producers for the effects

of drought. In Ukraine, these payments have been more or less constant in recent years. For

individual years, a negative MPS has in fact been the dominant component, but the switch

Box 1.3. Evaluating policies in non-OECD countries (cont.)

The first point to note is that the core economic analysis of how agricultural policiesoperate (in particular the identification of inefficiencies associated with distorting policies)remains valid for all countries, irrespective of their level of development. This has enabledOECD measurement and analysis to be applied successfully to a heterogeneous range ofcountries, including the countries covered in this monitoring report, formerly planned

economies that have joined the OECD (the Czech Republic, Hungary, Poland and Slovakia),and three countries with developing country status at the WTO (Korea, Mexico and Turkey).

Second, the distinction between supporting agriculture through investments in publicgoods versus supporting farmers’ incomes inefficiently through instruments such as pricesupports and input subsidies is very important. Indeed, this distinction is possibly evenmore important in developing countries, where often there is an under-provision of public

goods that support the functioning of the market system.

Nevertheless, a range of arguments have been advanced that apply specifically todeveloping countries, and which are purported to qualify the policy prescription in favourof market orientation. These include the impracticality of providing fully decoupledsupport in poor countries, and the suggestion that market interventions may provide alegitimate way of stimulating agriculture to develop beyond a low level equilibrium of

subsistence farming. Such issues are the subject of much debate in development circles; adebate that has had implications for WTO discussions, as developing countries havesought reduced obligations, longer implementation periods, special safeguards to protectproducers, and a recognition that some policies are different in a development context(e.g. providing subsidised inputs for low income and resource poor farmers). None of thesearguments repudiates the findings of OECD analysis, but they do suggest possiblecircumstances under which “second best” solutions are necessary.

Recognising that some of the economic arguments may differ, and that non-OECDcountries have not signed up to the results of OECD analysis in the same way as OECDmember countries, there are some cases where the PSEs and related measures need to beinterpreted more cautiously, and where the associated policy evaluation needs to be morecircumspect. These needs are reflected in the analysis contained in this monitoring report(See Section 3 in Annex A).

For further reading see OECD publications:

OECD (2001), Market Effects of Crop Support Measures, Paris.OECD (2002), The Incidence and Efficiency of Farm Support, Paris.OECD (2002), Agricultural Policies in OECD Countries: A Positive Reform Agenda, Paris.

OECD (2003), Farm Household Income: Issues and Policy Responses, Paris.OECD (2005), Agriculture and Development: The Case for Policy Coherence, Paris.OECD (2006), Agricultural Policy and Trade Reform: Potential Effects at Global, National and

Household Levels, Paris.


1. OVERVIEW

from a negative to positive value in 2005 means that the average for 2003-05 has been low

and input subsidies have been on balance more important. Input subsidies are typically even

less efficient than market price support, as they encourage production (to an even greater

extent) and a substantial share of support is captured by input suppliers. They are also often

associated with negative environmental consequences, as they encourage the over-use of

inputs. On the other hand, for agricultural sectors that are relatively under-developed,

interventions in input markets can compensate for market failures (such as a sub-optimal

provision of credit) and provide a way of supporting the transition to more efficient

technologies and production methods. While this provides a possible rationale for some

targeted support in the countries covered in this review, the overall scale and structure of

support for inputs does not correspond to this justification.

More decoupled forms of support are emerging

Despite the dominance of market price support and output and input payments, other

more decoupled forms of support are emerging. In China, payments based on area, input

constraints and farm income are now collectively more important than payments based on

input use, in Romania payments based on area and numbers of animals have increased,

while in South Africa there has been an increase in the use of payments based on overall

income, compared with the 1990s.

Average market protection is low, but sensitive commodities keep protection

The producer Nominal Protection Coefficient (NPC), which is the ratio of prices

received by farmers to world prices, and is an indicator of the protection provided to

producers, is below the OECD average in all countries under review except Romania

(Figure 1.12). The NPC has risen in all cases except South Africa, where support declined. In

countries where the NPC was already greater than one (China, Romania, Russia), this

implies an increase in the misalignment of domestic prices vis-à-vis world market levels,

but in other cases (Bulgaria, Brazil, Ukraine) it implies a closer correspondence between

Figure 1.11. Composition of Producer Support Estimates (%PSE)

Source: OECD, PSE/CSE Database, 2006.1 2 http://dx.doi.org/10.1787/204262421431

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1. OVERVIEW

domestic and international prices. The tendency of all countries to now provide price

support to farmers is reflected in negative CSEs for all countries (in Ukraine the CSE only

became negative in 2005), but consumers are on average taxed much less than in OECD

countries. In some countries, the relatively low NPCs mask significant variations among

commodities. This is for instance the case in South Africa where the average NPC is

below 1.1 but the NPC for sugar exceeds 1.5, in Ukraine where an overall NPC implies

implicit taxation of producers but the poultry NPC is 1.8, and Brazil where with an average

NPC just above one, the rice NPC is close to 1.3.

The money spent on producer support could be more productively allocated to public investments

In addition to support to individual producers, countries provide services to the

agricultural sector as a whole. This support is captured by the General Services Support

Estimate (GSSE), which includes expenditures on research and development, extension,

inspection, marketing and infrastructure. These are potentially important areas of public

investment as they yield higher returns to farmers than price or input support. Yet

expenditures on general services only account for a minority of support in all seven

countries for which support is calculated. A somewhat worrying development is that the

share of the GSSE in total support has been declining in several countries, as producer

support has risen (Figure 1.13).

The total value of support to the agricultural sector is measured by the TSE, which

includes the PSE, the GSSE and transfers from taxpayers to consumers. A given rate of

support to the agricultural sector imposes a larger burden on countries with lower incomes

and a higher share of agriculture in GDP. Thus, the burden of that support is extremely high

in Romania, at 6% of GDP (Figure 1.13). In China, total support is low relative to the OECD

average, but imposes a greater burden on the economy (more than 2% of GDP). In other

countries, the ratio of the TSE to GDP is less than 2%, i.e. of a similar order to the average

ratio in OECD countries, indicating that countries tend to provide support to their

agricultural sectors to the extent that they can afford it.

Figure 1.12. Producer Nominal Protection Coefficients


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http://dx.doi.org/10.1787/312043763461

1. OVERVIEW

Policy observations and recommendationsPolicy reform lessons: All of the countries under review in this monitoring report have

demonstrated that profound agricultural policy reform is both possible and beneficial,

given sufficient economic pressures and political will. The breadth, extent and, in some

cases, speed of reform has been remarkable. This is true for the developing countries and

the formerly planned economies under review. These reforms have permitted the

agricultural sector to both benefit from, and contribute to, broader economic growth.

A key policy lesson from past reforms in these eight countries is the importance of

getting the fundamentals right. Macroeconomic stability has been the cornerstone of

economic growth. Tight fiscal and monetary policies combined with an opening of

the economy provided the necessary conditions for private sector development, but

substantive improvements in human capital, regulatory systems and infrastructure have

been required to capitalise on these reforms. Given the appropriate economic

environment, private economic agents, including commercial farmers, have responded

rapidly to market forces. Agricultural policy reforms over the medium-term have resulted

in relatively low levels of government support and greater market orientation.

Current policy developments: Less positive is the somewhat ad hoc nature of recent policy

developments which does not provide the sector with the predictable policy environment

that is essential for sound business decisions. There are several examples in this report of

ad hoc agricultural expenditures to build up stocks or regulate prices, only for governments

to introduce countervailing measures the following year.

Even more disconcerting is the fact that support to agriculture in the countries under

review is still dominated by market price support and input subsidies, the least efficient

and most trade distorting ways of providing agricultural assistance. Moreover, the share of

MPS and input subsidies in total support has been growing. Such measures generally

misallocate resources and are not well targeted to specific desired outcomes. While there

Figure 1.13. Composition of Total Support Estimate (% of GDP)

Note: Data for 1995-97 for Brazil are not available.


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http://dx.doi.org/10.1787/210881303767

1. OVERVIEW

is a strong case for the increased public investment aimed at enhanced competitiveness of

the agricultural sector, scarce budgetary resources have often been used in inefficient ways

to support producer incomes.

Changing policy priorities: However, as the economic situation and sectoral performance

have improved, there has been a noticeable shift in government priorities for agriculture.

This shift comes from the realisation that economic growth alone does not solve, and can

sometimes exacerbate, economic and social divisions. Current policies are correctly being

focused on such objectives as:

● Closing the income gap between rural and urban populations.

● Integrating small-scale farmers into markets.

● Stimulating the reallocation of resources to create more efficient farm structures.

● Increasing the competitiveness of agro-food products on domestic and international

markets.

● Improving the governance of institutions in designing and implementing agricultural

policies.

● Sustainable management of water and land resources.

There have been policy developments in these directions. This report documents

ongoing programmes to improve agricultural structures and equity through land and credit

reforms, the development of infrastructure and information services and the improvement

of regulatory systems. A common and sustained theme of land reforms has been

the transfer of land rights to small holders combined with better targeting of credit

programmes to these beneficiaries. There have also been attempts to better target farm

income support to those most in need and to diversify the rural economy. Unfortunately,

little analytical information is available on the effectiveness and efficiency of these new

initiatives and internal monitoring is weak in most cases.

The role of agricultural growth in raising rural incomes and reducing poverty varies

from one country to the next according to the endowments and structure of the economy.

Indeed, the experiences of the countries for which OECD has recently undertaken

agricultural policy reviews have varied considerably. In Brazil, agricultural growth has

benefited some poor farmers, but others have come under increased competitive

pressures, leading them to migrate to urban areas or making them increasingly dependent

on social payments. In China, local non-agricultural opportunities, agricultural growth and

remittances from migrants have been key contributors to rural poverty reduction, while in

South Africa better education, health and social services in rural areas appear to have had

a greater impact on poverty than agricultural growth. In India, there is no evidence yet that

rural employment schemes and large infrastructure development schemes are successful

in raising the income of poor rural households by diversifying sources of income.

Biofuel production, including fuel ethanol and biodiesel, has become a policy priority

in Brazil and China aimed at furthering the objectives of energy security, environmental

protection and rural development. China is planning to increase significantly its biofuel

production with the intension of satisfying up to 15% of its transportation energy needs by

2020. In Brazil, several measures were introduced to promote the use and production of

biodiesel, in particular the supply of biodiesel from small scale farmers.


1. OVERVIEW

Policy recommendations: In terms of policy design, advisors and decision-makers in the

countries under review would do well to consider the operational criteria agreed by OECD

Agriculture Ministers in 1998, which state that policy measures should be:

● Transparent: having easily identifiable policy objectives, costs, benefits and beneficiaries.

● Targeted: to specific outcomes and as far as possible decoupled.

● Tailored: providing transfers no greater than necessary to achieve clearly identified

outcomes.

● Flexible: reflecting the diversity of agricultural situations, be able to respond to changing

objectives and priorities, and applicable to the time period needed for the specific

outcome to be achieved.

● Equitable: taking into account the effects of the distribution of support between sectors,

farmers and regions.

In terms of policy direction, priorities need to maintain the focus on economy-wide

measures such as improved access to education in rural areas, better health care, pension

and other social security services, enhanced land property rights and rural tax reforms. In

agriculture, the emphasis should be on continued improvements in competitiveness and

targeted adjustment assistance. It is important to recognise that the long-term future for

most semi-subsistence farm households lies outside agriculture, so there is a need for

measures that facilitate income diversification and the exploitation of non-farm activities.




Chapter 2

Brazil

Evaluation of policy developments

● Following several years of prodigious growth, the agricultural sector was afflicted in 2005by a price-cost squeeze that resulted from a combination of falling international pricesfor important export commodities, rising input costs (notably for fuel) and anappreciating exchange rate. Policy initiatives in 2005/06 were primarily designed tomitigate this development.

● The interest charges associated with official credit were held constant. With marketrates rising, this resulted in an increase in the implied subsidy. In addition, thegovernment announced, for the second year running, a package of emergency assistancethat included fresh credit at reduced interest rates, further deferral of debt repaymentsand a range of drought assistance measures.

● Brazil’s delivery of credit subsidies is heavily managed, while the repayment of debt hasbecome an issue for negotiation with producers. This approach to the problem posed byhigh real interest rates thwarts the development of a properly functioning credit market.

● Guaranteed prices were mostly held constant. With falling international prices, this ledto a rise in market price support. In 2005/06, the volume of crops benefiting from pricesupport doubled, and price guarantees were extended to soybeans for the first time. Bylimiting the regional coverage of price guarantees, the government has in the past soughtto limit the coverage of support to smaller farmers. Recent payments have breached thisimplicit objective and create a worrying precedent, given that a downturn in marketconditions was widely anticipated.

● Despite these changes, the overall level of support provided to producers remains muchlower than the average in OECD countries, and much of the recent increase reflects thecounter-cyclical nature of existing policies.

● The government maintained its increased level of expenditures on infrastructure andother public investments. Such support offers higher returns to farmers than pricesupport or credit subsidies, yet is only half the value of support to producers.

● Land reform has accelerated under the current government. This programme combinessocial and economic objectives. On the latter, there is some evidence that theproductivity of new settlements has improved, but it is nevertheless questionable howmany recipients of land can be transformed into economically viable family farmers.

● A new programme to promote the use of biodiesel includes the specification of a minimumblending ratio in diesel oil and provides incentives for processors to purchase from smallscale family farmers.

35

2. BRAZIL

Description of support

● Support to producers (%PSE) averaged 5%in 2003-05. It increased from 4% in 2004 to6% in 2005, with both payments based oninput use and market price support rising.The rate of support is still much lower

than the OECD average of 30%.

● Two-thirds of producer support isprovided in the form of credit subsidiesand one-third through market pricesupport.

● Market price support increased by 65% toBRL 2.9 billion (USD 1.2 billion) in 2005, asguaranteed prices were maintained forsupported commodities in the face offalling market prices, and the exchangerate appreciated.

● Payments based on input use rose by58% to BRL 7.5 billion (USD 3.2 billion)in 2005, with interest rate subsidies fori nvest me nt a nd wo rk ing ca p it alincreasing, as well as the implicit subsidyassociated with the deferral of paymentson farm debt (the latter accounted for

about one-third of payments in thiscategory).

● Prices received by producers were onaverage 2% higher than those received onworld markets in 2003-05 (i.e. the NPC was

1.02), with significantly higher protectionfor rice, maize, cotton and wheat.

● The effects of price supports onconsumers were equivalent to a net tax of2% in 2003-05 (i.e. a %CSE of –2%).

● Support provided to general services,notably infrastructure and agriculturalschools, averaged 31% of total support in2003-05, with higher allocations in 2004/05than in previous years, and these ratesbeing maintained in 2005/06.

● Total support to agriculture averaged0.7% of GDP in 2003-05, which is less thanthe OECD average of 1.1%, even thoughagriculture accounts for a much highershare of national income than in mostOECD countries.

Source: OECD, PSE/CSE database, 2006.

Figure 2.3. TSE composition over time

1 2 http://dx.doi.org/10.1787/871442161558

Figure 2.1. PSE level and composition over time

1 2 http://dx.doi.org/10.1787/143308784554

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NPC was equal to 1 for coffee, sugar, oilseeds (soybeans), milk,beef and veal, pigmeat and poultry.

1 2 http://dx.doi.org/10.1787/616444842012

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2. BRAZIL

Table 2.1. Brazil: Estimates of support to agricultureBRL million

1995-97 2003-05 2003 2004 2005

Total value of production (at farm gate) 53 149 173 125 166 643 181 765 170 966

of which share of MPS commodities (%) 73 80 80 80 81

Total value of consumption (at farm gate) 50 319 130 820 125 999 138 514 127 946

Producer Support Estimate (PSE) –2 795 8 495 8 207 6 672 10 607

Market Price Support (MPS) –4 945 2 110 1 604 1 785 2 941

of which MPS commodities –3 587 1 692 1 280 1 424 2 373

Payments based on output 74 141 164 119 141

Payments based on area planted/animal numbers 0 0 0 0 0

Payments based on historical entitlements 0 0 0 0 0

Payments based on input use 2 076 6 208 6 399 4 739 7 487

Payments based on input constraints 0 0 0 0 0

Payments based on overall farming income 0 36 40 29 39

Miscellaneous payments 0 0 0 0 0

Percentage PSE –5 5 5 4 6

Producer NPC 0.92 1.02 1.01 1.01 1.04

Producer NAC 0.95 1.05 1.05 1.04 1.06

General Services Support Estimate (GSSE) 2 914 3 782 1 974 4 495 4 878

Research and development 483 762 780 719 787

Agricultural schools 192 991 246 1 233 1 492

Inspection services 109 113 94 106 139

Infrastructure 1 697 1 678 824 2 122 2 088

Marketing and promotion 8 41 11 26 85

Public stockholding 425 146 18 191 227

Miscellaneous 0 52 0 97 59

GSSE as a share of TSE (%) n.c. 30.4 19.4 40.1 30.5

Consumer Support Estimate (CSE) 3 070 –2 314 –1 801 –1 633 –3 507

Transfers to producers from consumers 3 144 –3 041 –1 680 –1 645 –5 799

Other transfers from consumers –102 –279 –238 –35 –562

Transfers to consumers from taxpayers 15 180 0 47 493

Excess feed cost 13 826 117 0 2 361

Percentage CSE 6 –2 –1 –1 –3

Consumer NPC 0.94 1.03 1.02 1.01 1.05

Consumer NAC 0.94 1.02 1.01 1.01 1.03

Total Support Estimate (TSE) 135 12 458 10 180 11 214 15 979

Transfers from consumers –3 042 3 320 1 918 1 680 6 361

Transfers from taxpayers 3 279 9 416 8 500 9 569 10 180

Budget revenues –102 –279 –238 –35 –562

Percentage TSE (expressed as share of GDP) 0.00 0.69 0.65 0.63 0.79

GDP deflator 1995-97 = 100 100 195 181 196 210

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for Brazil are: wheat, maize, rice, oilseeds, sugar, cotton, coffee, milk, beef and veal, pigmeat andpoultry.Source: OECD, PSE/CSE database, 2006.

1 2 http://dx.doi.org/10.1787/062441312131


http://dx.doi.org/10.1787/062441312131

2. BRAZIL

Summary of key policy developmentsThe basic mechanism for providing market price support to Brazilian farmers consists of

regionally announced minimum guaranteed prices. The government made further changes to

the operation of this system in the crop years 2004/05 and 2005/06 (which run from July to June)

by making greater use of measures under which the private sector is induced to buy from

farmers at minimum prices. Brazil’s highly directed system of agricultural credit reflects the

failure of the commercial system to provide sufficient liquidity to all but a minority of farmers.

In 2005/06, credit was used as a means of cushioning the effects of weaker market conditions

for many products, and the effects of drought in several regions. Land reform accelerated and

is close to meeting the ambitious target set out in the second National Agrarian Reform Plan.

However, there are still concerns about the amount and quality of land being allocated, and the

degree to which this is accompanied by other necessary investments. Moreover, rising land

prices have raised he cost of the programme beyond expectations.

Policy contextAgriculture and its related industries are very important to the Brazilian economy.

Primary agriculture accounted for 8% of GDP in 2005 (down from 10% in 2004 due to a

cyclical downturn in agricultural markets). With a dualistic farming structure that contains

many small scale relatively unproductive producers, the sector accounts for a greater share

of employment (19% in 2003). Agricultural and agriculture-based products (including food

but also products such as leather) accounted for 37% of all exports in 2005, but just 7% of

imports, and were responsible for 86% of the country’s balance of trade surplus.

Consequently, the sector plays a major role in underpinning macroeconomic stability.

Macroeconomic situation

GDP growth slipped from 4.9% in 2004 to 2.3% in 2005, as a result of sluggish

investment growth (linked to very high real interest rates), weak private consumption, and

stagnant agricultural output. The latter was a consequence of both deteriorating market

conditions and drought in several important producing regions.

Longer term, the foundations for sustained growth are mostly in place. The

government has maintained a primary budget surplus, enabling the public debt-to-GDP

ratio to trend downwards since 2003, although it remains high at just over 50% of GDP

(which results in interest payments equivalent to over 8% of GDP), and the problem of

unfunded pension liabilities has not been resolved. The tight budget constraint limits the

government’s scope for increasing spending on public investments. Consumer price

inflation, at 5.7% in 2005, was converging on the official end of year target of 5.1%, with the

cost of food and beverages increasing by just 2%.

Brazil’s current account surplus widened in 2004 and again in 2005, thanks to a rapid

increase in merchandise exports, which reached USD 118 billion, an increase of over 60% in

dollar terms over two years. This enabled external debt to halve, from 42% of GDP to 21%,

as a result of which the country’s sovereign debt has been upgraded and interest premia

are at historically low levels. The impressive performance of exports occurred in spite of a

17% appreciation in the nominal exchange rate in 2005.

The government increased the minimum wage from BRL 300 per month in May 2005

to BRL 350 per month in April 2006. In addition, the coverage of Bolsa Familia (a conditional

cash transfer programme) was extended to 8 million families, with a near term goal of


2. BRAZIL

11.2 million families, accounting for nearly a third of the population. The cost of this

programme was BRL 6.5 billion (USD 3.0 billion), of which BRL 4.3 billion (USD 2 billion)

was provided directly to families. Despite these initiatives, human capital remains weak

and there is a complementary need for greater investment in education and the removal of

policy disincentives for formal labour employment.

Agriculture and agri-food situation

Output

Having increased by more than 5% a year for four years, GAO declined by 0.3% in 2005

(Figure 2.4). Crops performed worse than livestock, with a 3.8% increase in 2004 followed by

a fall of 0.6% in 2005, compared with an increase of 6.5% in 2004 and no change in 2005. On

average, agricultural prices increased by 5.1% in 2004 and fell by 2.9% in 2005. With input

prices increasing by 10.0% in 2004 and 6.4% in 2005, the sector as a whole has undergone a

significant price-cost squeeze in the last two years.

This overall picture masks important variations from one commodity to the next. In

2005, soybean prices fell by 26%, cotton prices by 21% wheat by 16%, rice by 23% and maize

by 5%. On the other hand, coffee prices strengthened by 24%, sugar cane prices by 14% and

oranges by 4%. The prices of all livestock products rose, except for beef and veal, where

they fell by 4%. As a result of these movements, the value of crop production fell by 13%,

while the value of livestock output increased by 7%.

Rising prices for all inputs, including fuel, fertiliser and machinery, were reflected in

reduced demand: domestic sales of agricultural machinery dropped by 39% in 2005, while

fertiliser consumption fell by 11%.

Crops

The above changes in producer prices led to a diversity of supply responses. The area

planted to soybeans, wheat, cotton and rice fell, while there were increases in the area

Figure 2.4. Evolution and annual changes of agricultural output in Brazil, 1995-2005

Source: OECD Secretariat, 2006.1 2 http://dx.doi.org/10.1787/387028753140

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2. BRAZIL

devoted to maize, beans and less important crops such as rye, oats and sunflower. These

shifts in area were reflected in the direction of output changes, with maize output

increasing particularly rapidly (18.4%). A notable exception was soybeans, where the

contraction in planted area was more than offset by an improvement in yields and

production rose by 3.8%. Coffee and sugar cane output increased by 18.8% and 7.6%

respectively. In the case of coffee, the increase was purely due to improved yields, while for

sugar cane the growth came exclusively from increases in area. The production of oranges

and tobacco was essentially unchanged.

Livestock

According to official sources, production of pigmeat increased by 8.8% in 2005, that of

beef and veal by 9.0% and poultry by 14.7%. Private sector sources suggest slightly lower

numbers, but nevertheless report significant increases for all types of meat, including beef

and veal (where prices fell). Milk production was reported to have increased by 5%, with

Brazil emerging for the first time as a net exporter of dairy products in 2004 and 2005.

Structures

Brazil has an increasingly concentrated production structure that land reform and

targeted price and credit policies are unlikely to reverse. The largest 20% of farms in Brazil

are responsible for 80% of output, while the smallest 40% comprising traditional, often

semi-subsistence farms, account for just 4% of production (FIPE, 2004). This is being

matched by increasing concentration of the food industry. Between 1990 and 2000, the

share of supermarkets in total food sales climbed from under 20% to 75%. This provides an

opportunity for some suppliers, but poses a substantial difficulty for small scale producers

who cannot meet the quality and/or volume requirement of large downstream purchasers.

Agro-food trade flows

Despite weak production growth and an appreciating exchange rate, Brazil’s exports of

agricultural and agro-food products increased by 13.5% in 2005, reaching USD 32.2 billion

(Figure 2.5). If other non-food items such as wood and leather goods are included, the total

climbs to USD 43.6 billion. With agro-food imports increasing by just 0.2% to USD 3.8 billion,

the agro-food trade surplus widened to USD 28.4 billion (USD 3.8 billion higher than the

previous year). Non agro-food trade grew even more rapidly, with exports increasing by

25.9% and imports by 18.1%; the surplus reaching USD 11.3 billion. The vast majority of this

surplus came from non-food but nevertheless agriculture related products.

The main products responsible for this trade performance were sugar (where exports

grew by 49%), coffee (40%) meats (29%) and tobacco (20%). Exports from the soybean

complex, which was until recently a major driver of Brazil’s export growth, actually

declined slightly (although exports of uncrushed soybeans increased). The increase in

coffee exports was exclusively due to price improvements (exported volumes declined). For

sugar and tobacco, price impacts dominated volume increases, but for meats the

improvement was largely attributable to increased export quantities.

The EU remains the principal destination for Brazil’s agribusiness exports, but the

share of this market declined from 37% in 2004 to 35% in 2005. The share of exports going

to the Americas was unchanged, but a greater proportion of exports went to Eastern Europe

(8.2%) and Africa (6.5%). The changes, although small, provide further evidence that Brazil


2. BRAZIL

is reducing its reliance on the EU market, which in 2000-03 accounted for 43% of exports,

and focusing on economies with lower incomes but possibly greater potential for growth.

Brazil’s livestock exports have been afflicted by outbreaks of Foot and Mouth Disease

(in June 2004 and October 2005) and Newcastle Disease (in July 2006). In the case of foot and

mouth disease, which occurred in Mato Grosso do Sul and Paraná, 58 countries erected full

or partial barriers to Brazilian meat trade. In the case of the Newcastle Disease in Rio

Grande do Sul, 38 countries imposed restrictions on poultry meat from this State. In

addition, in March 2006 the EU stopped purchases of Brazilian honey, alleging a lack of

control over residues. In 2005, the EU absorbed 80% of Brazil’s honey exports.

Imports of agribusiness products were less than 12% the value of exports in 2005.

Twenty-three per cent of these imports were of cereals (mostly wheat), while the other big

items were mostly non-food items such as pulp and paper. 43% of imports of these

products come from other Mercosur members (mostly wheat from Argentina), with 20%

coming from the EU, 14% from Asia and 11% from NAFTA countries.

Domestic agricultural policiesBrazil maintains a complex array of price support and credit instruments. For full

details on the functioning of these instruments, the reader is referred to OECD (2005).

Market price support

Several instruments are used to provide guaranteed prices to producers. In each case,

the aim is to provide targeted assistance to small and/or medium scale (“family”) producers

rather than the sector as a whole. This is done by restricting the terms under which price

supports are applied, although marginal interventions naturally have market impacts. The

overall effect is captured in the calculation of market price support.

Figure 2.5. Agro-food trade in Brazil, 1996-2005

Source: UN, UN Comtrade database, 2006.1 2 http://dx.doi.org/10.1787/652126063606

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2. BRAZIL

The traditional instrument, Aquisição do Governo Federal (AGF), consists of direct

government purchases from producers and producer cooperatives at announced prices.

The scope of the AGF is limited to specific regions and by the amount of budgetary funds

allocated. Twelve commodities are covered, including both staple crops (mostly rice, maize

and wheat) and non-food crops such as cotton and jute. Minimum guaranteed prices were

held constant for most commodities between 2004/05 and 2005/06. With market prices of

most products declining, this implied an increase in support per unit. The volume of direct

purchases declined to 1.2 million tonnes, compared with 1.7 million tonnes in 2004/05.

This is consistent with the government’s efforts to disengage from taking physical delivery

and managing stocks itself. The government also makes direct acquisitions from small

farmers under the Food Acquisition Programme, PAA, but these purchases are made at

market prices and accounted for just 2% of all acquisitions in 2005/06. Another similar

programme is the Incentive for Milk Consumption (ICL), which buys milk from producers

at market prices and distributes it to needy families.

Increasingly, the government has preferred to use instruments through which the

private sector effectively operates the price guarantees. The most important of these

instruments is the Prêmio para Escoamento do Produto (PEP). Here, the government offers a

premium to commercial buyers, which covers the difference between the minimum

guaranteed price and the price the buyer is willing to pay. Participants in the programme

are those buyers who bid for the lowest premium at regional auctions organised by the

national supply agency CONAB. Receipt of the premium is contingent on their paying

producers the minimum price. In 2005/06, the use of this instrument more than doubled,

with 10.9 million tonnes of crops receiving the minimum price, predominantly soybeans

and maize. This is the first time that soybeans have benefited from official support.

Until 2005/06, the government used public options contracts. Before each season,

CONAB would announce the products for which sell options were to be sold, at a fixed

“execution price” (at least the minimum price) and the number of contracts. To purchase

an option the buyer would pay an option price established through an auction. The

government, through CONAB, could buy back its obligation to purchase the product before

the expiration of the contract, in which case the producer would receive a payment equal

to the difference between the “execution price” and the market price; alternatively it could

transfer the obligation to buy to another party. In 2005/06, use of this instrument was

suspended, and replaced with recently introduced privately operated instruments.

The private sell option contract, PROP (Prêmio de Risco para Aquisição de Produto Agrícola

oriundo de Contrato Privado de Opção de Venda), works in the same way as the public sell

option, except that private agents act as the buyer and the government pays these agents

a “risk premium” if the market price falls below the “execution” price. A new programme

that operates similarly, and has been applied mostly to soybeans is (Prêmio Equalizador Pago

ao Produtor). Here the government pays a premium to the buyer of output in storage, with

buyers identified and the size of the premium established at auction.

Table 2.2 indicates the prices paid and volumes purchased under these various

programmes. Maize and soybeans account for the lion’s share of support, with more than

4.5 million tonnes purchased in each case. The other commodities to receive significant

assistance are rice, cotton and wheat. The share of production purchased increased

significantly for maize and for soybeans in 2005/06 (where previously there was no

support), but declined for rice, cotton and wheat. Purchases made in 2005/06 have some

effect on the 2005 PSE estimates, but will mostly be reflected in the 2006 calculations.


2. BRAZIL

Table 2.2. Brazil: Volume of purchases of agricultural commodities, by instrument, 2003-06

1 000 tonnes

Support Instrument 2002-03 2003-04 2004-05 2005-06

PEP 0 399 2 150 5 054

Cotton 0 28 198 2

Rice 0 0 0 460

Manioc 0 0 0 0

Maize 0 184 760 1 782

Soybeans 0 0 0 2 570

Wheat 0 186 1 192 240

PROP 0 0 924 3 046

Cotton 0 0 272 0

Rice 0 0 328 239

Manioc 0 0 76 161

Maize 0 0 94 2 059

Soybeans 0 0 0 587

Wheat 0 0 153 0

PEPRO 0 0 0 1 635

Cotton 0 0 0 311

Rice 0 0 0 0

Manioc 0 0 0 0

Maize 0 0 0 0


Wheat 0 0 0 0

AGF-Total 0 282 1 690 1 176

Cotton 0 0 4 0

Rice 0 0 567 236

Manioc 0 0 0 0

Maize 0 100 637 908

Soybeans 0 0 0 0

Wheat 0 183 481 32

Public Option 2 253 1 417 352 0

Cotton 0 0 0 0

Rice 0 0 350 0

Manioc 0 0 0 0

Maize 1 735 767 0 0

Soybeans 0 0 0 0

Wheat 518 650 2 0

Total 2 253 2 098 5 115 10 911

Maize 1 735 1 051 1 491 4 749

% of production 4% 2% 4% 11%



Rice 0 0 1 244 935


Cotton 0 28 474 313


Wheat 518 1 019 1 829 271


Manioc 0 0 76 161


Source: MAPA/SPA, 2006.1 2 http://dx.doi.org/10.1787/448318880715


http://dx.doi.org/10.1787/448318880715

2. BRAZIL

In 2006/07 a new programme will be introduced, providing price insurance to family

farmers enrolled in PRONAF. The programme aims to reduce the need for emergency

assistance and so provide a more predictable policy environment. Reference prices under

the programme will be at least equal to the guaranteed minimum prices established for

CONAB operations.

Credit

The provision of bank credit to agriculture in Brazil is dominated by the national rural

credit system, Sistema Nacional do Crédito Rural (SNCR). The majority of lending to the sector

comes from non-bank sources such as domestic agribusiness and international lenders.

Non-bank credit is typically unavailable for smaller agricultural producers without

established links to markets, so the government uses a wide array of instruments under

the SNCR to increase the flow of lending to the sector. As with price policies, these

measures are designed primarily to benefit those producers without access to commercial

credit, although they inevitably affect the overall allocation of credit, both within

agriculture and beyond.

In 2005/06 the availability of official agricultural credit increased by 15% to

BRL 53.35 billion (USD 21.9 billion), with BRL 60 billion (USD 27.7 billion) announced for

2006/07. However, actual allocations fell slightly from BRL 44.1 billion in 2004/05 to

BRL 42.6 billion (USD 17.5 billion) in 2005/06, due to reduced profitability and liquidity

within the sector. The interest rate subsidy on this credit comprises more than half the

“payments based on input use” in Table 2.1.

The biggest source of funds was compulsory resources, under which banks are forced

to choose between either a) holding 25% of their sight deposits as obligatory reserves

(exigibilidades) at the central bank at zero interest, or b) lending to agricultural borrowers at

controlled (lower than market) interest rates. These resources accounted for 39.5% of

financings to producers in 2005/06. Other important sources of credit are the rural savings

of cooperative banks (a share of 25.1% in 2005/06), constitutional (state) funds (9.6%), the

unemployment insurance fund FAT (9.3%) and the national development bank

BNDES (8.1%).

The SNCR provides directed credit at controlled interest rates under a range of

programmes that fall into three categories: i) marketing and storage credit; ii) working

capital; and iii) investment credit. Working capital accounted for 57% of this credit in 2005/06,

with investment taking a share of 22% and marketing and storage 21%.

BNDES is the main financer of investments in Brazil, yet agriculture accounted for just

10% of its investments in 2005/06, compared with 18% in 2004/05. The share of the

Treasury’s own resources, which was once a major source of agricultural lending, declined

to just 2%. Most of this money goes into the national programme to strengthen family

farming, PRONAF, accounting for one-third of the programme’s total resources (PRONAF).

The allocation of marketing and storage credit, and of investment credit, is heavily

managed, whereas most working capital is obtained directly by the producers at the set

interest rate. The main form of marketing and storage credit is a federal government loan,

the Empréstimo do Governo Federal (EGF), under which the farmer’s crop or livestock serve as

collateral. A similar instrument exists for processors. In 2003, these programmes were

complemented by a special marketing credit line, the Linha Especial de Commercialização

(LEC). The resources allocated to this mechanism were reduced sharply in 2005/06, with


2. BRAZIL

wheat and maize receiving negligible allocations, and nearly all financings allocated to

coffee and apples. Specific initiatives in 2005/06 included a line of credit to assist coffee

under the Coffee Economy Defence Fund (Funcafé), and a separate initiative to assist

purchasers of coffee (FAC). The interest rates charged under LEC, Funcafé and FAC were,

respectively, 8.75%, 9.75% and 9.5%. This contrasts with a short term market interest rate

(the SELIC rate) of 19.1%.

In 2005/06 there were significant readjustments in specific programmes for

investment credit that are administered by BNDES, including MODERFROTA (which

finances tractors and agricultural machinery) and MODERINFRA (which covers irrigation

and storage).

Adjustments were also made to the terms of the PRONAF programme, which supports

“family farming”, with a greater share of credit going to poorer areas (notably the North

East) and the addition of several special credit lines (e.g. for young people and women, and

for different ecological areas). Total disbursements for investment and working capital

under PRONAF increased by 2% in 2005/06, to BRL 6.2 billion (USD 2.5 billion). PRONAF

accounted for 13% of all official credit to agriculture in 2005. A family farm insurance

programme (SEAF), which is governed by the general terms of PROAGRO (see below), was

also created to serve farmers enrolled in PRONAF.

With market prices for agricultural products declining, the government undertook a

range of measures to ease the flow of liquidity into the agricultural sector. The use of CPRs

(Cédula de Produto Rural) increased to BRL 13.3 billion (USD 5.5 billion), while several

new financial securities were issued, with a total disbursement of BRL 490 million

(USD 201 million). Emergency measures were adopted to give producers easier access to

credit (e.g. under LEC), while further extensions were granted for the repayment of farm

debts. The latter required a range of rulings on debts accumulated under different

programmes.

Farm insurance programmes

The government operates a range of farm insurance schemes, with recently

introduced schemes being used primarily to cushion the effects of drought. The traditional

programme, PROAGRO, increased its indemnities from BRL 20 million (USD 6.8 million) in

2004/05 to BRL 40 million (USD 16.4 million) in 2005/06. However, these payments were

dwarfed by indemnities paid under a supplementary scheme established in August 2004,

PROAGRO MAIS, which pays exclusively to farmers enrolled in the PRONAF programme.

Under this programme, farmers are insured for 100% of the credit they receive and 65% of

estimated future revenues. Indemnities reached BRL 728 million (USD 249 million) in 2004/

05, with an average payment of BRL 3 300 (USD 1 128). This programme was funded in 2005/

06 mostly by ad hoc extra-budgetary allocations. Federal benefits under a third scheme, the

crop guarantee programme Garantia Safra, that assists PRONAF enrolled farmers in semi-

arid areas, also increased, from BRL 28.5 million (USD 9.7 million) to BRL 39.3 million

(USD 16.1 million). Finally, transfers under the Rural Insurance Premium Program reached

BRL 561 000 (USD 192 000) in 2004/05.

Structural adjustment policies

The current government’s land reform programme, the Second National Agrarian

Reform Plan (PNRA II) was launched in November 2003. This programme seeks to improve

the distribution of land in Brazil, which, with a Gini coefficient of 0.81 in 2000, is one of the


2. BRAZIL

most unequal in the world. The extreme concentration of land ownership in Brazil is

viewed as a source of social problems and an impediment to broad based development.

PNRA II aims to settle 400 000 families by 2006, provide 130 000 families with access to

land via land credit, and ensure security of tenure for another 500 000 families by regularising

their legal status. The overall aim, therefore, is to benefit more than one million families

directly. The broader aims are even more ambitious, with knock-on benefits anticipated for

3-5 million families with links to agriculture. Beyond the allocation of land, the government

also seeks to turn these settlements into economically viable operations through the provision

of supporting infrastructure, extension and credit. At the same time the plan aims to tackle a

range of social issues such as indigenous rights, gender equality and land conflicts.

According to the Ministry of Agrarian Development, MDA, the settlement of land is on

target, with 280 000 families settled between 2003 and 2005, 127 500 of those in 2005 alone.

The measurement, which includes settlements based on expropriation lawsuits and land

redefinitions has been criticised by some researchers and social organisations. Even so, the

pace of land reform has been faster than under previous initiatives. The total expenses of

INCRA, the agency responsible for administering PNRA II, increased 2.4 times in the last three

years, from BRL 1.4 billion (USD 0.5 billion) in 2003, to BRL 2.4 billion (USD 0.8 billion) in 2004

and BRL 3.4 billion (USD 1.4 billion) in 2005. However, the cost of acquiring land has increased

faster than expected, with an average cost of BRL 1 450 (USD 596) per hectare compared with a

price of BRL 1 000 (USD 326) per hectare envisaged in 2003. Increased spending on land

reform and accompanying investments in rural infrastructure account for much of the

increase in the GSSE in 2004 and 2005, as compared with previous years.

Biodiesel policies

In December 2004, the federal government announced a new biodiesel programme.

This programme is expected to have a significant effect on producers’ incentives, given

that in 2005 diesel oil accounted for 55% of the fuel consumption of all vehicles in Brazil,

compared with shares of 26% for petrol (gasoline) and 17% for anhydrous and hydrous

alcohol (ethanol).

A main element of the new programme is the establishment of a minimum blending

ratio (as operated for ethanol), with the share of biodiesel in diesel oil set at 2% from 2008

and 5% from 2013. These ratios are sufficiently low that they will not require alterations in

engines powered by diesel.

A second element of the programme is the creation of a Social Fuel Stamp. This

certificate is given to biodiesel manufacturers who make a minimum share of their

purchases from family farmers enrolled in PRONAF, with those minimum shares set by

region, and who meet other requirements, such as providing technical assistance.

Biodiesel manufacturers in receipt of the Social Fuel Stamp are eligible for government

credit at reduced interest rates and for reduced rates on federal taxes.

At the producer level, financial support in the form of investment credit at reduced

interest rates is provided to farmers who invest in biodiesel crops, such as soybeans and

castorseed, as well as other oilseeds and several tropical crops. For family farmers, this

credit is provided via PRONAF Biodiesel and PRONAF Agro-Industry, which cover planting

and machinery costs respectively. For commercial farmers, low interest credit is available

from BNDES.


2. BRAZIL

Under the new programme, all biodiesel production purchased by processors from

family farmers in conjunction with the Social Fuel Stamp is sold to distributors via public

auction. At the moment, the state oil company Petrobras buys nearly all the biodiesel sold

at these auctions, but this situation is likely to change as Petrobras develops its own

processing capacity.

Agro-food trade policiesThe centrepiece of Brazil’s import policy is the common external tariff (CET) applied by

Mercosur. Brazil’s average nominal MFN tariff for agriculture (using the WTO definition)

was 10.2% in 2004, compared with an overall average tariff of 10.4%. Brazil is one of the few

WTO Members for which the average tariff applied on agricultural products is lower than

that applied on industrial goods (South Africa is another).

Brazil has a number of exceptions to the CET. In some cases, including fertiliser and

pesticides, zero rates are applied; in others, notably several dairy products and rice, higher

rates are levied. In addition, domestic tax exemptions are applied to several agricultural

imports. In 2005, zero duties under the PIS/PASEP (Social Integration Programme Tax) and

COFINS (Social Security Contribution) were specified for imports of fertiliser, pesticides and

other inputs, as well as fluid milk, milk powder for human consumption and certain cheeses.

Brazil applied a total of 50 trade defence measures in 2005, of which 12 pertained to

agricultural products. In particular, protective policies were applied to milk powder

imported from Argentina, Uruguay, the EU and New Zealand. In the case of the first two

countries, this was done via an agreement on prices; in the latter two cases, Brazil

instituted anti-dumping measures. In addition, the tariff levied on imported garlic was

raised from 14% to 35%.

The federal government allocated BRL 1.8 billion (USD 0.7 billion) to states for the

purpose of export promotion. It is not clear how much of this allocation is earmarked for

agricultural commodities. Brazil also has three main export financing measures for which

exporters (including those of agricultural products) are eligible: BNDES-exim; Proex; and the

Exports Guarantee Fund (FGE). Disbursements under BNDES-exim, the largest of these

programmes, grew by 54% between 2004 and 2005, from USD 3.9 billion to USD 5.9 billion

(this compares with a 23% growth in the dollar value of exports). Under a new initiative

(December 2005), BNDES seeks to support the creation of value added by providing financing

for processed products but excluding many raw agricultural commodities. In addition to

these programmes, a new source of finance was developed in 2004, called Exports Proger,

which aims to cater to small companies with annual revenues of less than BRL 5 million.

In the absence of substantive progress in WTO negotiations, Brazil continued to pursue

a range of bilateral and regional trade agreements, and, less formally, to promote South-

South dialogue on trade policy issues. Specifically, Brazil concluded tariff agreements with

India and the South African Customs Union (SACU) – agreements which contain special

treatment for a number of agricultural products. In addition, it concluded an economic

cooperation agreement with the Gulf Cooperation Board, entered negotiations for a free

trade agreement with Israel, and for tariff agreements with Egypt and Morocco.

At the Mercosur level, progress was made on assimilating Venezuela as a full member,

and an agreement on agricultural tariffs was concluded with the Andean Community.

Within Mercosur, agreements were made on the use of safeguards (a move which is expected


2. BRAZIL

to favour producers of import competing products, such as wheat, rice, milk, garlic, onions

and wine) and on automotive policy (the latter is expected to ease trade in tractors).

Bibliography

FIPE (2004), “A Social Accounting Matrix for Brazil”, Report produced for OECD.

Marques, Vicente Azevedo (2006), “Report on Main Policy Developments in Brazil”, Report submitted toOECD.

MAPA (2005), Consolidaçao dos Programas de Governo, Brasilia.

OECD (2005), OECD Review of Agricultural Policies: Brazil, Paris.

WTO (2004), Brazil: Trade Policy Review, Geneva.




Chapter 3

Bulgaria


● Over the review period, Bulgaria has introduced legislation establishing EU CommonMarket Organisations such as domestic market intervention, which was only used forwheat, and export subsidies. A number of budgetary measures, similar to those appliedin the EU were also introduced. As a result, support to producers has increased, but itremained well below OECD and EU levels in 2003-05.

● The introduction of export subsidies and use of export restrictions reduced the marketorientation of Bulgaria’s agriculture and resulted in distortions on production and trade.

● Bulgaria introduced payments per hectare, which are spatially targeted to abandonedland and less-favoured areas, with differentiated rates by type of farmer (e.g. youngfarmers) in the second case. As is intended, these payments will encourage agriculturalproduction in those areas, but not that of specific commodities.

● SAPARD measures can potentially contribute to improvements in the competitivity of

the agro-food sector through restructuring of farm and agro-food companies, better foodquality and safety, infrastructure improvements and diversification of income sources inrural areas.

● Bulgaria will implement the EU Common Agricultural Policy in January 2007. It isexpected to raise support to producers gradually and significantly. Opting for the mostdecoupled options, in particular regarding the main direct payments, will allow

producers to base their decisions on market signals. Targeting optional measures tospecific objectives should also improve the efficiency of agricultural policy.

49

3. BULGARIA


● Support to producers (%PSE)declined from 11% to 6% between2004 and 2005. It was 8% on averagein 2003-05, an increase from negativenumbers recorded in 1995-97, but a

level much lower than the OECDaverage of 30%.

● Market price support accounted for65% of the PSE in 2003-05, followedby payments based on input use(27%) and payments based on

output (8%).

● Prices received by farmers, whichwere lower than those on the worldmarket in 1995-97, became 5%higher on average in 2003-05.However, prices of wheat, barley,

sunflower remained lower thanthose on the world market in 2003-05, while producers received pricesmore than twice higher than thoseon the world market for poultry andsugar.

● The %CSE, switched from animplicit support to consumers in1995-97 to an implicit tax of 8% in2003-05.

● Support for general services provided

to agriculture mainly related toinfrastructure and accounted for 6%of the total support to agriculture(TSE) in 2003-05.

● Total support to agriculture as ashare of GDP was 1.33% in 2003-05,

compared to an OECD average of1.14% in 2003-05.



1 2 http://dx.doi.org/10.1787/817134383243


1 2 http://dx.doi.org/10.1787/468202588532


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3. BULGARIA

Table 3.1. Bulgaria: Estimates of support to agriculture BGN million

1995-97 2003-05 2003 2004 2005




Producer Support Estimate (PSE) –269 476 399 724 304

Market Price Support (MPS) –279 308 293 581 51

of which MPS commodities –159 165 145 324 27




Payments based on input use 3 130 73 107 209




Percentage PSE –33 8 9 11 6

Producer NPC 0.74 1.05 1.07 1.12 0.97

Producer NAC 0.77 1.09 1.09 1.13 1.06

General Services Support Estimate (GSSE) 8 28 19 25 41


Agricultural schools 0 1 1 0 2


Infrastructure 8 21 11 19 32




GSSE as a share of TSE (%) –2.9 5.6 4.6 3.4 11.8

Consumer Support Estimate (CSE) 286 –411 –384 –622 –226

Transfers to producers from consumers 290 –298 –276 –647 31

Other transfers from consumers 14 –110 –119 –60 –152


Excess feed cost –17 –3 11 85 –105


Consumer NPC 0.76 1.09 1.10 1.14 1.02

Consumer NAC 0.78 1.09 1.09 1.12 1.05

Total Support Estimate (TSE) –261 504 418 749 345

Transfers from consumers –303 408 395 707 121

Transfers from taxpayers 29 207 142 102 375

Budget revenues 14 –110 –119 –60 –152

Percentage TSE (expressed as share of GDP) –6.87 1.33 1.21 1.96 0.82

GDP deflator 1995-97 = 100 100 427 408 428 444

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for Bulgaria are: wheat, maize, barley, sunflower, sugar, milk, beef and veal, sheepmeat, pigmeat,poultry and eggs.Source: OECD, PSE/CSE database, 2006.

1 2 http://dx.doi.org/10.1787/216077154575


http://dx.doi.org/10.1787/216077154575

3. BULGARIA

Summary of key policy developmentsThe main developments in Bulgaria’s agricultural policy related to preparation for

accession to the EU in January 2007, and to emergency measures as a response to recent

weather-related disasters and animal disease outbreaks. Intervention mechanisms

were introduced in 2002 and export subsidies in 2004. Less-Favoured Area (LFA)

payments, a scheme applied in the EU, were introduced in 2005 on a pilot basis. The

number of measures offered under the EU Special Accession Programme for Agriculture

and Rural Development (SAPARD) increased. A paying agency was created to handle

EU payments and discussion started on the implementation of the EU Single Area Payment

Scheme (SAPS).

Policy contextAgriculture represented less than 10% of GDP in 2005, down from 15% in 2000, while its

share in total employment remained stable at about 25% over the same period. Bulgaria is

a net exporter of agro-food products. Agro-food exports accounted for 11% of total exports

and agro-food imports for 5% of total imports in 2005. The average share of household

income spent on food is around 40%.


GDP growth rate accelerated to 5.6% in 2004 and 5.5% in 2005, compared to an average

of 5.1% per annum over the period 2000-05. The contribution of services and industry to

GDP growth increased. Fixed capital formation increased by an average of 15.4% per annum

over the period 2000-05. Inflation rates have been below 10% since 2001. From 2.3% in 2003,

inflation rates increased to 6.1% and 5% in 2004 and 2005, respectively, mainly due to

higher domestic prices for energy. The currency appreciated against USD from 2002 to 2004

and remained stable in 2005.

The merchandise trade balance deteriorated over the period 2000-05. The 2000 deficit

tripled in 2004 and more than quadrupled in 2005, mainly due to the higher cost of oil

imports and lower exports of electricity following the closing down of two nuclear reactors.

The current account deficit reached 11.8% of GDP in 2005 as the positive impact of direct

investment in the country and tourism could not offset the negative impact of the

deteriorating trade balance. The state budget has been balanced since 2003 and even

positive in 2005. On average interest rates declined slightly. The improved overall economic

situation reflected positively on the unemployment rate. From close to 20% in the early

2000s, it declined to around 10% in 2005 and to 9% in 2006.


Output

Gross Agricultural Output (GAO) fell sharply in 2000 and has fluctuated since,

reflecting mainly variations in yields with weather conditions (Figure 3.4) GAO decreased

by 1% in 2003 because of a drought, increased by 2.2% in 2004 and fell again by 8.6% in 2005

as the 4% increase in livestock production was counterbalanced by a more than 10% drop

in crop production.

Prices of almost all agricultural products increased in 2003 and 2004, with the

exception of sunflower and sugar beet. This brought Bulgarian farm-gate prices for crops

close to EU levels in 2004. In 2005, however, cereal prices fell significantly, while sunflower


3. BULGARIA

prices recovered. Prices for livestock products, in particular beef and veal prices, remain

substantially below EU levels, although, with the exception of egg prices, they have

increased in 2004 and 2005.

Crops

The most important crops are cereals and sunflowers, which account for approximately

50% of crop output. They are followed by vegetables, which account for around 25% of crop

production, and industrial crops (including oilseeds, fibres, and medicinal and aromatic

plants), which has increased to 14%-15% of crop output in 2005. The share of all cereals in

agricultural area has been relatively stable, with variations in individual shares. Wheat

area has increased in 2004 and 2005, following a sharp reduction in 2003. Production

changes mainly reflect large fluctuations in yields due to extreme weather conditions (a

drought in 2003 and torrential rain and floods in 2005).

Livestock

The most important livestock products are milk, pigmeat and poultry meat which

account for 59% of livestock production. The share of livestock products in agricultural

output is declining. The overall trend is difficult to measure because of a change in the

methodology used to calculate GAO for livestock in 2001, but the number of animals and

the production of milk and meat clearly declined in 2003 compared to 2000 levels There are

two main reasons for the drop in livestock output: feed prices increased more than meat

and milk prices; and stricter sanitary and quality requirements were imposed on livestock

production. However, meat and milk production has increased in 2004 and 2005.

Farm income has remained at BGN 3 000 million (EUR 1 534 million) over the period

2000-05 with small yearly fluctuations. The annual farm income per full time farmer was

estimated at BGN 3 716-3 912 (EUR 1 990-2 000) in 2005.

Figure 3.4. Evolution and annual changes of agricultural output in Bulgaria, 1995-2005

Source: National statistics, 2006.1 2 http://dx.doi.org/10.1787/778128150572

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3. BULGARIA

Structures

According to the 2003 farm survey, there were 684 229 farms with 2.9 million hectares of

land. The average size of family farms is 1.3 hectares. They account for 98% of the farms and

cultivate 30% of the land. Other legal entities include cooperatives. One-third of family farms

have less than 0.3 hectare of land and 77% less than 1 hectare. Almost one-third of cattle and

a quarter of pigs are on farms with less than two animals. Only 47% of cattle are on farms with

more than five animals. According to Eurostat’s 2003 structural survey, there were

153 700 farms with standard gross margins over one unit (EUR 1 200). They occupied

2.6 million hectares and their average size was 16.7 hectare. Main occupation farms accounted

for 80% of these farms. More than half of farmers were over 55 and only 7% under 35.

In 2005 the total number of farms declined by 20% compared to 2003, while the average

farm size increased by 18%. The number of small farms has declined in recent years and

there has been an increase in the average size of the medium and large farms. Farms above

1 hectare account for 26.6% of the total, compared to 23% in 2003, and they cultivate 95% of

the utilised agricultural area. The number of livestock farms has declined by 21% from 2003

to 2005 and the number of animals per farm has increased (by 11.6% for cattle, 21.6% for

dairy cows, and between 17% and 20% for pigs, sheep and goats).

Inputs

Fertiliser application per hectare fell sharply in the early 90s. It has increased in 2004

and 2005, to 35 kg of nitrogen (N), 7.5 kg of phosphate (P2O5) and 0.85 kg of potassium (K2O)

per hectare, but remains much lower than in the late 80s, when the respective rates of

application were 90, 50 and 20 kg per hectare.


Bulgaria has been a net exporter of agricultural and food products over the whole

period of transition (Figure 3.5). Agro-food net exports have increased in both volume and

value in 2004 and 2005. Agro-food exports have increased by over 50% from 2001 to 2005.

Bulgaria’s major agro-food exports are cereals, sunflower seeds, oriental tobacco, wine and

sheepmeat, which account for about 25%-30% of the value of agricultural exports (8%-10%

for sunflower seeds, 5%-7% for tobacco 5%-7% and 4%-6% for wine). Processed products (HS

Chapters 15 to 24) account for around half of agricultural exports, crops (HS Chapters 6

to 14) for about 35% and animal products for only 17.5%. Two-thirds of Bulgaria’s agro-food

exports (in value terms) are to OECD countries, mainly the EU, but also Turkey. Among EU

member states, Greece is the main partner.

Imports of agricultural and food products have more than doubled from 2001 to 2005.

The major commodity imports are: meats and edible offal (13% of total agro-food imports);

sugar and sugar products, 9%; oil and fats, 7%; and fruits, 6%. The shares of import from the

EU and from other OECD countries remained relatively constant, while the share of

imports from the CEFTA and NIS countries has slightly increased. Half of Bulgaria’s agro-

food imports come from the EU, notably Greece (10% of total agro-food imports). Brazil

accounted for 18% of Bulgaria’s agro-food imports in 2005.


3. BULGARIA

Domestic agricultural policiesThe main instruments for domestic support are output and area payments, credit

subsidies for short and long term credit, variable input subsidies, and support under the

SAPARD programme in respect of the National Rural Development Plan (see Box 3.1 for a

general description of SAPARD).

Commodity specific support

There is no price intervention in Bulgaria except for tobacco and wheat. Legislation for

intervention on the domestic market was introduced in 2002 (Decree 198/29.08.2002 of the

Council of Ministers). Intervention in this framework, has so far been restricted to wheat.

Wheat intervention purchase started at the end of 2002 and amounted to 120 000 tonnes. In

practice, intervention was carried out through the Sofia Commodity Exchange. Initially,

quotas were established by region and a list of producers, who could sell wheat to

intervention, was set. These restrictions were removed in November 2002. The intervention

price was fixed at BGN 160 (EUR 82) per tonne (VAT excluded).

A more detailed regulation establishing rules for intervention was adopted in

July 2003. It covers the rules for interventions on agricultural markets and products for

which intervention is allowed (durum and soft wheat, maize, barley, sorghum, beef, veal

and pork carcasses). Under this regulation, State Fund Agriculture, the organisation that is

implementing domestic agricultural policy measures, is to act as intervention and paying

agency. It is to announce the list of products covered by intervention, the quantities to be

bought or sold, the minimum purchase prices, the intervention periods and other

requirements for quality, storage capacity etc. The control of grain quality is assigned to

the National Grain Service. This regulation has not been used for any eligible commodity

except wheat.

Figure 3.5. Agro-food trade in Bulgaria, 1996-2005

Source: UN, UN Comtrade database, 2006.1 2 http://dx.doi.org/10.1787//208855621522

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3. BULGARIA

In 2003 intervention stocks were sold on the domestic market to slow down the rise in

wheat prices resulting from the 2003 bad harvest. Ivanova (2004) found that intervention in

2002 and 2003 did not have any impact on domestic prices and did not achieve expected

results. Intervention purchase resumed following the 2004 good harvest, and again at the

beginning of 2006 with 150 000 tonnes in January and 42 000 tonnes in March, at a price of

BGN 175 (EUR 89) per tonne. Wheat intervention purchases were announced in

September 2006 for 113 000 tonnes of wheat at a price of BGN 200 (EUR 102) per tonne.

According to the Tobacco Act, domestic market measures on tobacco consist of

production quotas for different type of tobacco (oriental tobacco, Burley and Virginia), fixed

minimum prices for the three quality category and three types of price premiums. The first

type of tobacco premium is a price subsidy, the second type is a payment per tonne of

tobacco sold and the third type is an additional quality premium, which was introduced in

2001. In recent years, the national quota has regularly increased, with quotas, minimum

prices and payments set by type of tobacco. In the context of the reduction of world tobacco

consumption, minimum prices have been constant in 2002. In contrast, all types of tobacco

premiums increased till 2003. For the 2004 harvest, the price subsidy and premium per

tonne sold declined while the premium for quality increased for Oriental tobacco. As a

result, the average per tonne support of the three types of tobacco has increased until 2004.

In spite of the increase in the price subsidy in 2005, the decrease in prices of Oriental

tobacco continues, while the prices of Virginia and Burley increased by 3% and 8%

respectively. As a result, the quantity of tobacco sold increased in 2003-04 compared to the

2000-02 average and in 2004 it reached 58 800 tonnes which is above the negotiated

quantities with the EU (47 137 tonnes).

A payment per tonne of quality milk sold to the market was introduced in 2001.

Payment rates increased, starting from BGN 0.03 (EUR 0.015) per litre for cow milk in 2002

to BGN 0.05 (EUR 0.026) per litre in 2005; from BGN 0.04 (EUR 0.02) per litre in 2002 to

BGN 0.07 (EUR 0.036) per litre in 2005 for buffalo milk; and BGN 0.07 (EUR 0.036) per litre for

the period 2003-05 for sheep milk. The payment is restricted to farmers with more than

200 cows and milk producers in under-developed and under-populated mountain regions.

Funds amounted to BGN 9 million (EUR 4.6 million) in 2005 compared to BGN 8 million

(EUR 4.1 million) in 2004.

Payments based on area

A per hectare payment for the cultivation of abandoned private agricultural land was

introduced in 2003. Its rate was BGN 100 (EUR 51) per hectare from 2003 to 2005. As a result,

24 300 additional hectares were cultivated in 2003 and approximately the same area the

following year.

In 2005, Less-Favoured Area (LFA) payments were introduced on a pilot basis in

six regions with different production pattern on a pilot basis. The following rates were

applied:

● BGN 300 (EUR 153) per hectare for producers not members of any producers group.

● BGN 320 (EUR 164) per hectare for young producers.

● BGN 340 (EUR 174) per hectare for members of any producers group.

The first results of implementation showed that only 25% of the funds allocated to this

programme are going to be spent.


3. BULGARIA

Payments based on input use

Farmers are offered low interest rates for short term credit, and subsidies for seeds,

fertilisers and diesel fuel. There is also a subsidy for storage of wheat in public warehouses.

The importance of interest concession as a mechanism of input support has declined, but

is still in use. Interest concessions for the purchase of variable inputs are being replaced by

direct input subsidies. In practice, only credit subsidies for buying fertilisers for wheat,

maize and sunflower remain. In 2005, diesel fuel subsidies were granted to wheat

producers at a rate of BGN 10 (EUR 5.1) per hectare of land and subsidies to cover storage

costs of bread-wheat producers were increased by BGN 0.30 (EUR 0.15) per tonne per month

to BGN 1.50 (EUR 0.77).

In 2004, a payment of BGN 250 (EUR 128) per hectare was introduced for wheat and

barley basic seeds production within the Institutes of the National Centre for Agricultural

Science. The amount of money spent for supplying seeds to tobacco producers has

increased over the years. In 2004, it was BGN 2.3 million (EUR 1.18 million), of which

BGN 0.97 million (EUR 0.50 million) for variety maintenance and BGN 1.3 million

(EUR 0.53 million) for seed production.

Funds of BGN 170 million (EUR 87 million) were made available for disaster relief in

the regions affected by torrential rain and floods in 2005. An additional BGN 5 million

(EUR 2.5 million) was granted to farmers affected by floods in the form of higher sowing

payments for the 2006 crop year. In October 2005, the Minister announced an increase

in sowing aid to wheat producers by BGN 10 million to a total of BGN 43.1 million

(EUR 22 million) to alleviate income losses due to unfavourable weather conditions, price

stagnation and rising oil prices. For the autumn 2006 campaign, farmers will receive a

payment of BGN 30 (EUR 15.3) per hectare plus BGN 60 (EUR 30.1) per hectare paid as a one-

year loan at annual interest rate of 1.5%. The loans will amount to some BGN 27.5 million

(EUR 14.1 million). The State Agricultural fund will provide an additional BGN 2.873 million

(EUR 1.47 million) for the autumn sowing campaign (BGN 1.673 million or EUR 0.86 million

for fertiliser subsidies at a rate of BGN 6.5 or EUR 3.3 per hectare and a payment of BGN 20

or EUR 10.2 per hectare to cover sowing costs).

The following payments to livestock farmers were introduced in recent years:

● A payment for the maintenance of animals and poultry birds from the National Gene

Pool and high quality part of the animal population.

● A payment per head, introduced in 2003, for covering part of the costs of feeding cattle,

sheep, goat and birds in the winter period.

● A payment for elite animals and birds for replacing the National Gene Pool.

● A payment for livestock in Rodopi region introduced in 2003 (under the Rodopi

programme).

The rate of the payment for covering part of feed costs for cattle, sheep and goat

increased substantially in 2005 compared to the previous year. The payment rate for elite

animals and birds also increased in 2005. Only heifers (milk breed) and young female sheep

(meat breed) are included in this programme. The payment only applied to a limited

quantity of animals (60 head for heifers per producer and 250 heads for young female

sheep per producer).


3. BULGARIA

Several programmes of investment loans with interest concessions are offered to

farmers. Their importance has decreased with the reduction in interest rate on credit from

commercial banks.

SAPARD

Support to the agricultural producers and to rural regions in the country under the

EU SAPARD programme (Box 3.1) started in 2001 with three measures: investment in

agricultural holdings, improvement of processing and marketing of agricultural and fishery

products, and development and diversification of activities. In 2003 the National

Agricultural and Rural Development Plan was amended and the SAPARD Agency was

authorised to implement the following six measures and one sub-measure of the plan:

● Markets of producers and wholesale markets.

● Forestry, afforestation of agricultural land, investment in forest holdings, processing and

marketing of forestry products.

● Setting up of producer organisations.

● Renovation and development of villages, protection and preservation of rural heritage

and cultural traditions.

● Development and improvement of rural infrastructure.

● Improvement of qualification through vocational training.

● Technical assistance.

Support for investments in agricultural holdings and for the improvement of

processing and marketing of agricultural and fishery products increased, but only one

project was approved for “wholesale markets and markets places”. The biggest share of

investments under “Development and diversification of activities” was utilised in the field

of rural tourism. Some funds were also spent for wood processing, beekeeping and

aquacultures, but investments under other measures were relatively limited in respect to

both the number of projects and the amount of funds.

Pest and disease control

Bulgaria was affected by several outbreaks of swine fever in 2005 and 2006. The

Bulgarian government introduced vaccination and controls on the movement of pigs. Pigs

on the affected farms were culled.

Poultry producers who have suffered significant losses resulting from bird flu

outbreaks and the related decrease in poultry consumption will receive partial

compensation. An initial BGN 10 million (EUR 5.1 million) fund was announced in

February 2006. It was supplemented with BGN 3 million (EUR 1.53 million) in July, from

which individual farmers will receive nearly BGN 2.3 million (EUR 1.18 million). Measures

to contain the July 2006 bird flu outbreak include the setting of a quarantine zone from

27 July to 10 August 2006, the culling of 1 500 chickens, hens and turkeys in the affected

area and a payment to farmers of BGN 10 (EUR 5.1) per destroyed chicken and BGN 25

(EUR 12.8) per destroyed turkey.


3. BULGARIA

Institutional changes related to EU accession

Bulgaria signed the Treaty of accession to the EU in April 2005. It was ratified by

Parliament in May 2005. In September 2006, the EU Commission gave the green light for

Bulgaria’s accession to the EU on 1 January 2007.

Box 3.1. The EU SAPARD in Bulgaria

The SAPARD (Special Accession Programme for Agriculture and Rural Development) is aEU programme, which provides financial and technical assistance for agriculture and ruraldevelopment in candidate countries as they prepare for EU accession. SAPARD fundsinvestment projects:

Priorities for SAPARD assistance include:

● Implementing the Community acquis (Acquis communautaire) [cf. Article 2 ofRegulation 1268/1999].

● Implementing veterinary, phytosanitary and marketing requirements.

● Upgrading food processing standards.

● Restructuring the agri-food sector to improve competitiveness.

● Implementing coherent structural and rural development policies.

SAPARD eligible measures include:

● Investments in agricultural holdings.

● Improving processing and marketing.

● Improving structures for quality, veterinary and plant-health controls.

● Agricultural production methods protecting environment and maintaining thecountryside.

● Economic diversification.

● Setting-up farm relief and farm management services.

● Setting-up producer groups.

● Renovation and development of villages.

● Land improvement and reparcelling.

● Creating and updating land registers.

● Improving vocational training.

● Developing and improving rural infrastructure.

● Water resource management.

● Forestry measures.


SAPARD implementation: Candidate countries first submit to the Commission forapproval a multi-year SAPARD plan, which identifies the specific measures chosen by thecountry among the list of measures eligible for funding under SAPARD. The country’sSAPARD agency selects and manages projects, arranges finance and carries out controls.All projects are co-financed by the EU and the candidate country. EU contribution mayreach 75% of public financing. For investments generating revenues, the minimum rate for

private investment is 50%.

Source: EU Commission website: http://ec.europa.eu/agriculture/external/enlarge/back/sapard_en.pdf.


http://ec.europa.eu/agriculture/external/enlarge/back/sapard_en.pdf

3. BULGARIA

In the summer of 2005 preparation of the Act for the implementation of the EU Single

Area Payment Scheme (SAPS) in Bulgaria started. For this purpose, five working groups were

created to deal with issues concerning the paying and intervention agency [conditions for

accreditation, regulations for farmers application, internal control, regulations for the

Integrated Administration and Control System (IACS), etc.], direct support implementation

and top-up payments, horizontal problems (export subsidy, export/import licensing, etc.),

market organisation, coordination with rural development regulation measures. At the

beginning of 2006 the legislation was voted in the Parliament. It clarified that State Fund

Agriculture will play the role of both intervention agency and paying agency. The paying

agency was constituted, and the staff was appointed and partially trained.

Two different options for the minimum size of farms eligible for direct payments have

been considered: 1 hectare of agricultural utilised area; or a combination of 1 hectare of

agricultural utilised area or 0.5 hectare of vineyards or perennial crops.

Data on individual milk production and other data necessary for implementing the

milk quota started to be collected at the end of 2004. An initial distribution of the milk

quota among producers has been done, but no information is publicly available yet.

Box 3.2. Introducing the Common Agricultural Policy in Bulgaria

Bulgaria will enter the EU in January 2007. It will join the Common Market and adopt theEU trade regime, as well as domestic measures of the Common Agricultural Policy (CAP).

In addition to market price support measures such as import protection, exportsubsidies and intervention on the domestic market, the main budgetary measures*

available to Bulgaria are:

● Direct payments, at a rate of 25% of the EU15 level in 2007, rising by steps to 100% in 2016.During a transition period of a maximum of five years, direct payments can beimplemented as a uniform payment per hectare, the Single Area Payment Scheme(SAPS). The Single Payment Scheme (SPS) currently implemented in the EU15 will thenapply.

● Possibility to top-up payments (until EU15 rate is reached) according to two options: 1) upto 55% of EU15 level in 2007, rising by steps to 100% as from 2010; 2) up to the directsupport level applicable in 2006 under a CAP-like national scheme, on a product-by-product basis, and increased by 10 percentage points. Top-up payments can be partiallyfunded (20% on average) under the rural development envelop. The remaining share mayonly come from national budgets.

● Measures under the national Rural Development Plan, replacing SAPARD. Bulgaria willhave to choose between a list of measures such as less-favoured area payments, agri-environmental payments, investments in farm holdings, etc. As for member stateswhich entered the EU in 2004, additional specific measures will be available: Specialsupport to semi-subsistence farmers undergoing restructuring; support for meeting EUstandards for food safety, animal welfare and the environment; and the possibility toco-finance top-up payments.

Bulgaria will have to adapt to EU sanitary and phytosanitary standards. Transitionalarrangements have been agreed until 31 December 2009 concerning milk deliveries.

* The overall ceiling for market expenditures and direct payment decided for the EU25 will apply for the EU27.

Source: Commission of the European Communities (2005), Report on the Results of the Negotiations on the Accessionof Bulgaria and Romania to the European Union, DG E I 5859/05, February.


3. BULGARIA

In 2005, Bulgaria’s parliament passed a law banning the production of some

genetically modified organisms, which are banned in the EU, and harmonising the national

legislation with that of the EU.

Budget plan

Expenditures on agriculture in 2006 were expected to increase by BGN 26 million

(EUR 13.3 million) to reach some BGN 660 million (EUR 338 million). Substantial government

spending will be earmarked for purchasing computer equipment for the administrative

control information system and the building-up of a register of farms and processing

enterprises, which will be maintained by the National Veterinary Service. SAPARD funds

for 2006 total BGN 161 million (EUR 82.44 million) compared to BGN 147 million

(EUR 75.09 million) in 2005. Because of delays in implementing SAPARD, BGN 577 million

(EUR 295 million) of SAPARD funds were still available before the end of the

implementation period in December 2006. Over BGN 208 million (EUR 106 million) have

been allotted for the modernisation of milk, meat and fish processing. Animal farms,

which are falling behind in their implementation of EU standards, will receive

BGN 74 million (EUR 38 million) (AgraFood East Europe, February 2006).

Agro-food trade policiesIn response to animal disease outbreaks, a number of temporary import bans were

implemented. In April 2005, Bulgaria banned imports of poultry meat, eggs and live birds

from regions of Greece affected by Newcastle disease. In late 2005, it introduced bans on

poultry imports from countries affected by bird flu. Following a bird flu outbreak in a region

of Bulgaria, Bulgarian veterinary authorities placed a temporary export ban on exports of

live birds, eggs and poultry products, which have not undergone thermal treatment at the

end of July 2006, until the EU issues an import ban. In March 2006, Bulgaria banned imports

of poultry, wild birds, poultry meat and eggs from parts of the EU affected by bird flu.

A temporary ban on exports of wheat and wheat flour was introduced in September 2003,

in connection with the rapid rise in world prices for wheat (Decree 193/05.09.2003). In 2002,

import tariffs were set to zero for wheat and to 25% for wheat flour (Decree 285/09.12.2002).

The ban on exports was removed in July 2004, while the zero tariff for wheat remained

until the end of 2004. No export restrictions have been used for other products (except very

temporarily for sanitary reasons, see below), and import tariffs are below bound rates.

In an attempt to introduce EU Common Market Organisation measures, a legislation

establishing export subsidies was introduced in 2002. By the end of 2004 export subsidies were

used for poultry meat (120 tonnes), eggs (500 tonnes), lamb (250 tonnes), dairy products

(300 tonnes) and canned fruit and vegetables (1 462 tonnes). They amounted to

BGN 668 thousand (EUR 341 800) and are below Bulgaria’s commitment to WTO. Subsidised

exports are carried out on the basis of export licenses and in accordance with the requirements

of the Regulation for issuing the export licenses and Regulation for export subsidy refund.

Integration into the EU single market continued with the establishment of duty-free

tariff quotas for imports of pigmeat, poultry meat and skim milk powder from the EU

from 2005/06. However, in May 2006 Bulgaria imposed a limit of 3 000 tonnes quarterly on

imports of milk powder and cream from the EU, which will be lifted at the time of

accession. The tariff quota for sugar was increased to 320 000 tonnes in 2005 (50 000 tonnes

in May 2005 and 20 000 tonnes in December 2005). The in-quota tariff is 5%.


3. BULGARIA

Bibliography

AgraFood East Europe, various issues.

Commission of the European Communities (2005), Report on the Results of the Negotiations on theAccession of Bulgaria and Romania to the European Union, DG E I 5859/05, February.

Eurostat (2005), “Farm Structure in Bulgaria 2003”, Statistics in Focus, Agriculture and Fisheries,November.

Ivanova, N. (2004), “Real Price Analysis of Grain and Producer Support Estimates for Key AgriculturalProducts in Bulgaria”, Background paper to a World Bank study.

Ivanova, N. (2006), “Report on Main Policy Developments in Bulgaria”, Report submitted to OECD.

Box 3.3. Bulgaria’s trade agreements

In preparation for accession in January 2007, a number of “double profit” trade agreementshave been signed with the EU since 1995, as well as with countries, which joined the EU inMay 2004.

In 2003 a new trade agreement between Bulgaria and the EU was signed. Cereals, beef,pigmeat, fruits and vegetables are among the key products covered by the agreement. TheEU established import quotas, which will increase by 10% a year, at a zero tariff for cerealsfrom Bulgaria. Reciprocally, Bulgaria established import quotas for cereals, rice and sugarfrom the EU, with zero or lower tariffs. The EU can also export 3 000 tonnes of milk toBulgaria with a 10% tariff, and 3 000 tonnes of cheese with a zero tariff. As a result, Most-Favoured Nation (MFN) tariffs on both sides declined gradually as the list of products withzero duties increased.




Chapter 4

China


● A rural-urban divide with large and growing income disparity further accentuated bydifferences in access to education, health care, pensions and other social benefits, has beena striking feature of China’s impressive economic growth.

● Benefiting from continued strong economic growth and a relatively good fiscal position,China’s government has been allocating more budgetary resources to rural areas, includingto agriculture. The rural tax reform implemented between 2000 and 2006 is also intendedto help increase farmers’ disposable incomes.

● The level of support to agricultural producers (the PSE) remains low compared to the OECDaverage. It tended to increase, in particular at the beginning of the 2000s, but then stabilisedbetween 2003 and 2005.

● While the level of support to agriculture is low, its structure is dominated by market pricesupport and input subsidies, the least efficient and most trade distorting ways ofproviding agricultural assistance. Only a small part of this type of support is effectivelyreceived by producers.

● China has progressively reduced import tariffs on agro-food products, but for selectedcommodities state trading still plays an important role in driving a wedge betweendomestic and world prices. In particular, export-import decisions for grains are stillmade by the government and driven by the level of strategic stocks and expectedproduction trends of various grains rather than by prospects of profits based on pricedifferentials. This can lead to a situation, for example, where wheat is imported whendomestic prices are lower and maize exported when domestic prices are higher thanthose on the world markets.

● China’s increasing focus on development of rural infrastructure and on improving access tobasic public services in rural areas such as education, the health care system and socialsecurity addresses the core of the rural-urban divide and in the mid-term should contributeto more balanced development of the Chinese economy. However, as grain security remainsa key policy objective there is a risk that a disproportionate part of support will be diverted tograin producers instead of the rural population at large.

● The dominating top-down decision making process undermines local initiatives and leadsto conflict situations. Chinese farmers should be able to organise themselves on the basis ofautonomous large scale peasant organisations to communicate and protect their owninterests, for example in terms of land tenure rights, provision of public goods andmarketing of agricultural commodities.

63

4. CHINA


● Support to producers (%PSE)increased from 3% in 1995-97 to 8%in 2003-05. This compares with theOECD average of 30% in 2003-05.

● Market Price Support (MPS)accounted for 41% of the PSE in2003-05 compared to 32% in 1995-97.

● Despite an almost three-fold realincrease in budgetary support to

producers, its relative importancehas declined.

● Prices received by producers wereon average 5% higher than thosereceived in the world markets in2003-05 (i.e. the NPC was 1.05) andfor such commodities as cotton,sugar, and maize even more than20% higher. In contrast, producerprices for wheat were almost 10%lower than on the world markets.

● The cost to consumers, asmeasured by the %CSE, increasedslightly from 2% in 1995-97 to 4% in2003-05.

● Support provided to generalservices for agriculture almost

doubled in real terms between1995-97 and 2003-05, but its sharein the TSE fell from 47% to 35%.

● The total cost of agriculturalsupport to the economy (%TSE)increased from 1.89% in 1995-97 to2.45% in 2003-05 and was higherthan the OECD average of 1.14% in2003-05.



1 2 http://dx.doi.org/10.1787/067614886283


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1 2 http://dx.doi.org/10.1787/182533641284


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4. CHINA

Table 4.1. China: Estimates of support to agricultureCNY million

1995-97 2003-05 2003 2004 2005

Total value of production (at farm gate) 1 996 250 2 921 510 2 440 890 3 031 220 3 292 420


Total value of consumption (at farm gate) 1 997 135 3 067 174 2 698 029 3 208 958 3 294 534

Producer Support Estimate (PSE) 66 521 253 998 254 158 216 058 291 777

Market Price Support (MPS) 21 353 104 148 139 042 69 994 103 407

of which MPS commodities 17 841 62 270 84 951 42 155 59 706


Payments based on area planted/animal numbers 0 8 267 0 11 600 13 200



Payments based on input constraints 3 471 51 414 46 862 51 994 55 386

Payments based on overall farming income 9 866 26 040 23 278 24 920 29 922


Percentage PSE 3 8 10 7 8

Producer NPC 1.01 1.05 1.08 1.03 1.04

Producer NAC 1.04 1.09 1.11 1.07 1.09


Research and development 3 813 4 112 3 626 4 032 4 679

Agricultural schools 3 170 12 771 11 417 13 003 13 893

Inspection services 2 214 4 611 3 802 4 743 5 288

Infrastructure 21 432 56 632 53 720 56 760 59 417


Public stockholding 29 384 56 029 52 264 62 079 53 746


GSSE as a share of TSE (%) 46.7 34.6 32.9 39.4 31.9

Consumer Support Estimate (CSE) –29 397 –126 824 –191 029 –60 789 –128 654

Transfers to producers from consumers –13 533 –124 821 –172 565 –75 019 –126 881

Other transfers from consumers –12 223 –17 188 –39 837 7 613 –19 339

Transfers to consumers from taxpayers 2 101 116 128 128 93

Excess feed cost –5 743 15 069 21 245 6 489 17 473

Percentage CSE –2 –4 –7 –2 –4

Consumer NPC 1.02 1.05 1.09 1.02 1.05

Consumer NAC 1.02 1.05 1.08 1.02 1.04

Total Support Estimate (TSE) 128 635 388 270 379 115 356 802 428 892

Transfers from consumers 25 755 142 009 212 402 67 405 146 220


Budget revenues –12 223 –17 188 –39 837 7 613 –19 339


GDP deflator 1995-97 = 100 100 115 108 116 120

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for China are: wheat, maize, rice, rapeseed, soybean, peanuts, sugar, apple, cotton, milk, beef and veal,sheepmeat, pigmeat, poultry and eggs.Source: OECD, PSE/CSE database, 2006.

1 2 http://dx.doi.org/10.1787/743210713104

AGRICULTURAL POLICIES IN NON-OEC COUNTRIES: MONITORING AND EVALUATION 2007 – ISBN 978-92-64-03121-0 – © OECD 2007 65

http://dx.doi.org/10.1787/743210713104

4. CHINA

Summary of key policy developmentsRural development became China’s priority in recent years. However, while the rural-

urban divide is of major concern, grain security remains a key factor having a strong impact on

policy measures applied. In 2004, the government introduced minimum prices for selected

grains, initiated direct payments to grain producers, and applied subsidies for the purchase of

higher quality grain and soybean seeds and selected machinery. These policy measures were

also applied in 2005 and 2006. To support farmers’ incomes, agricultural tax reform was

gradually implemented and declared as completed at the beginning of 2006.

Policy contextAgriculture is an important sector of China’s economy, but while its share in total

employment is high at 39.5%, its contribution to GDP is much lower at 12.5%. This indicates

a large gap in labour productivity between agriculture and the rest of economy. Agriculture

is also less integrated with global markets than other sectors of China’s economy as

indicated by its just 3.6% share in China’s total exports and 4.3% share in imports. The

share of food in total living expenditures has been falling as real incomes continue to grow

at high rates, but was still high at 37% for urban households and at 46% for rural

households in 2005.


China’s GDP expanded by 10.2% in 2005, with growth in 2006 accelerating to about 10.5%,

despite measures designed to cool the economy. China’s GDP reached USD 2.2 trillion in 2005

making the country the world’s fourth-largest economy, behind the USA, Japan and Germany.

Consumer price inflation slowed from 3.9% in 2004 to 1.8% in 2005 and to just 1.4% in

2006, partly due to stronger food output. Real incomes continued to grow rapidly in 2005

with a rise of 9.6% per head in urban households and 6.2% in rural households.

In July 2005, China adopted a new exchange rate regime for the Yuan (CNY), scrapping

its peg to the USD and replacing it with a managed float against a basket of currencies. The

Yuan appreciated initially from CNY 8.28 to CNY 8.11 per USD and then to CNY 7.87 per

USD by November 2006.

China’s fiscal position remains strong with the fiscal deficit at 1.2% of GDP, both in

2005 and 2006. The current account surplus widened to about USD 205 billion in 2006,

driven mostly by the trade surplus, and foreign-exchange reserves increased to almost

USD 1 000 billion by October 2006, equivalent of about 16 months of imports (EIU, 2007).

Despite impressive economic performance, China’s policy makers face major

challenges such as the growing rural-urban divide, strong inter-regional differences in

economic development, growing pressures on environment, ageing of the population, and

growing dependence on energy imports.


Output

In 2005 China recorded sound growth of Gross Agricultural Output (GAO) at 2.9%, of

which crop output increased by 2.1% and livestock output by 4.6% (Figure 4.4). The rates

slowed compared to 2004 when rising agricultural output prices (13.1%) accelerated overall

output growth to 6.4%, including that for crops by 6.7% and for livestock products by 5.7%.

In 2005, output prices increased by just 1.4% indicating that commodity prices in China


4. CHINA

stabilised after sharp increases at the end of 2003 and in 2004. The 2005 increase in output

prices compares unfavourably with the increase in input prices of 8.3%.

Crops

In 2005, China’s grain production increased for the second consecutive year. This was

the result of stronger grain prices in the preceding two years and a set of new policy

measures applied by the government in response to a fall in grain production between 1998

and 2003 and a corresponding decline in grain stocks. Total grain production increased by

3.9% to 428 million tonnes (484 million tonnes in line with Chinese definition of grains

which includes beans and tubers). Area sown to grains increased by 3.5% in 2004 and again

by 3.9% in 2005 to a total of 82.9 million hectares, reversing the falling tendency between

1997 and 2003.

While vegetable and fruit production continued to increase at high rates, the

performance of other crops was weaker, partly in line with longer term readjustment of

Chinese agriculture. Cotton production declined by 9.6% in 2005, largely due to a fall in area

sown by 11.1%. The fall in production to 5.7 million tonnes combined with a strong

demand from the textile industry, contributed to a record import of cotton at 2.7 million

tonnes in 2005. Sugar cane and sugar beet production decreased by 1.3% and oilseeds

production remained at the 2004 level.

Livestock

Driven by strong demand, livestock production continues to develop rapidly. Total

meat production amounted to 77.4 million tonnes, up 6.9% over the 2004 level. Milk

production was low in the past, but since the end of the 1990s has doubled every 3-4 years.

In 2005, it grew by 21% reaching 28.7 million tonnes.

Pork remains the key meat produced, but reflecting changes in consumer preferences,

its share in total meat production dropped to 65%, while the share of poultry meat

Figure 4.4. Evolution and annual changes of agricultural output in China, 1995-2005

Source: FAO, FAOSTAT database, 2006.1 2 http://dx.doi.org/10.1787/411165452330

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increased to 20% and that of beef and sheepmeat to 15%. Regional specialisation

strengthened with pig production dominating along the middle-and-low valley of the

Yangtze River, beef in central and Northeast China, sheep in Northwest prairie and central

and Southwest China, and poultry in developed eastern coastal regions.

Structures

Agricultural production structures are dominated by small-scale farming. There are

about 200 million farm households with an average land allocation of just 0.6 ha per

household. While crop production remains fragmented, livestock production has become

more concentrated with large-scale commercial operations accounting for 38% of total

pigmeat, 58% of milk, 30% of beef, 44% of sheepmeat, and 53% of egg production in 2004

(China Livestock Yearbook, 2005).

Farmland is de facto owned by village collectives, which extend land lease contracts to

individual households. Farmers’ land use rights have been strengthened with the

extension of land lease contracts up to 30 years, but there is still a large scope for conflict

situations between farmers and various layers of authority (OECD, 2005). In particular, low

compensation for lost access to land has become one of the main reasons for peasants’

discontent. As urbanisation and industrialisation advance, the total number of farmers

who lost access to land could amount to 40-50 million (Zhao, 2005). Surveys indicate that

farmers receive just 5%-10% of the final price of land transferred for other uses, local

government 20%-30%, various enterprises 40%-50%, and village committees 25%-30%

(Zhang Y., 2006). To protect farmers’ economic interests, many legislative initiatives were

undertaken by the government over recent years, but their implementation has been weak.

Concerns over the need to maintain a high level of self-sufficiency in food production,

in particular of grains, motivate the government to protect the so called “basic farmland”

area, which according to the 11th Five Year Plan should not fall below 120 million hectares

by 2010 from the current 122 million. This leads to various measures to tighten the control

over the conversion of basic farmland for non agricultural uses in particular for

commercial, industrial or residential development purposes.

Inputs

Scarce land and abundant labour motivate farmers to maximise land productivity

through intensive use of labour and variable inputs, in particular fertilisers, pesticides and

water. As capital remains scarce, the level of mechanisation is in general low. The average

use of chemical fertilisers in active substance per hectare of sown area increased to 302 kg

in 2004, which is one of the highest in the world and makes agriculture one of the key water

polluters (Box 4.1).

China’s WTO accession and lower tariffs on imports eased access to high quality

imported inputs and stronger competition had led to a fall in input prices by 2003.

Moreover, new marketing channels for input supplies developed in addition to the earlier

existing Chinese Supply and Marketing Co-operative system. However, both in 2004 and in

2005 input prices increased as input producers benefited from stronger output prices while

fast growing oil prices on global markets were transmitted to fuel and fertiliser prices. To

curb the rise in input prices, the government took measures in 2005 to stimulate domestic

production of inputs (especially of fertilisers), to increase imports and to discourage

exports of fertilisers.


4. CHINA

Food industry

The food industry expanded by 26.9% and accounted for 8.2% of China’s industry

output in 2005. Its profits increased by nearly 30%. The industry ranks first in world

production of such products as edible oil, beverages and beer.

The industry is still very fragmented with some reports suggesting that the total

number of food processing enterprises is around 0.9 million (Taylor, 2005). This compares

with only about 20 thousand medium and large enterprises with annual sales in excess of

CNY 5 million each (USD 0.6 million; NBSC, 2005). The industry is undergoing intensive

restructuring with many enterprises expanding their activities and improving efficiency.

However, high value added processing is still rare.

Food processing enterprises play a key role in the commercialisation of production by

small-scale farmers, contribute to the development of the local economy and absorb part

of rural surplus labour, particularly in the central and western provinces. The so called

“company plus farmers” model is becoming more and more popular, which is one of the

newly developing downstream channels. On the basis of a contract, the company provides

Box 4.1. Why do Chinese farmers overuse chemicals?

Application rates of chemical fertilisers have increased almost four-fold since 1980 andChina now ranks among countries with the highest intensity of fertiliser use in the world.Pesticide use has increased even more rapidly. While growing use of chemicals has playedan important role in increasing agricultural production, it can also increase productioncosts, augment the risk of certain food quality and food safety problems, and contribute to

environmental pollution. In fact, agriculture has become the main source of non-pointwater pollution in China. In turn, water pollution contributes to water shortages andincreases the cost of water provision for agriculture.

Several recent studies have shown that chemical fertilisers are now over-applied at ratesbetween 20% and 50%. For pesticides, the over application rate appears to be even higher,at between 40% and 55%. In research currently underway, the Centre for Chinese

Agricultural Policy in Beijing has found that there were no significant yield losses on plotswhere fertiliser use was reduced by 25% to 35%. A number of hypotheses may explain thisphenomenon. It may be that for some farmers the over application of inputs is part of arisk management strategy. There is also some circumstantial evidence that land tenureand migration play a role in the pattern of excess application of chemicals. When migrantworkers return home, they often apply inputs “all at once” rather than in optimal amountsat critical times in the growing cycle because the time they have during their home visitsis limited. But the study also shows that there is even more evidence that the government,scientific community, plant breeders, extension agents, and input suppliers haveconvinced farmers that “if a little is good, a lot is better”.

While these findings are tentative, they suggest that incentives within the existingresearch, extension, education, and agricultural input suppliers need to be re-examined. Inparticular, they suggest that the information farmers receive is biased due to the vestedinterests of input suppliers. It is not counterbalanced by adequate information about themerits of reducing input use, both in terms of increasing farmers’ income and ofdecreasing environmental damage. Such information should be provided throughresearch, education, and extension services.

Source: Huang et al., 2006 and OECD, 2006.


4. CHINA

seeds, advice and technology while farmers deliver raw commodities in line with the

company’s requirements.


For the first time since the late 1970s, China’s agro-food trade balance changed from a

net export to a net import position in 2004. Rising grain prices on domestic markets in the

last quarter of 2003 and in 2004 led the government to buy 7 million tonnes of soft and

durum wheat to replenish strategic stocks. Sharply increasing wheat imports combined

with fast growth in imports of soybeans and cotton contributed to net imports of agro-food

products at USD 5.1 billion, while agro-food exports reached a record value of

USD 23 billion. In 2005, China remained a net importer of agro-food products but the deficit

shrank to USD 1.5 billion as exports continued to grow at high rates and imports stabilised

(Figure 4.5).

The fall in the net trade deficit was driven mainly by changes in grain trade flows.

Following much stronger grain crops in 2004 and 2005, China resumed large-scale exports

of grains which more than doubled in 2005 to a total of 10.1 million tonnes. In particular,

exports of maize almost tripled amounting to 8.6 million tonnes. Imports of grains, mostly

of wheat and barley, were still high at 6.3 million tonnes, but less than the 9.8 million

tonnes imported in 2004. As a result, China’s net imports of grains of 5 million tonnes in

2004 turned to net exports of 3.9 million tonnes in 2005.

Imports of soybean and cotton reached record levels in 2005, amounting to

26.6 million and 2.7 million tonnes, up by 31% and 35%, respectively. Sugar imports

amounted to 1.4 million tonnes, up by 15%. Currently, China is the biggest buyer of

soybeans, cotton and wool in the world. Exports of fruits and vegetables continued to grow

Figure 4.5. Agro-food trade in China, 1995-2005


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4. CHINA

rapidly, confirming earlier observed tendencies for China to specialise in exports of labour

intensive products and to import land intensive products, in particular soybeans

(OECD, 2005).

Exports to Asia in 2005 constituted 67% of China’s agro-food exports. Japan remains

the largest single export market for China, accounting for 29% of the total, followed by the

USA, South Korea, Hong Kong and Germany. The largest single supplier is the USA

accounting for 23% of China’s agro-food imports in 2005, followed by Brazil and Argentina.

These three countries are the main soybean exporters to China. The USA is also a key

supplier of cotton, accounting for around one-half of China’s cotton imports in 2005.

Australia is the main provider of livestock products and wool and Malaysia of palm oil and

rubber.

Rural – urban divide

Real rural incomes rose more than three-fold between 1980 and 2000, representing an

annual rate of about 6%. This led to a remarkable fall in the number of people living below the

absolute poverty line (World Bank definition of USD 1 per day per person at the purchasing

power rate) from about 490 million at the end of the 1970s to 88 million in 2002. However, of

those defined as poor, some 99% live in rural areas (OECD, 2005). At the end of the 1990s and at

the beginning of the 2000s, the rate of growth slowed to below 5% and as urban incomes

continued to grow at higher rates, the rural-urban income gap increased (Figure 4.6). In 2004

and 2005, the rates of rural income growth accelerated to 6.8% and 6.2%, respectively, which

was just sufficient to stabilise the level of the gap. The rural-urban income divide is further

emphasised by strong differences in access to education, health and social security systems,

finance institutions, and even drinking water and basic sanitary facilities.

Domestic agricultural policiesGrain security, farmers’ income and rural sustainable development are major

concerns of China’s government in recent years. For the three consecutive years of 2004-06,

Figure 4.6. Rural household income per person in China, 1995-2005

Source: China Statistical Yearbook, NBSC, various editions.1 2 http://dx.doi.org/10.1787/417078174560

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“No. 1 Documents”, the top priority documents adopted jointly at the beginning of each

year by the Central Committee of the Communist Party and the government, concentrated

on agriculture and the countryside. The document for 2004 focused on “boosting growth in

farmers’ income”, for 2005 on “strengthening comprehensive production capacity of

agriculture” and for 2006 on the construction of the “new socialist countryside” (Box 4.2).

Price and income support policy

Minimum purchase price

Before 2004, state pricing accompanied by a state procurement system was in place for

major agricultural commodities. From 2004, centrally set state pricing only applies to

Box 4.2. Construction of the new socialist countryside in China

Document No. 1 for 2006 outlined a new rural development strategy. As the publicationof this document coincided with the first year of the 11th Five Year Plan, the priorities setthere were further developed in the plan and their implementation will be extended until2010. The plan sets three important objectives: ensure adequate supply of grains andother agricultural products; steady increase of farmers’ income; and the harmoniousdevelopment of rural society. The following measures are envisaged to achieve theseobjectives:

First, speeding up the development of rural infrastructure such as roads, electricity andwater supply, water conservancy, communication, rural schools and clinics, and sanitationsystems. In particular, it is planned that the problem of unsafe drinking water for100 million rural habitants will be resolved and that 1.2 million kilometres of roads will beconstructed or renovated by 2010.

Second, improving access to basic public services in rural areas through the gradualextension of 9-year compulsory education and the development of a cooperativehealthcare system. In addition, a social security system for farmers would be establishedto include poverty relief and assistance and a rural pension system for elderly people.From 2006, 9-year compulsory education in western rural areas has been exempted fromtuition and free compulsory education in all rural areas is to be achieved by 2010. In 2006,both central- and local-governments increased substantially subsidies for medical care inrural areas. Currently, a rural cooperative healthcare system covers 40% of the ruralpopulation and it is planned that by 2010 the system will cover the whole rural population.

Third, making efforts to raise farmers’ incomes. This will include enhancements for thedevelopment of agricultural production capacity, encouraging the development of villageand township enterprises, and speeding up the migration of rural labour to urban areas.The plan assumes a 5% yearly growth rate of real farmer income and a transfer of25 million rural workers to urban areas.

Fourth, improving capacity for increased grain production. Hard goals to be achieved by2010 include grain output of 500 million tonnes (including soybeans) and not less than103.3 million hectares sown to grains. For this purpose, the government will enhance thedirect subsidy policies for grain producers and reinforce the construction of farmlandwater conservancy, drainage and irrigation systems.

Fifth, deepening institutional reforms in rural areas. These will include setting up ofrural self-governance mechanisms, and development of farmers’ autonomousorganisations such as cooperative economic organisations and professional associations.


4. CHINA

tobacco, which remains under a state monopoly. Moreover, minimum purchase prices are

applied to selected grains.

In May 2004, China allowed qualified non-state firms to buy and sell grains on the

opened market. Private firms which meet certain criteria were also permitted to engage in

grain processing and storing activities (OECD, 2005). The government regulates the grain

market through national grain stocks, state trading enterprises (see below) and minimum

purchase prices. The minimum prices were first announced in 2004 for early indica rice

and japonica rice at CNY 1 400 (USD 169) and CNY 1 500 (USD 181) per tonne, respectively.

The same level of prices was maintained in 2005, but the coverage was extended to include

middle and late indica rice. However, as market prices in both years were in general above

the minimum level, there was no government intervention in 2004 and in 2005 the

intervention was limited to early indica rice.

In 2006, new minimum prices were announced and the coverage was further extended

to include wheat. The level of prices per tonne was as follows: CNY 1 440 (USD 180) for

white wheat, CNY 1 380 (USD 173) for red wheat, CNY 1 400 (USD 175) for early indica rice,

CNY 1 440 (USD 180) for middle and late indica rice, CNY 1 500 (USD 188) for japonica rice.

As wheat market prices fell below the minimum levels, China’s government designated

state-owned warehouses in six major wheat producing provinces to buy wheat at

minimum prices. According to China’s State Grain Administration, these purchases

amounted to 41 million tonnes up to the end of September which accounted for over 80%

of farmers’ total sales and about 40% of total wheat production in 2006. Intervention

purchases of early indica rice were much smaller at below 4 million tonnes which

compares with total rice production of about 181 million tonnes in 2006 (eFeedLink).

Direct payments

Grain producer subsidies based on planted area were introduced nationally in 2004,

usually at the rate CNY 10 (USD 1.2) per mu (1/15 ha) of area sown to rice, wheat or maize.

In total, funding of CNY 11.6 billion (USD 1.4 billion) was appropriated from the state grain

risk fund for this purpose. To ensure that farmers benefit from the government subsidies,

the sub-national governments are required to publicise all details about the use of the

grain risk fund monies and penalties are in place for inappropriate use of those funds. The

system was continued in 2005 and 2006 at the total cost of CNY 13.2 billion (USD 1.6 billion)

and CNY 14.2 billion (USD 1.8 billion), respectively.

While politically popular, the role of these subsidies in supporting farm incomes is

minor. It is estimated that of the total increase in rural incomes of 6.8% in 2004, direct

subsidies accounted for only around 5%; 49% was attributed to increased product sales and

43% to non-farm income sources (Gale et al., 2005).

Elimination of agricultural taxes

Until the beginning of the 2000s, Chinese farmers paid different formal and informal

taxes, charges and fees. In 2000, officially recorded agriculture-related taxes (agricultural tax,

animal husbandry tax, tax on special agricultural products, tax on the use of cultivated land,

and contract tax) amounted to CNY 46.5 billion (USD 5.6 billion). However, farmers also paid

contributions to the township government (Five Tongchou) amounting to CNY 26.8 billion

(USD 3.2 billion) and to the village committee (Three Tiliu) amounting to CNY 35.2 billion

(USD 4.3 billion) as well as various fees estimated at around CNY 90 billion (USD 10.9 billion).

If all these payments are also taken into account, the taxation shouldered by farmers, known


4. CHINA

as the “peasant burden”, would be as high as between CNY 180 billion (USD 21.7 billion) and

CNY 220 billion (USD 26.6 billion), or more than 10% of farmers’ net annual income (Aubert

and Li, 2002).

The rural tax reform, initiated in 2000, and progressively implemented from 2003,

attempts to address the issue of the high tax burden on farmers. It started from

incorporating most agricultural taxes, fees and charges into one tax and then capped the

tax at a maximum rate (8.4%) relative to the annual grain-equivalent value of agricultural

output for the previous years. Reform included the removal of the Animal Slaughter Tax

and of the Special Agricultural Tax on all products except tobacco. In addition, the

government announced in 2004 that the Agricultural Tax would be phased out over five

years, beginning in 2004. In March 2005, the government announced that agricultural tax

reform should be further accelerated with the aim of phasing out all national farm taxes in

2006. In 2005, 28 provinces exempted farmers from agricultural taxes and at the beginning

of 2006 China totally eliminated national agricultural taxes that had been implemented for

2 600 years.

While rural tax reform provides more transparency and helps increase farmers’

disposable income, there are two main threats to its sustainability. First, the success of

reform depends on continued tax revenue transfers from the central government to

provinces and counties as compensation for lower sub-national tax revenues. Second, the

official value of the “peasant burden” seems to be underestimated, which means that

transfers from the central government will not fully compensate for various payments

imposed on farmers by townships and village committees. Thus, it is rather unlikely that

local authorities will discontinue collecting miscellaneous informal fees, levies and fines,

in particular as farmers remain poorly organised and are weak partners vis-à-vis heavy and

largely unreformed local administrations.

Input subsidies

To lower prices of chemical fertilisers, fertiliser producers have been given access to

lower priced inputs, such as electricity. The rates are differentiated across provinces but for

example in 2002 fertiliser producers paid between 10% and 30% less per kilowatt hour than

other industrial enterprises (OECD, 2005). In 2004, the price for chemical fertilisers increased

by 12.8% which absorbed part of the producer price increase. To avoid such a situation in

2005, the government undertook three measures. First, export taxes were increased to curb

exports. For the period from 1 June to 31 October 2005 (a peak period for the utilisation of

fertilisers), the tax was at 30% and then from 1 November to 31 December 2005 at 15%.

Second, a cap on the sale price of chemical fertilisers in the domestic market was set.

Third, to encourage production, fertiliser producers were temporarily exempted from VAT.

Despite these measures, fertiliser prices increased by another 12.8% in 2005 (NBSC, 2006).

Since 2002, farmers have benefited from subsidies for purchasing improved quality

soybean seeds. In 2004 and 2005, this scheme was extended to cover improved seeds of wheat,

maize and rice. The budgetary allocations for this purpose amounted to CNY 2.85 billion

(USD 0.3 billion) in 2004 and CNY 3.87 billion (USD 0.5 billion) in 2005 (RDI, 2006).

The government provides a small subsidy for the purchase of farm machinery. This

subsidy mainly assists a small number of large farms of sufficient scale to warrant

mechanisation. Benefits of this subsidy may accrue indirectly to the small-holders through

reduced costs faced by farm service providers, such as harvesting companies.


4. CHINA

According to official estimates, Chinese farmers’ benefits from the cancellation of

special product tax, reduced agricultural tax, direct payments to grain producers, subsidies

paid to improved seeds and for agricultural machinery amounted to CNY 45 billion

(USD 5.4 billion) in 2004 and to CNY 70 billion (USD 8.5 billion) in 2005 (Chen, 2006). In

April 2006, the government announced CNY 12.5 billion (USD 1.5 billion) worth of

additional subsidies for grain producers to offset the rising cost of diesel fuel and fertilisers

(People’s Daily, 12 April 2006).

Preferential credit

Until the end of the 1990s, preferential loans were provided mostly to state marketing

organisations to fund the purchase and storage of key agricultural products, in particular

grains. In the 2000s, most of these programmes were discontinued. In February 2006, the

Agricultural Development Bank of China (ADBC), the so called “policy bank” implementing

government programmes, announced that commercial rates will also be applied to the

grain marketing enterprises.

Preferential rates are now applied for loans targeting rural development and poverty

alleviation. In 2006, the rates were just above half the commercial rates. However, there is

evidence that loan funds are diverted to supplement sub-provincial government budgets

and that loans are made to industrial enterprises and not necessarily benefiting the poor

(OECD, 2005).

Payments for returning farmland to forests

The so-called “grain for green project” and officially titled the Returning Farmland to

Forests Programme was launched in 1999. Under this programme, cultivated lands in

environmentally fragile areas are “retired” from crop production and converted to pasture

or forest. Participating farmers are provided with grains and cash subsidies according to

the area of damage-susceptible land they “retire”. For each mu retired, farmers in the

upstream regions of the Yellow River basin in northern China received yearly 100 kg of grains

and CNY 20 (USD 2.4) in cash; and in the upstream regions of the Yangtze River basin they

received 150 kg of grains and CNY 20 (USD 2.4) in cash. In 2004, the grain allocation was

converted to a cash equivalent. The period for which “retired” land is subsidised is set at two

years for land returned to pasture, five years for land converted to “economic” forests and

eight years for land converted to “ecological” forests. Free seedlings are also made available

for afforestation (OECD, 2005).

Between 1999 and 2005, within this programme trees were planted on about 9 million

hectares of cultivated land at a total cost born by the central government of CNY 103 billion

(USD 12.4 billion; State Forestry Administration, 2006). Sharp increases in grain prices and

concerns over grain security led to a significant slow down in the implementation of the

programme in 2004 from a planned 3.3 million hectares to 0.7 million hectares. In 2005,

the converted area was still small but increased to 0.86 million hectares. In line with

the 11th Five Year Plan, CNY 137.7 billion (USD 17.3 billion) will be allocated for this

programme between 2006 and 2010.

Biofuel policies

China is planning to increase its biofuel production, including fuel ethanol and

biodiesel, from around 1 million tonne in 2005 to nearly 4 million tonnes in 2010 and to

12 million tonnes in 2020 which should then satisfy up to 15% of its transportation energy


4. CHINA

needs. China’s stated objectives of biofuel development are: to improve the welfare of rural

citizens; to strengthen energy security and reduce oil dependence; and to mitigate

emissions harmful to the environment.

Biofuel development is subject to strict central government regulation and control.

The National Development and Reform Commission (NDRC) regulates both supply of and

demand for biofuels. To ensure adequate control, only state-owned enterprises are used to

develop biofuel production. Fuel ethanol producers benefit from a number of financial

incentives which include: refund of value added taxes; exemption from 5% consumption

tax; profit guarantee of CNY 100 (USD 12.5) per tonne; preferential supplies of grain stocks;

and compensations of losses due to adjustment, transportation or sales. In 2006, the

subsidy per tonne of fuel ethanol amounted to CNY 1 373 (USD 172) at a total budgetary

cost of CNY 1.5 billion (USD 188 million) (Latner et al., 2006).

While so far all financial incentives were limited to fuel ethanol, in May 2006, the

Ministry of Finance outlined the creation of a special fund to encourage the development

of renewable energy resources, including biomass energy which has been extended beyond

fuel ethanol to also include biodiesel.

However, food security concerns may become a limiting factor for the development of

biofuels. Currently, fuel ethanol is produced mostly from maize (80% of fuel ethanol

production in 2005), but in the future, inputs (feedstock sources) will also include sugar,

oilseeds, sweet sorghum, wheat and cassava. While the NDRC asserts that the targeted

biofuel production will not threaten China’s grain security, it will affect production mix

and, most likely, will contribute to increased imports of the above-mentioned inputs

(Latner et. al., 2006).

Overall budgetary support to agriculture

Under the Chinese budgetary accounting system, government expenditures for

agriculture consist of four major items, namely expenditures on rural production, rural

capital construction, agricultural science and technology promotion, and rural relief funds.

In 2005, these expenditures amounted to CNY 245 billion (USD 29.9 billion), of which those

on rural production accounted for 73% of the total, rural capital construction for 21%, science

and technology promotion funds for 1%, and rural relief funds for 5%. While overall

expenditures for agriculture increased by 5% compared to 2004, their share in the total

budgetary expenditures in China fell to 7.2% from 9.7% in 2004 (NBSC, 2006).

The growing expenditures, at least in nominal terms, seem to confirm the

government’s commitment to allocate more resources to rural areas, but it is difficult to

assess the actual level of budgetary support to rural development, including to agriculture.

While all budgetary expenditures from various government bodies should be included in

the data provided by the Ministry of Finance, it is difficult to verify if it is the case as a large

part of expenditures comes from various special funds being under the responsibility of

various ministries and government institutions. They include the NDRC, Ministry of

Finance, Ministry of Science and Technology, Ministry of Water Conservancy, Ministry of

Agriculture, State Administration of Forestry, China Meteorological Bureau, Ministry of

Land Resources, State Council Poverty Alleviation Office, State Office for Preventing Flood

and Drought, Ministry of Communication, Ministry of Health, Ministry of Culture and

Ministry of Civil Affairs. Moreover, each ministry has its own system of channelling funds

from the centre to the village level (Zhang X., 2006).


4. CHINA

Another difficulty is linked with the Chinese concept of three nongs (agriculture,

farmer and countryside), which can be defined in various ways thus resulting in various

estimates of total budgetary allocations to support agricultural (in fact rural) development.

Moreover, information on budgetary expenditures is very aggregated and in many cases

the coverage of payments within a given programme is so large that it is impossible to

separate payments which address farmers directly, payments to services provided

collectively to agriculture (general services) and payments to support the development of

rural areas in general, including for non-agricultural activities in rural areas (OECD, 2005).

Agro-food trade policies

Import policy

In line with its WTO commitments, China has progressively reduced import tariffs on

agricultural products. Applied tariff rates are very close to the bound rates. In 2005, all

tariffs applied to agricultural goods, with very few exceptions, were ad valorem. The fall in

the applied MFN tariffs on agricultural products (WTO definition) was differentiated across

various commodities but on average they fell from 23.1% in 2001 to 15.3% in 2005, which

compares with an overall average rate of 9.7% in 2005 (WTO, 2006).

Tariff dispersion declined from a range of 0% to 121.6% in 2001, to from 0% to 65% in

2005. In particular, tariffs on grains were reduced from 51.9% to 33.9% and on oilseeds from

32% to 11.1%. Tariffs on dairy products declined from 35.9% in 2001 to 12.1% in 2005.

Nevertheless, grains, and other traditionally highly protected agricultural commodities,

such as sugar (29.9% in 2005) and tobacco (25.4% in 2005), still benefit from higher than

average protection. Some of the lowest tariffs apply to oilseeds, a sector that was

previously highly protected. For example, tariffs levied on soybeans fell from 114% (out-of-

quota rate) in 1997 to 0-3% as of 2002. Lower tariffs apply also to subsectors in which China

has a comparative advantage, such as horticultural and animal products.

Imports of agricultural goods are subject to VAT. The rate for agricultural products is

13%, 4 percentage points below the rate generally applied to other products. Depending on

the market situation, VAT exemptions have been applied, sporadically, to a wide range of

agriculture-related imports, such as grains, seeds, breeding animals, fertilisers and

pesticides, some feed components and cotton. However, if there is a domestic oversupply

of a given commodity, the VAT exemption on imports is removed.

Tariff rate quotas (TRQs) apply to major agricultural products, such as wheat, maize,

rice, soybean oil, palm oil, rape oil, sugar, wool, wool tops, cotton, and chemical fertilisers.

The National Development and Reform Commission (NDRC) and Ministry of Commerce

(MOFCOM) are jointly responsible for administering TRQs for rice, maize, wheat, and

cotton, and MOFCOM is solely responsible for fertilisers, oils, sugar, wool, and wool tops.

The size of the annual quota is based on China's commitments at the time of accession to

the WTO. MOFCOM announced the elimination of the TRQ on vegetable oils from the

beginning of 2006, implementing a tariff-only arrangement instead.

In general, imports under TRQ were differentiated and ranged from very low for rice

(fill rate 11% in 2005) and maize (less than 1% in 2005) to particularly high for cotton (nearly

300% in 2005). The fill rate for cotton reached 100% by 2002. Since 2003, quota levels for

cotton have been increased and actual imports substantially exceeded the original quota

specified in China’s Protocol of Accession to WTO (Table 4.2). According to the Chinese


4. CHINA

Table 4.2. Tariff quota utilisation in China, selected commodities,1 2002-05

2002 2003 2004 2005

Wheat Quota level (’000 tonnes) 8 468.0 9 052.0 9 636.0 9 636.0

In-quota imports (’000 tonnes) 632 450 7 260.0 3 538

Utilisation rate2 (%) 7.5 5.0 75.3 36.7

State-trading share (%) 90.0 90.0 90.0 90.0

In-quota MFN tariff rate (%) 1-10 1-10 1-10 1-10

Out-of-quota MFN tariff rate (%) 71.0 68 65 65

Maize Quota level (’000 tonnes) 5 850.0 6 525.0 7 200.0 7 200.0

In-quota imports (’000 tonnes) 10 < 5 < 5 < 5




Out-of-quota MFN tariff rate (%) 28-71 24-68 20-65 20-65

Rice Quota level (’000 tonnes) 3 990.0 4 655.0 5 320.0 4 767.0

In-quota imports (’000 tonnes) 237 260 770 522




Out-of-quota MFN tariff rate (%) 22-71 16-68 10-65 10-65

Soybean oil Quota level (’000 tonnes) 2 518.0 2 818.0 3 587.1 3 587.0

In-quota imports (’000 tonnes) 870 1 880 2 520 1 694



In-quota MFN tariff rate (%) 9.0 9.0 9.0 9.0

Out-of-quota MFN tariff rate (%) 52.4 41.6 30.7 19.9

Palm oil Quota level (’000 tonnes) 2 400.0 2 600.0 3 168.0 3 170

In-quota imports (’000 tonnes) 1 695 2 330 2 390 4 320





Rapeseed oil Quota level (’000 tonnes) 878.9 1 018.6 1 243.0 1 243.0

In-quota imports (’000 tonnes) 78 150 350 178





Sugar Quota level (’000 tonnes) 1 764.0 1 852.0 1 945.0 1 945.0

In-quota imports (’000 tonnes) 1 183 780 1 210 1 390





Cotton Quota level (’000 tonnes) 818.5 856.3 + 500 894.0 + 1 000 894.0 + 1 400

In-quota imports (’000 tonnes) 177 870 1 910 2 654





1. Other commodities covered by TRQs in China include wool, wool tops, and fertilisers (urea, NPK anddiammonium phosphate).

2. Utilisation rate refers to in-quota imports divided by quota level. Quota levels for cotton were increasedduring 2003-05.

Source: WTO, 2006. 2005 import data from China’s Customs Statistics. Utilisation rate in 2005 calculated by the OECDSecretariat.


4. CHINA

authorities, all cotton imports during 2002-05, including those in excess of the quota, were

charged the in-quota tariff rate.

China’s government still controls imports (and exports) of key commodities through

State Trading Enterprises (STEs). Under China's WTO accession agreements, agricultural

products subject to import by STEs are: grains (maize, rice, and wheat), vegetable oils,

sugar, tobacco, and cotton. STEs set import prices, which are "usually" based on the c.i.f.

price plus tariff and other charges such as VAT and other taxes, port charges, inspection

fees, and domestic transportation charges. China’s TRQ system includes criteria for

allocating the import quotas to STEs and private enterprises. STEs continue to control the

majority of wheat, maize, rice and sugar imports. Their role in imports of vegetable oils

(palm, rapeseed, and soybean) and cotton is much lower (Table 4.2). In addition, imports of

tobacco remain under state monopoly (WTO, 2006).

Export measures

China has notified to the WTO that during 2002-04 it did not subsidise its agricultural

exports. Under its WTO accession agreements, China maintains the right to apply export

taxes, but in 2005 such taxes were not applied with very few exceptions, such as a 20% tax

on exports of raw hides and skins of goats.

Exporters of agricultural products are entitled to a VAT rebate at the time of

exportation. Rebates vary across commodities and thus appear to have been used to

manage exports of certain products, including agricultural products. With few exceptions,

the rebate rates are lower than the VAT rates actually paid, mainly for budgetary reasons.

In general, for goods subject to a 17% VAT rate, the rebate rates are 17% or 13%; for goods

subject to a 13% VAT rate the rebate rates are 11%, 8%, or 5%. The difference between the

rates of VAT actually charged and the rate rebated constitutes a levy on exports (WTO, 2006).

State trading is used for the export of rice, maize, cotton, silk, and tobacco. As of

1 January 2005, state trading was eliminated for silkworm cocoons and silk products. The

continued use of state trading to export selected commodities allows the government to

influence their domestic (and export) prices.

China imposes export quotas that are both global (i.e. irrespective of destination) and

destination-specific. In 2004, global export quotas applied to exports subject to state and

“designated” trading such as cotton, grains, silk, and tea. As of 1 January 2005, export

quotas and licensing for silk and silk products were eliminated. In 2004 and 2005,

destination-specific quotas applied to, inter alia, live cattle, live swine and live chicken to be

exported to the Special Administrative Regions (SARs) of Hong Kong and Macao. Non-

automatic licences are used to manage these export quotas. Other exports, including meat

products are subject to automatic licensing for statistical purposes (WTO, 2006).

Bibliography

Aubert, Claude and Xiande Li (2002), “‘Peasant Burden’: Taxes and Levies Imposed on Chinese Farmers”,Agricultural Policies in China after WTO Accession, OECD, Paris.

Chen, Xiwen (2006), Current Issues on Agriculture, Countryside and Farmers in China, www.snzg.cn/shownews.asp?newsid=17172.

Cheng, Guoqiang (2006), “Updates for OECD PSE Database”, Report submitted to OECD.

China Livestock Yearbook (2005), Agricultural Press.


http://www.snzg.cn

4. CHINA

The Economist Intelligence Unit (EIU, 2007), Country Report, China, 26 Red Lion Square, London WC1R4HQ, United Kingdom, January.

Efeedlink (2006), “China Buys 41.3 Million Tonnes Local Wheat to Support Farmers”, eFeedLink eNewsletter,16 November.

Gale, Fred, Bryan Lohmar and Francis Tuan (2005), China’s New Farm Subsidies, Economic ResearchService/USDA, Washington, DC, www.ers.usda.gov/publications/WRS0501/WRS0501.pdf.

Huang, Jikun, Hu Ruifa, Cao Jianmin and Scott Rozelle (2006), “Non-Point Source of AgriculturalPollution: Issues and Implications”, Environment, Water Resources and Agricultural Policies. Lessonsfrom China and OECD Countries, OECD, Paris.

Latner, Kevin, Caleb O’Kray, Junyang Jiang (2006), People’s Republic of China: Bio-fuels, an Alternative Futurefor Agriculture, USDA Foreign Agricultural Service, GAIN Report CH6049, August 8.

Li, Xiande (2006), “Report on Main Policy Developments in China”, Report submitted to OECD.

NBSC (National Bureau of Statistics of China) (2005 and 2006), China Statistical Yearbook.

OECD (2005), OECD Review of Agricultural Policies: China, Paris.

OECD (2006), Environment, Water Resources and Agricultural Policies: Lessons from China and OECD Countries,Paris.

People’s Daily, 12 April 2006.

State Forestry Administration (2006), Press Release for the Plan of the “Grain for Green” in the 11th FiveYear Plan, www.forestry.gov.cn/swhm/xwfb/04.asp.

Taylor, Daniel (2005), People’s Republic of China: Food Processing Ingredients Sector, USDA ForeignAgricultural Service, GAIN Report CH5607, June 16.

WTO (2006), Trade Policy Review, Report by the Secretariat, People’s Republic of China, WT/TPR/S/161,28 February.

Zhang, Xiaoshan (2006), Deep Reform to Promote New Countryside Construction, the Eighth EuropeanConference on Agriculture and Rural Development in China (ECARDC), Yiwu, Zhejiang, China,31 August to 2 September.

Zhang, Yinghong (2006), “The Land Requisition Reform During the Socialist New CountrysideConstruction”, Search (Qiusuo), No. 4.

Zhao, Beibei (2005), “How to Resolve the Lost-Land Farmers”, Interview with Han Jun, People’s Daily,9 December.


http://www.ers.usda.gov/publications/WRS0501/WRS0501.pdf

http://www.forestry.gov.cn/swhm/xwfb/04.asp



Chapter 5

IndiaThis chapter is based on an OECD review of agricultural policies in India undertaken

in 2005. The Government of India did not participate in this review and it was therefore notpossible for the draft report to undergo the in-country or OECD review process. Consequently,estimates of agricultural support for India are not available.


● Agricultural policies in India remain targeted to ensuring food self sufficiency and alleviatingpoverty of the second largest population in the world. Increasing rural income to supportmacroeconomic growth is a key government objective that will impact agriculture.

● Based on available budget and tariff information, the level of agricultural support for Indiawould appear to be slightly below the OECD average but considerably higher than that forother emerging economies reviewed by the OECD. Moreover, most of the support isprovided in the form of market price support and input subsidies which are the leastefficient and the most trade distortive forms of support.

● Reform is taking place in different areas of the economy. Trade barriers are being progressivelylowered, there is a floating exchange rate for the Indian Rupee and a value-added tax oncommodities was introduced in 2005. Opening to foreign direct investment is proceeding.

● There have not been major changes to agricultural policies in India in the past two years.Recent developments include increased volumes of credit to a greater number of farmersand relief measures for indebted farmers facing crop failure. Investment in irrigation hasbeen doubled over the period and budgets to encourage production diversification andimproved commodity marketing have been increased. Income insurance schemes arebeing developed. Several research and development programmes have been launched in2006 to enhance agricultural productivity.

● Measures taken to improve the functioning of commodity markets; to reduce excessiveregulations; and to liberalise agricultural trade contribute to the improvement of theeconomic environment for private initiatives.

● The fight against poverty raises important issues of policy coherence. A significant challengefacing the government is to adopt alternative ways of reducing rural poverty from the currentcommodity price support and tariff measures which penalise the growing population ofurban consumers with higher prices.

● Under-pricing of fertilisers, power and irrigation does not improve income distribution inrural areas and is environmentally harmful. One of the key emerging challenges is how toimprove competitiveness on both the domestic and export markets. Redirecting resourcesfrom input subsidies to infrastructure, while reforming land ownership and formal leasingframeworks that constrain agricultural production, could efficiently address this challenge.

81

5. INDIA

Policy contextFive year plans set the framework for government action in India by identifying objectives

and ways of reaching them. Based on a draft Plan prepared by the Planning Commission where

development and growth targets for each sector and allocation of resources are set, the

National Development Council, chaired by the Prime Minister, approves the five year plans.

Currently, the Tenth Five Year Plan (2002-07) is coming to an end.

Agriculture accounted for 20% of GDP in 2005-06 and employs nearly 60% of the

workforce, but this figure conceals seasonal unemployment. The sector is key in feeding and

providing subsistence to the world’s second largest population. In recent years its

importance in trade has diminished, although the decline in the share of exports slowed in

2005. India is a net exporter of agricultural products, supported by export subsidies and the

low value of the Indian Rupee.


The economy has benefited from strong growth since 2003, led by the return to normal

rainfall and a consequent rise in agricultural output and incomes. The progressive

development of a middle class influences demand and changes consumption patterns.

While GDP has been growing at around 8% in recent years, supply has not been able to

match a robust domestic demand, increasing dependence on imports and leading to a

negative current account balance for 2004 and 2005.

Rising international oil prices were the main driver of inflation in India. Government

intervention limited the full pass through to domestic prices and thereby contained inflation

at just above 4%. The introduction in most states of a value-added tax in 2005 has been a major

development contributing to the reform in the taxation system, but eliminating exemptions

and moving to a nationwide goods and services tax would further broaden the tax base.

High variations of year to year GDP growth have compromised realising the average

annual target growth of 8% set in the Planning Commission’s tenth plan. In 2005-06 real GDP

grew by 8.4%, but overall growth figures mask sectoral disparities. Services grew by 10.3%,

while growth was 7.6% in industry and 3.9% in agriculture. This compares to less than 1%

growth in agriculture in 2004-05, and 10.2% and 7.4% for services and industry respectively.


India is divided into 20 major states, 10 small states and 5 union territories which vary

significantly in terms of the economic importance of agriculture, from almost 40% of GDP

in Punjab to less than 2% in Delhi. State governments retain constitutional authority over

the agricultural sector.

Although the share of rural population has been declining in the past 25 years, more

than 70% of the population still live in rural areas. In 2004, 305 million persons (28% of the

population) were below the national poverty line, estimated at INR 327 per month

(USD 7.22 per month) by the Planning Commission, while 39% of children suffered from


5. INDIA

malnutrition. The fight against poverty and malnutrition remains an essential aspect of

policy making.

Output

Gross Agricultural Output growth for the past four years is mainly attributable to

favourable climatic conditions. A record high 9% growth in real terms occurred in 2002-03,

followed by two years of near stagnation at 1% and a forecast growth of 4% in 2005-06

(Figure 5.1).

Crops represent the bulk of agricultural production at more than 70% of total

production. A slow reallocation between commodities has been taking place since 2001.

The share of crops in value of output is gradually declining, mainly reflecting a decline in

the share of grains. The increased share of livestock in agricultural production has

mitigated climate impact on agricultural output in recent years. This was the case in 2002,

for example, when crops output fell by 9% as a result of a severe drought whereas livestock

production grew by 2% leading to an overall real decline of 6%.

Crops

Cereals, fruits, vegetables and oilseeds are the main crops produced as measured by

the 2005 value of production. With limited purchasing power of a large part of the

population and strong preference for vegetarian food, cereals are the staple food, pulses

rank second in the food basket and are the major source of protein for the population,

edible oils come third.

Fifty per cent of agricultural area is planted to rice and wheat. Some slight area

reallocations have occurred; food grains and pulses have been declining at a slow pace

(3 percentage points over the past ten years), while coverage of plantations (tea, cotton,

coffee, rubber and potatoes) increased in the mid and late 1990s, and has been stable since.

Figure 5.1. Evolution and annual changes of agricultural output in India, 1995-2005


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5. INDIA

These commodities account for only 2% of agricultural area. Area under maize has increased

in the past ten years by an annual 2% on average, with an acceleration in the past two years.

After a drop in 2002-03, volumes of grains produced have recovered in the past three

years at around 235 million tonnes, although not reaching the 2001 record production of

242 million tonnes. Rice and wheat account for 18% of agricultural output. Fruits and

vegetables have grown from 14% of the value of production in 1993 to 19% in 2004. Oilseeds

and pulses are also important contributors to the value of agricultural output accounting

for 19% and 8% of value of production, respectively.

Livestock

The livestock sector has been growing by an annual average rate of 3% in real terms for

the past ten years, reaching some 27% of agricultural value of production. The main products

are milk, with 18% of agricultural output, poultry and mutton. Starting from very low levels,

pork and eggs have been the fastest growing animal products in the past 15 years. Poultry

and milk have also grown rapidly, by a yearly average of 3%. India is now the world’s largest

producer of milk. Increased animal numbers have in turn increased demand for feed crops.

Structures

Indian agriculture is dominated by a large number of small scale holdings that are

predominantly owner occupied. The number of farms continues to increase due to the

system of inheritance and the limited opportunities to move out of agriculture. There were

116 million farmers in India in 1995 operating on an average holding size of 1.55 hectares.

More than two-thirds of households operate on less than 1 hectare of agricultural land,

while only about 1% of land holders operate farms in excess of 10 hectares. Many of the

small holdings are not economically viable due to their size and composition of

production. About three-fifths of the cultivated land is used to produce only one crop in a

season and the land remains idle for a large part of the year. Furthermore, there are major

constraints to modernising and organising production and to undertaking the marketing of

produce from these farms. From 1993-94 to 2002-03, the ratio of gross capital formation in

agriculture to real GDP originating in agriculture, increased only by one percentage point

from 6.1% to 7.1%. This compares to an overall ratio of 26% in the economy in 2002-03.

About 40% of the crop area is irrigated, with the remainder dependent on the natural

rains, thus causing sharp year-to-year fluctuations in crop output. Use of irrigation varies

according to commodity. Sugar, wheat, rice and cotton are the major commodities under

irrigation. Ninety-two per cent of area sown to sugar is irrigated, 88% for wheat, 52% for

rice and 33% for cotton.

Inputs

The input mix has been stable in the past few years. Animal feed is the main item in

costs of inputs in domestic production. In 2005, they accounted for 49% of input

expenditure. Chemical fertilisers made up 14%. Market charges, diesel fuel, seed and

manure each accounted for 6% to 8% of input expenditure.

The use of chemical fertilisers, high yielding seeds and irrigation has risen over the

last three decades. Currently, almost 80% of the area under cereals is sown to high yielding

varieties. Nevertheless, cereal yields are quite low and there remains a large gap between


5. INDIA

actual and potential yield. High levels of nitrogen fertiliser use resulting from support

distortions have caused environmental harm in specific areas.

Credit

A move towards more expensive inputs has increased farmer borrowing needs in an

environment where access to credit is identified as one of the main impediments to the

development of agriculture. On the basis of a survey carried out in 2003, only 21% of rural

households reported an outstanding formal loan while the corresponding statistic for

informal loans was 40%. The remaining households, mainly small and marginal farmers,

have no access to credit. The same survey found that 59% of rural households did not have

a deposit account in a financial institution. The credit-deposit (C-D) ratio of the rural

branches of commercial banks declined from 49% in 1995 to 42% in 2002. The proportion of

medium/long-term loans in direct finance to agriculture and allied activities has declined

from over 41% in 1990-91 to about 31% in 2000-01. The share of small and marginal farmers

receiving direct finance fell from 54.5% in 1990-91 to around 51% in 2000-01. There have

been wide disparities in the flow of credit across regions.

Infrastructure

Many opportunities for developing the agricultural sector are hampered due to the

lack of modern infrastructure, such as the regular supply of power and availability of good

roads, markets, warehouses and processing facilities. In particular, the post harvest losses

for grains, fruits and vegetables resulting from inadequate storage and processing

facilities, are extremely high (25% to 30%). Improvements in the storage and post-harvest

handling of agricultural products combined with an increase in value-added processing

could have a significant positive impact on raising incomes in rural areas.

The low rate of land mobility in all states continues to be a major obstacle to improving

the farm structure in India. This is particularly difficult given the relatively small holding size

that a farmer can own, and the absence of any formal land leasing system in most states. The

development of a well functioning land sale and lease market would facilitate an improvement

in farm structure, and consequently, enhance productivity and overall production.

Food industry

The level of agricultural processing is low by international standards, estimated at less

than 2% of production. Most of the food produced is consumed directly in the households

or sold in primary commodity markets. This in turn lowers the return producers receive for

their products on the domestic market.

In 2005, there were 6.4 million firms engaged in agricultural activities other than crop

production or plantation, slightly more than 15% of all enterprises. Large scale co-operatives

exist at the national level. The National Federation of Co-operative Sugar Factories is one of

them. It provides advice to member co-operatives on technical and financial management,

materials development, and inventory control. The National Milk-grid has been successful in

developing milk production and linking milk producers with consumers, thus creating a

nationwide milk-grid of 43 000 village co-operatives covering 4.25 million milk producers.

More recently the network has been consolidating veterinary services together with feed and

artificial insemination services for co-operative members, along with intensified member

education.


5. INDIA


India’s participation in world markets has grown at a rapid pace. Total merchandise

imports grew by 43% in 2003-04 compared to the previous year and by another 28% in 2004-05.

In the same period, exports of goods grew by 31% and 23% respectively. Trade in

agricultural products has grown too, although at a much slower pace, thus leading to a

decline in the agro-food share of trade. India has remained a net exporter of agricultural

products, with a growing agro-food trade surplus in 2004 and 2005 (Figure 5.2).

Agricultural imports neared 4% of total imports in 2005. The basket of commodities

most traded has not changed much in the past ten years. However, the individual and

overall weights of commodities in it have evolved. Edible oils, although decreasing in

recent years, are still the largest group of commodities imported in 2005-06 at

USD 2 billion, accounting for 70% of bulk consumption goods imported and, together with

cashew nuts (USD 472 million) and pulses (USD 530 million), make up most of the basket of

imported agricultural commodities. Raw cashew nuts are imported for processing before

export. Similarly, imports of sugar occur when domestic supply cannot satisfy processing

needs. Imports of manufactured fertilisers have tripled in the past three years, reaching an

estimated USD 1.6 billion in 2005-06. In 2005, Indonesia and Argentina alone accounted for

36% of Indian agro-food imports. Both countries were the main providers of edible oils,

accounting for 60% of total imports of that commodity. The other main countries of origin

of agro-food imports were Brazil, Myanmar, the United States and Sri Lanka, together

bringing coverage to 60% of agro-food imports.

Buoyant growth of exports in other sectors has nearly halved the relative share of

agricultural exports in total merchandise exports from 19% in 1995 to about 10% in 2005.

But the decline slowed in 2005, when agricultural exports grew at a pace comparable to that

Figure 5.2. Agro-food trade in India, 1995-2005


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5. INDIA

of total exports. Cereals, together with oil meals, cashew nuts, tea, fruits and vegetables are

the main exported agricultural commodities. Cereals represent 20% of total agro-food

exports. In 2005, about USD 1.5 billion of rice was exported, reflecting government

intervention to reduce domestic stocks. Export destinations are more diversified than

import partners and in 2005 the United States, Saudi Arabia, Japan, the United Arab

Emirates and Bangladesh together accounted for one-third of agro-food exports.

Domestic agricultural policies

Overall structure

India has a highly regulated agriculture, with declared objectives of food security and

alleviation of poverty. The regulatory controls are shared between the central government;

through the Essential Commodities Act (ECA, 1955) and the state governments with the

Agricultural Produce Market Regulation Act (APMRA). In many states additional legal

instruments are in place. Agriculture has only indirectly been affected by reform initiated

by the central government and taking place in other areas of the economy. Regulations on

prices have prevented the full transmission of monetary reforms.

Cereals, pulses, edible oilseeds, oilcakes, raw cotton, sugar, and jute are included in

the list of essential commodities regulated under the ECA through instruments like

licenses, permits and orders to control prices and storage which limit the movement,

distribution and disposal of products. In addition, compulsory purchases and sales by the

central government are also regulated by this Act.

In its Tenth Five Year Plan, government focus has moved to raising output by

increasing crop productivity. In order to achieve this objective, a four step strategy has been

adopted and includes: increasing crop intensity through multi-cropping in the same

season; adopting modern technologies; increasing the use of productivity; enhancing

inputs; and diversifying production by replacing low value crops by high value crops and by

moving from crops to livestock. Diversifying the crop sector and moving from crops to

livestock can be seen as contradicting measures in place under the ECA, where low value

crops have been the focus of support for many years.

Adjustments have been made to ECA, including removing the licensing requirement of

dealers and restrictions on the storage and movement of food grains, sugar, oilseeds and

edible oils. Similarly, the sugar control order and the milk and milk products order have

also been amended to encourage greater participation by the private sector in the

marketing of these commodities.

The involvement of many government institutions blur the global picture of

government policies. Commodity specific institutions regulate markets through an array of

measures including minimum support prices, import subsidies, public procurement and

distribution of food grains. The Agricultural Produce Marketing Committee (APMC) Acts in

the states also restrict the growth of agricultural marketing and do not allow co-operatives

and private parties to set up modern markets. Government institutions also control and

distribute inputs, develop infrastructures, and provide general services.

Prices and income support

Minimum Support Prices (MSP) are instruments of the ECA. They are declared on the

basis of advice from the Commission on Agricultural Costs and Prices. Some state

governments further augment the MSP, typically by 20% to 25%. Initially aimed at rice and


5. INDIA

wheat, the MSP policy now covers about 24 crops. However, in practice, MSP are effectively

used for rice, wheat and sugar cane in a small number of states. The purchase of other

crops occurs sometime, either because MSP are typically well below market prices or

because of the lack of administrative capacity to procure the commodity. This was the case

in 2004-05 when raw cotton prices fell to the MSP.

Agricultural market prices were relatively high in 2005, in a context where the CPI grew

by 4.2%. High agricultural prices were explained by a fall in stocks for wheat and excessive

rain for vegetables (for which prices grew by 14%) and a rise in oil prices. The highest

growths occurred for pulses (19%), eggs, fish and meat (16%). Cotton reflected the rise in

international prices, growing by 9%. On the contrary, oilseeds prices declined by 5% on

account of improved crop prospects and milk prices declined by 1.5%.

Rice procurement has reached record heights in the past three years. It amounted to

26 million tonnes in 2005-06. This compares to a total production of 131 million tonnes.

Concurrently, wheat procurement has been declining since 2001-02 to 15 million tonnes in

2005-06, while production has been stable in the past few years at around 72 million tonnes.

Emphasis is being put on non-agricultural rural employment as a source of income

that could be spent on agricultural commodities and thereby increase outlet volumes.

Developing public/private partnerships and attracting private investment in agricultural

processing industries would procure jobs to the rural unemployed and hence increase rural

income. Though originally intended to raise agricultural productivity and output by

promoting the use of modern inputs; in recent years input subsidies are seen more as an

income support measure for farmers.

Crop insurance

In 2005, farmers from 23 states and 2 union territories participated in the National

Agricultural Insurance Scheme (NAIS) and 16 million farmers were insured. This crop

insurance is only available for a limited number of crops. Premium rates, based on area,

vary from 1.5% of the sum assured for wheat to 3.5% for oilseeds. Small farmers benefit

from a 10% subsidy on their premium payments, the subsidy is borne equally by central

and state governments. Under this scheme, claims exceeded premiums by INR 7 billion

(USD 159 million) in 2004-05.

Infrastructure

The government has played a leading role in creating the core infrastructures like

irrigation projects, rural roads, rural electrification, and the setting up of agricultural

markets. Rural development and agricultural objectives are often combined in large

infrastructure projects. However, the problem of inconsistent power supply continues to be

a serious cause of concern for farmers and rural industries in several states, aggravated by

the fluctuation of oil prices in international markets.

INR 121 billion (USD 2.7 billion) were spent in 2005-06 to develop programmes covering six

components of infrastructure development: Accelerated Irrigation Benefit Programme (AIBP),

rural water supply, rural roads, rural houses, rural electrification and telephone connectivity.

The AIBP was modified in 2004 to add a grant component to the existing loan

component. The grant component can be either 10% or 30%, according to state. The

remainder is covered by the loan. Outlays have substantially increased from INR 28 billion

(USD 618 million) in 2004-05 to INR 45 billion (USD 1 billion) in 2005-06 and INR 71 billion


5. INDIA

(USD 1.6 billion) in 2006-07. The programme has covered 189 large irrigation projects and

nearly 4 500 minor irrigation schemes. An extra INR 30 billion (USD 680 million) was

budgeted in 2005 to restore and repair existing structures. Recent evaluation of the AIBP

suggests that the programme has not had sufficient tangible benefit. The area under

irrigation is expanding very slowly despite additional allocation of funds.

INR 2 billion (USD 45 million) are budgeted in 2005-06 to improve rainwater harvesting

efficiency, soil moisture conservation, use of manures and adoption of improved dryland

farming technologies in the arid and semi-arid regions of the country, particularly in the

districts receiving annual rainfall less than 750 mm and with assured irrigation coverage

less than 30% of the net sown area.

Irrigation projects and rural infrastructure development in general have also been

supported by foreign grants. For example, the EU contributed to the development of

12 infrastructure projects with an overall funding volume of INR 11.5 billion (USD 253 million)

over the past ten years in a general context of local rural development projects, ranging from

land rehabilitation and irrigation to agricultural and watershed management projects.

Credit

Several initiatives have been taken in recent years to improve the agricultural credit

delivery mechanism. These, inter alia, include simplifying procedures, encouraging

decentralised decision-making and encouraging self-help groups under micro finance

programmes. In 2004, commercial banks (including Regional Rural Banks) and co-operative

banks were mandated to increase the flow of credit by 30% and the number of borrowers by

5 million in 2005-06. Yet an increasing number of indebted farmers have faced crop

failures. Credit relief measures are now in place for an amount equal to two percentage

points of the borrower’s interest liability on the principal amount, up to INR 100 000

(USD 2 300), with an overall budget of INR 17 billion (USD 385 million). Furthermore, the

rate for short-term credit has been set at 7% on loans up to INR 300 000 (USD 6 800) on the

principal amount in effect from late 2006. Expenditures on interest subsidies exceeded the

budget estimates by INR 18 billion (USD 408 million) on account of provision for interest

subsidy to farmers.

Governance in the credit sector should benefit from a USD 1 billion loan issued at the

end of 2006 by the Asian Development Bank to the Government of India to reform the rural

co-operative credit sector. This loan is topped by a USD 180 million loan from several

European sources. The three year Rural Cooperative Credit Restructuring and Development

Program aims at improving governance and putting an end to recurring losses of the

existing system. The programme has a 15 year term with a three year grace period.

Marketing and diversification

Innovative marketing strategies have been developed in some states to get a better

share of the consumer price for farmers. Some experiences with direct marketing have

been quite successful in reducing risks of deficient market demand and adverse price

fluctuation. These arrangements are on the increase and can be further enhanced by

providing an appropriate legal and regulatory framework. Nine states and three union

territories have amended the APMC Act to facilitate marketing of agricultural products. It

should, however, be emphasised that a dispute settlement framework should be developed

to assist small farmers in contract farming to deal with contract enforcement and other

transaction costs.


5. INDIA

INR 6.3 billion (USD 143 million) was allocated in 2005-06 to the National Horticultural

Mission (NHM) to develop agricultural marketing of fruits, vegetables, flowers, dairy,

poultry, fisheries, pulses, oilseeds. A budget of INR 700 million (USD 16 million) for 2005-06

was allocated to developing public/private partnerships in setting up agricultural markets,

marketing infrastructure and support services such as grading, standardisation and

quality certification. The NHM budget was doubled in 2006-07 to INR 15 billion

(USD 34 million). There are, at present, three multi-commodity exchanges and 22 regional

exchanges in India.

Inputs

Input subsidies are provided primarily through subsidising fertilisers, irrigation water,

and electricity used for irrigation and other agricultural purposes. From time to time, input

subsidies have also been provided on seeds, as well as on herbicides and pesticides. In

addition, commercial banks, co-operatives and regional rural banks are required to provide

credit to agricultural producers for input purchase at interest rates below the market rate.

Excess use of subsidised inputs has negatively impacted the environment, creating

imbalances between nutrients and water logging in many areas.

In 2001-02 fertiliser subsidies accounted for 34.7% of input subsidies, irrigation and

electricity 36.7% and 27.8%, respectively. But a recent report from the Planning Commission

pointed to the undervaluation of agricultural electricity consumption and implicit subsidy

directly resulting from the pricing and supply methods. Consumer prices for electricity are

set by state Electricity Regulatory Commissions. The agricultural sector is supplied

un-metered power in almost all states and the farmers pay a highly subsidised lump sum

based on the declared horse power of their irrigation pumps. This leads to a zero marginal

cost of power which promotes inefficient use and over exploitation of ground water leading

to degradation. Fertiliser subsidies are seen as a means of alleviating the impact on

agricultural producers of the high cost of an inefficient domestic fertiliser industry. As a

result of lower trade barriers on agricultural inputs, increased imports of fertilisers

occurred. Market openness should enhance efficiency gains in domestic industry.

General services

The Indian Council of Agricultural Research (ICAR) is in charge of public agricultural

extension and R&D. Under ICAR, the National Fund for Strategic Agricultural research was

set up in 2006 with a budget of INR 50 million (USD 1.1 million) and the objective of

building capacity for basic and strategic research of national and long term importance to

break yield and quality barriers and make India a global leader in research for

development. This fund complements other research and extension structures.

The National Agricultural Initiative Programme (NAIP) was launched in July 2006

to pilot innovation in conducting research with a total budget of INR 11 billion

(USD 250 million), financed by a USD 200 million loan from the World Bank and

USD 50 million funded by the Government of India. The NAIP will function through four

components: the ICAR; the Research on Production to Consumption Systems; the Research

on Sustainable Rural Livelihood Security (SRLS); and the Basic and Strategic Research in the

Frontier Areas of Agricultural Sciences (BSR).

As in the case of R&D, the funding of extension services has remained primarily in the

public domain. Estimates indicate that public expenditure on agricultural extension

amounts to a mere 0.17% of the value of agricultural output. This may explain low


5. INDIA

commodity yields and sub-optimal input use. Public expenditure on agricultural

education, research, and extension is low, but private sector interest in research is

increasing.

Box 5.1. India: the transition to the Eleventh Five Year Plan, (2007-12)

In its preparatory work for the Eleventh Five Year Plan, the Planning Commission invitedcomments on a preliminary document, “Towards Faster and More Inclusive Growth”. Inthis proposal, and on the basis of macroeconomic projections, six objectives are identifiedfor government action:

● Providing essential public services for the poor.

● Regaining agricultural dynamism.

● Developing human resources.

● Protecting the environment.

● Improving rehabilitation and resettlement practices.

● Improving governance.

The second objective, “regaining agricultural dynamism”, directly targets agriculture,

while the implementation of several other objectives will impact this sector. Agriculture isexpected to feed the nation. It must also support non-agricultural growth and employmentthrough farmer spending.

The main instruments considered in this proposal are already in place in the tenth plan,but adjustments are suggested based on the results of the mid-term evaluation carried outby the Planning Commission. Investment in infrastructure; improvement of utility pricing

for water and electricity; adjustment in support to fertilisers to improve the fertiliser mix;and extension of general services to the provision of seeds, fertilisers and veterinaryservices, are the main measures that target agricultural production. The creation of abuffer stock of milk powder is also proposed.

Economic growth will be supported by measures that increase rural income; improve

and extend existing insurance schemes to more farmers; and extend social welfareprogrammes to all India. The reform of the legal framework for marketing of agriculturalproducts will allow development of modern agricultural markets and contract farming.

In the government economic projection assumptions, the additional income generatedby the Employment Guarantee Act, which promises a hundred days of wage employmentannually to one adult in every rural household, will be spent on agricultural and non-

agricultural products, and hence will support overall domestic production. Similar resultsare expected from the improved provision of public schooling and health services whichwill allow reallocation of disposable income of lower income groups to expenditure onconsumption goods. Infrastructure development schemes will be pursued and enhanced.At the local level, these infrastructure schemes could serve the purposes of theEmployment Guarantee Act, and thus limit budgetary spending.

The proposal suggests that there will be a move away from distorting subsidies such asfertiliser subsidies that currently focus excessively on nitrogenous fertilisers or powersubsidies that encourage over exploitation of groundwater.

Improvements to the formal credit system will be pursued and the co-operative creditsystem strengthened. Livestock and fisheries will be encouraged. Mention is made ofprotecting traditional pastures that are losing grounds to other land and water uses.

Source: Planning Commission (2006b) and (2006c).


5. INDIA

Commodity specific research and extension is also funded through levies on sales.

This is the case for sugar cane where a fee is levied on production and used to conduct

various research, extension, and technological improvement activities in support of sugar

cane and sugar production. In recent years these funds have been diverted from general

services to market intervention.

Consumer measures

Consumer measures have played an important role in alleviating the effects of price

support on consumers, allocating food grains to the poor and reducing under nourishment.

The Public Distribution System (PDS) is an instrument under the ECA. It manages supply of

the major food grains, pulses and sugar through procurement, storage and public

distribution. During periods of shortage, procurement operations are often augmented

with compulsory procurement, a levy on millers, and restrictions on the movement of

commodities between states. Commodities procured at Minimum Support Prices feed in

buffer stocks. These stocks are used to distribute supplies to the poorer sections of the

population at subsidised rates, as part of social welfare programmes, or to release supplies

onto the domestic or export markets in order to stabilise prices. To illustrate this with an

example, of the 42 million tonnes of grains that were procured in 2004-05, 31 were

distributed through the PDS, ten were distributed through other welfare schemes and one

was sold on the open market. No exports occurred on procured grains, in this year.

The PDS imposes levies on the food industry, e.g. Indian sugar mills are required to

supply 10% of their production to the government as “levy sugar” at below market prices,

which is then sold through the PDS or other welfare programmes to consumers who are

below the poverty line. The Mid-day Meal Scheme is one example of food distribution

programmes. The budget for this programme was increased to INR 30 billion

(USD 680 million) to cover 25 million (below poverty line) families in 2005-06, an increase of

5 million families as compared to previous year. The total expenditure on food subsidies

was estimated at INR 47 billion (USD 1.1 billion) for 2005-06.

With the introduction of VAT in 2005 and its further implementation in more states in

2006, consumer prices of food would typically be taxed at 4%; remaining commodities are

taxed at 12.5%. Essential commodities, i.e. grains, are exempt from VAT. To date only two

states (Tamil Nadu and Uttar Pradesh) have not implemented VAT.


Import policy

A complex system of taxation applies to agricultural imports. A basic duty applies to

imports of wheat, rice, maize, coffee, tea, vegetable oils, tobacco and dairy products. An

additional countervailing duty, equal to VAT and other taxes applicable to similar products

produced domestically, is levied on the aggregate of the assessed value and the basic duty. A

2% surcharge on all direct and indirect taxes has been added since July 2004. Revenue from this

surcharge would be used for primary education and pupils’ mid-day meals. Total import tariffs

on most consumer food products range from 35.9% to 58.4%. A basic duty of 30% applies to

most processed food products. For example, applied import tariffs on oilseeds are at 30% and

at 60% for sugar. Imports are encouraged in cases where domestic supply cannot satisfy

demand either continuously, as is the case for pulses, or to cover temporary domestic supply

failures that would handicap local processing industries, as occurs for cotton and sugar.


5. INDIA

In February 2006, a renewable six months ban on imports from all countries of birds

and products of avian species, excluding poultry, was announced. This ban was extended

to poultry, eggs and pig, live or meat, from countries reporting the outbreak of Highly

Pathogenic Avian Influenza. This ban was extended for another six months in August 2006.

In 2006-07, duties on packaging machines were reduced from 15% to 5%. Complete

exemption from excise duty is provided for condensed milk, ice cream, preparations of

meat, fish and poultry, pasta and yeast; while excise duty on ready-to-eat packaged foods

and instant food mixes were reduced from 16% to 8%.

Box 5.2. India’s recent trade agreements

In March 2005, the operational aspects of the India and Mercosur Preferential TradeAgreement (PTA) were signed. Both partners offered a list of commodities which wouldreceive preferential treatment in the form of percentage tariff abatement on the appliedtariffs. According to India’s offer list, 14 agro-food commodities out of a total250 commodities exported from Mercosur countries into India, would benefit from thispreference. A 10% margin applies to meat commodities and 15% to soybean oil with anannual quota. Reciprocally, Mercosur countries offer a preference to 11 agro-foodcommodities including: milk and fruits and some processed food products, some of which

with quota. Ratification by Mercosur legislations will bring the PTA into force.

Singapore and India signed a Comprehensive Economic Co-operation Agreement (CECA)in June 2005. The agreement includes trade liberalisation in a number of agro-foodproducts under a framework of tariff schedules. A 290 page tariff schedule based on theHarmonised Tariff Schedule of the Republic of India reciprocates a one sentence schedulefor Singapore according to which: “Singapore shall eliminate customs duties on all

originating goods of India as from the date of entry into force of this Agreement.”

Four sets of commodities are identified in the Indian schedule. The first set lists the506 commodities for which tariffs were eliminated on 1 August 2005, There are only eightagro-food products in this set, all of which are grains.

The second set identities the 2 202 products for which a progressive annual reduction isscheduled leading to complete phase out of tariffs by 2009; 158 agro-food products areincluded, mainly fish and processed food.

The third set identifies 2 407 products for which a progressive annual reduction of tariffsis planned up to 50% in 2009. Fifty-five agro-food commodities are listed, mainly liveanimals and meat.

The fourth set identifies 6 551 products excluded from any concession in duty. Of the

6 551 products listed, 1 225 are agro-food products.

India and Chile signed a PTA in March 2006 that will come into force upon accomplishmentof the constitutional requirements. Both countries have offered fixed tariff preferences ona list of products. For India, this list includes 178 products at the eight digit HS level, of which84 are agro-food, mainly meat and fish products. These products would receive a 10% or 20%preference. Reciprocally, Chile has offered a similar range of tariff preferences on 296 tariff

lines at the eight digit level, of which seven relate to agro-food. These are onion, spices andtea.

Source: Department of Commerce, 2006.


5. INDIA

Export policy

Agricultural export earnings are mostly exempt from income and other taxes. Export

promotion measures include duty exemptions or concessional tariffs on imports of raw

material and capital inputs and transport subsidy for exports. In this context, exporters

may benefit from a variety of import tariff incentives and a promotional import licensing

schemes on imported inputs, some of which are contingent upon value-added processing

and export of the final product. Commercial banks also provide export financing on

concessional terms. Export promotion in the form of an advisory and facilitating role has

been put in place. Agricultural Export Processing Zones have been set up.

Effective in 2005, a Special Agricultural Produce Scheme (Vishesh Krishi Upaz Yojana),

was set up to promote exports of fruits, vegetables, flowers, minor forest produce, dairy,

poultry and their value- added products. These products qualify for duty free credit scrip of

5% of value of export fob in respect of exports made on or after 1 April 2005. The duty credit

can be used for imports of inputs or goods, including capital goods, provided the same are

freely importable. Cost of freight for floriculture and horticulture is subsidised, similarly,

poultry transport costs for exports benefit from a subsidy of INR 3 000 to INR 15 000

(USD 68 to USD 340) per tonne.

Surpluses of cereals procured at MSP are exported at prices lower than the domestic

price. In 2005, the Cotton Corporation of India was allowed to export cotton with a subsidy

of up to USD 66 per tonne toward the cost of handling, processing, and internal

transportation under condition that the export price realisations should be above the

domestic prices, and that only the cotton procured at the MSP should be exported.

Bibliography

Asian Development Bank (2006), Asian Development Outlook 2006.

Basu, Priya (2006), Improving Access to Finance for India’s Rural Poor, The World Bank.

Central Statistical Office (2006), Government of India Website.

Department of Commerce (2006), Government of India Website.

Dev, Mahendra (2006), “Report on Main Policy Developments in India”, Report submitted to OECD.

The Economist Intelligence Unit (2006), Country Report India.

Gaiha, Raghav (2006), Indian Agriculture – Crisis, Policy Initiatives and Corporatisation, Presentationsubmitted to the Global Forum on Agriculture, OECD, Paris 2006.

International Monetary Fund (2006), “India: Selected Issues”, IMF Country Report No. 06/56.

Ministry of Finance, Economic Survey, Government of India, various issues.

Ministry of Finance, Union Budget, Government of India, various issues.

Ministry of Statistics and Programme Implementation (2006a), National Sample Survey 2004-05,Government of India.

Ministry of Statistics and Programme Implementation (2006b), Directorate General of CommercialIntelligence and Statistics Website.

Office of the Economic Adviser to the Government of India, Ministry of Commerce and Industry (2006),Wholesale Price Index Website.

OECD (2006), Economic Outlook, June.

Planning Commission (2006a), Integrated Energy Report, Government of India.

Planning Commission (2006b), Mid Term Appraisal of the Tenth Five Year Plan, Government of India.


5. INDIA

Planning Commission (2006c), Towards Faster and More Inclusive Growth, an Approach to the 11th Five YearPlan, Government of India.

Reserve Bank of India, Annual Report, various issues.

United States Department of Agriculture, Foreign Attaché Services, GAIN Report, various issues.

World Trade Organisation (2002), Trade Policy Review of India.




Chapter 6

Romania


● The level of support increased dramatically over the review period, almost reaching theOECD average, and approaching the EU level in 2005. The increase in support is dueto higher protection from world markets, which reduced significantly the marketorientation of Romanian agriculture.

● In addition to border protection, output payments also distort production incentives andthe market orientation of Romanian agriculture. Payment rates have been relativelystable for beef products since 2002 but they increased significantly for pigmeat andpoultry meat in 2004 and 2005, partly in response to animal disease outbreaks. Romaniawent one step towards decoupling measures from production when it replaced outputpayments to livestock products with payments per head in 2006.

● Romania continues to use various input subsidies, which are the most distortive form ofsupport.

● Romania’s use of export subsidies was well below its WTO entitlements. This form ofsupport should be avoided as it distorts production and trade.

● Current experience with SAPARD funds should be evaluated, in terms of adoption ofmeasures and their impact on structural adjustment and rural development, in order toimprove the operation and efficiency of the EU-equivalent programme, which will applyafter accession.

● Romania will implement the EU Common Agricultural Policy in January 2007. Opting forthe most decoupled options will allow producers to base their decisions on marketsignals. Targeting optional measures to specific objectives should also improve theefficiency of agricultural policy.

97

6. ROMANIA


● Support to producers (% PSE)increased by 1 percentage point in2005 to 29%. From 5% in 1995-97, itreached 27% in 2003-05, but is stilllower than the OECD average of

30%.

● Market price support and paymentsbased on output accounted for 88%of the PSE in 2003-05. Paymentsbased on variable input use werethe second largest category at over

6%, followed by payments based onarea at over 4% of the PSE.

● Prices received by farmers, whichwere aligned with those on theworld market in 1995-97, became54% higher in 2003-05. However,

prices of oilseeds and sheepmeatremained lower than those on theworld market in 2003-05, whileproducers received prices morethan twice those on the worldmarket lfor eggs, poultry and sugar.

● The % CSE, switched from animplicit support to consumers of2% in 1995-97 to an implicit tax of30% in 2003-05.

● Support for general services

provided to agriculture accountedfor 4.6% of the total support toagriculture (TSE) in 2003-05.

● Total support to agriculture as ashare of GDP was overl 6% in 2003-05,which is much higher than OECD

average of 1.14%.



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6. ROMANIA

Table 6.1. Romania: Estimates of support to agricultureRON million

1995-97 2003-05 2003 2004 2005




Producer Support Estimate (PSE) 186 14 406 10 365 17 371 15 481

Market Price Support (MPS) –10 12 160 9 151 14 294 13 035

of which MPS commodities –8 6 425 5 041 7 911 6 323


Payments based on area planted/animal numbers 4 624 256 1 042 574


Payments based on input use 186 1 041 665 1 314 1 145





Producer NPC 1.00 1.51 1.55 1.55 1.43

Producer NAC 1.06 1.38 1.32 1.39 1.41

General Services Support Estimate (GSSE) 66 698 222 1 337 536




Infrastructure 24 620 217 1 181 461





Consumer Support Estimate (CSE) 95 –15 447 –15 101 –16 233 –15 006

Transfers to producers from consumers 12 –15 496 –14 865 –17 274 –14 349

Other transfers from consumers 5 –2 292 –3 236 –2 151 –1 489


Excess feed cost –17 2 341 2 999 3 192 831


Consumer NPC 1.00 1.54 1.63 1.55 1.43

Consumer NAC 0.98 1.43 1.48 1.42 1.40

Total Support Estimate (TSE) 347 15 104 10 587 18 709 16 017

Transfers from consumers –18 17 788 18 100 19 425 15 838

Transfers from taxpayers 359 –392 –4 278 1 435 1 668

Budget revenues 5 –2 292 –3 236 –2 151 –1 489


GDP deflator 1995-97 = 100 100 1 422 1 241 1 427 1 598

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for Romania are: wheat, maize, barley, oats, rapeseed, soybeans, sunflower, sugar, milk, beef and veal,sheepmeat, pigmeat, poultry and eggs.Source: OECD, PSE/CSE database, 2006.

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6. ROMANIA

Summary of key policy developmentsThe main developments in Romania’s agricultural policy related to preparation for EU

accession in January 2007, to emergency measures as a response to recent weather-related

disasters and animal disease outbreaks, and to the introduction of payments per head to

replace payments per litre of milk and per tonne of meat.

Policy contextAgriculture represented 9% of GDP, but 33% of total employment in 2005. Romania is a

net importer of agro-food products. Agro-food exports accounted for 3% of total exports,

while agro-food imports accounted for close to 6% of total imports in 2005. Households

spend about half their income on food.


GDP growth has been steady since 2000. It was over 5% in 2001-03, peaked at 8.3% in

2004, but slowed down to 4.1% in 2005, mostly due to floods that heavily affected

agriculture and infrastructures. GDP growth was driven by a rapid expansion of investment

– gross fixed capital formation increased by 9.4% – a continued strong consumption and an

increase in exports. The depreciation of the currency against the EUR and USD ended in

2004 and recent measures taken by the Central Bank in preparation for the capital account

liberalisation, which took place in mid-2005, resulted in a significant appreciation of the

domestic currency vis-à-vis both the EUR and USD in 2004 and 2005. The denomination of

the national currency changed in July 2005, the RON or new leu replacing the ROL or old leu

with the equivalence 1 RON = 10 000 ROL. In this chapter, all numbers in national currency

are expressed in RON.

Although partially compensated by foreign remittances of Romanian workers

temporarily working abroad (evaluated at about RON 7.3 billion or USD 2.5 billion), the

current account deficit doubled every year between 2002 and 2004, to reach a peak of

RON 24.8 billion (EUR 6.8 billion) in 2005. This trend was due to the deepening of the trade

deficit, as the value of imports grew quicker than that of exports. The trade deficit reached

a peak of RON 37.3 billion (EUR 10.3 billion) in 2005. The foreign debt increased by 80%

between 2001 and 2005, amounting to RON 88.6 billion (EUR 24.5 billion) by the end of 2005.

The Government budget deficit, as a percentage of the GDP decreased in 2003 and 2004

down to 1.5% and 0.8% respectively, but increased to 6.6% in 2005 due to higher wages and

pensions and increased expenditures caused by damage from the 2005 floods.

The central bank lending rate decreased from 35% in 2001 to 20.4% in 2003 and to 7.5%

in 2005. From high levels, inflation declined gradually and in 2005 reached single digits for

the first time since transition in 2005 (CPI December 2005 to December 2004 was 9.0%). The

reduction in unemployment continued and even accelerated as GDP grew. As a result, the

unemployment rate in 2005 was down to 5.9% in 2005, half of its 1999 level. Yet, regional

disparities are still large and there remains hidden unemployment in agriculture.


Output

Gross Agricultural Output (GAO) has been highly variable since 2000, reflecting mainly

variations in crop yields affected by extreme weather conditions (Figure 6.4). Following a

15% decline in 2000, GAO more than recovered with a rise of 23% in 2001. It then fell by 3.5%


6. ROMANIA

in 2002, increased by 7.5% and 18% in 2003 and 2004 respectively, and fell again by 13% in

2005 due to an 18% drop in crop production heavily affected by torrential rain and floods.

Livestock production increased every year since 2001, except in 2005.

Since 2000, crop prices have fluctuated, while most livestock prices increased until

2004. Prices of most agricultural products increased in 2004, with the exception of poultry

meat. Following the good 2004 harvest, crop prices fell in 2005. Sheepmeat and poultry

meat prices also decreased sharply while milk, beef, pigmeat and egg prices increased.

Crops

The period 2002-05 registered large variations in crop output, due to extreme weather

conditions. Cereal production, mostly wheat and barley, was modest in 2002. In 2003, an

extreme drought hit wheat and barley production, which halved compared to the previous

year, when output was already low. Wheat and barley production in Romania reached its

lowest level in almost 40 years, as a result of both poor yields and reduction in the

harvested area. In contrast, 2004 was an exceptionally good agricultural year. In 2005,

torrential rainfalls caused floods that destroyed large cultivated areas, damaged the road

and railway infrastructure, and led to the evacuation of many villages.

Oilseed production was not so affected by the 2003 drought and yields were good. As a

result, production increased as compared with 2002, as it did for vegetables. Conversely,

excessive moisture and the floods in 2005 affected potato and vegetables production, since

most of these crops are produced in small households located close to rivers.

Livestock

In 2002-03, animal numbers followed a generally increasing trend, but they decreased

slightly in 2004. In 2005, changes in livestock numbers were negligible, except those for

sheep and goats, which increased by over 6%.

Meat production increased from 2001 to 2003, then decreased significantly, in

particular pigmeat and poultry meat (by 12%, and 14% respectively) in 2004 due to the

Figure 6.4. Evolution and annual changes of agricultural output in Romania, 1995-2005

Source: National statistics, 2006.1 2 http://dx.doi.org/10.1787/068374475116

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6. ROMANIA

severe drought in the summer of 2003, which dramatically raised feed prices. Meat

production started recovering in 2005, due to lower feed prices and higher feed supply and

production subsidies. The unfavourable weather conditions did not seem to have much of

an influence on total milk production from dairy cows, buffalo cows and ewes, which has

continuously increased since 2000.

Structures

Romania has a very pronounced dual farm structure. Close to 45% of land is farmed by

agricultural companies, which account for 0.5% of all farms and have an average size of

275 hectares. However, the vast majority of Romanian farms are subsistence and semi-

subsistence farms (97.5% of the total), which occupy around half of the utilised agricultural

area. Another 2% of farms are commercial family farms, which occupy 4.1% of farm land.

According to Eurostat’s 2002 structural survey, close to 3.3 million farms were under

1 European Size Unit (1 ESU = EUR 1 200 of standard gross margin) in Romania. They occupied

3.9 million hectares or a quarter of all agricultural land. There were 1.2 million farms with

standard gross margins over one unit, which accounted for 27% of all farms and occupied the

remaining three-quarters of agricultural land. Their average size was 8.8 hectares and 94% of

those farms were under 8 ESU. Farms over 100 ESU occupied close to 25% of agricultural land.

Most farms over 1 ESU (89%) were mixed crop and livestock operations. On average, they had

less than 2 cows and 16 sheep. Main occupation farms accounted for 89% of farms over 1 ESU.

Seventy per cent of farmers were over 55 and only 5% under 35.

Inputs

Fertiliser use has been following an upward trend since 2002, after a sharp reduction

in the 1990s compared with the late 1980s. Nitrogen use, for example, is 45% of that in 1989.

The structure of fertiliser use has improved: phosphorus applications increased while

nitrogen applications decreased, but fertiliser use is still unbalanced in favour of nitrogen.

Fertiliser use per hectare was 20.4 kg of nitrogen (N), 8.7 kg of phosphate (P2O5) and 1.6 kg

of potassium (K2O) in 2005.


Romania has been a net importer of agro-food products over the whole period of

transition (Figure 6.5). The agro-food trade deficit, which shrank in the late 1990s, has

strongly increased in recent years as imports have grown more steadily than exports. Agro-

food exports and imports nearly doubled between 2001 and 2005. Close to three-quarters of

Romania’s agro-food trade (in value terms) is with OECD countries, mainly the EU, since

CEFTA countries joined the EU.

The major agro-food import is meat with a share of almost 16% of total agro-food

imports for pigmeat and 5% for poultry meat, followed by tobacco (12%), fruits (7%) and

sugar (6%). Around half of Romania’s agro-food imports come from the EU, notably

Germany (9%). Among non-EU countries, both Brazil and the United States account for 9%

of Romania’s agro-food imports.

Romania’s major agro-food exports are live animals with a share of 20% of agro-food

exports in 2005, down from 23% in 2004; cereals (14%) and oilseeds (12%, mainly sunflower

oil and seeds). Other major Romanian agro-food exports include walnuts, wine and

vegetables. Among EU member states, Italy accounts for between a quarter to a third of


6. ROMANIA

agro-food exports to the EU. Among non-EU countries, Turkey accounts for 9% of Romania’s

agro-food exports.

Domestic agricultural policiesThe main instruments for domestic support are output and area payments, credit

subsidies for short and long term credit, variable input subsidies, and support under the

EU-funded Special Accession Programme for Agriculture and Rural Development (SAPARD)

(see Box 6.1 for a general description of SAPARD). Variations in support rates and levels

should be considered in parallel with inflation rates (see GDP deflator in Table 6.1).

Output payments

Output payment for crops are paid as an advance for seeding wheat, rye, two-row

barley, vegetables, as well as for autumn fertilisation for spring crops such as: sunflower,

soybeans, tobacco, hemp, flax, fruit and table grapes. The condition for eligibility is that the

farmer should have a contract for selling his product. Sunflower and soybeans did not

receive payments in 2005, but special payments to promote organic wheat, rye, sunflower,

field vegetables, peas, beans, chickpeas and lentils were introduced.

Milk producers receive a payment per litre of milk sold to economic operators

specialised in milk processing and having an appropriate producing license, without an

upper limit on the quantity of milk receiving payment. Payment rates are presented in

Table 6.2. Payments per litre of cow and buffalo cow milk increased in 2002, compared to

2001, and remained stable in national currency until 2005, despite high inflation. They

increased by 10.7% in national currency (17% in EUR) in September 2005. In September 2006,

the Government announced that the payment rate for milk which reaches EU standards

will double. Output payments for sheep milk were granted in 2004 only (GO 1593/2003).

Figure 6.5. Agro-food trade in Romania, 1995-2005


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6. ROMANIA

Payments per tonne of beef remained stable in national currency in 2002 and 2003, but

decreased in EUR (Table 6.2). They increased in 2004 and 2005, in both currencies. Payments

per tonne of pigmeat increased in 2003 and 2004 compared to 2002. First announced as stable

for 2005, they further increased to RON 1 200 (EUR 331) at the beginning of 2005. Payments for

organic pigmeat, which were announced at RON 1 000 (EUR 276) per tonne in 2005, were

further raised to RON 1 400 (EUR 387) per tonne at the beginning of 2005. Payments per tonne

of poultry meat increased by RON 100 (EUR 28) annually between 2002 and 2005. They further

increased to RON 800 (EUR 221) per tonne at the beginning of 2005. In 2005, payments to

sheepmeat were RON 700 (EUR 193) per tonne. There are also payments for organic eggs.

Area and headage payments

In January 2006, the government decided that milk payments would no longer be paid

per litre of milk but per head of dairy animal, with a supplementary aid for registered

organic farms or for pedigree animals. Similarly, output payments for pigmeat were

replaced by payments per head (RON 100 or EUR 28 per pig between 90 kg and 110 kg). The

rates of payments per head of cattle, sheep and poultry were set at RON 1 000 (EUR 276) per

cattle, RON 20 (EUR 5.5) per sheep and RON 1.4 (EUR 0.39) per broiler chicken.

Payments per hectare increased in 2002 compared with 2001 but remained stable in

national currency over the period 2002-05, despite high inflation. The payment was

Table 6.2. Evolution of payment rates in Romania, 2001-06

Payment type Unit 2001 2002 2003 2004 20052 20063

Payment per ha RON/ha 100 250 250 2 500 250 250

EUR/ha 38.4 80.2 66.7 61.7 69.0 69.0

Payment per litre of cow milk1 RON/litre 0.05 0.14-0.216 0.14-0.216 0.14-0.216 0.15-0.20 n.a.

EUR/litre 0.02 0.044-0.069 0.037-0.058 0.035-0.053 0.041-0.055

Payment per litre of ewe milk RON/litre n.a. n.a. n.a. 0.28 n.a. n.a.

EUR/litre 0.08

Payment per tonne of beef RON/tonne n.a. 400 400 500 500 (600) n.a.

EUR/tonne 128 107 123 138 (166)

Payment per head of cattle RON/head n.a. n.a. n.a. n.a. n.a. 1 000

EUR/head 270

Payment per tonne of pigmeat RON/tonne n.a. 400 400 800 1 000 (1 200) n.a.

EUR/tonne 128 107 197 276 (331)

Payment per head of pigs RON/head n.a. n.a. n.a. n.a. n.a. 100

EUR/head 28

Payment per tonne of sheepmeat RON/tonne n.a. n.a. n.a. n.a. 700 n.a.

EUR/tonne 193

Payment per head of sheep RON/head n.a. n.a. n.a. n.a. n.a. 20

EUR/head 5.5

Payment per tonne of poultry meat RON/tonne n.a. 300 400 500 600 (800) n.a.

EUR/tonne 96 107 197 166 (221)

Payment per head of broiler RON/head n.a. n.a. n.a. n.a. n.a. 1.4

EUR/head 0.39

n.a.: not applicable.1. Cow and buffalo cow milk. Payment rates vary by season and region.2. For meats, the first number corresponds to the rate announced at the beginning of 2005, and the second number

in parenthesis to the rate announced in September 2005.3. Announced.Source: Gavrilescu (2006); AgraFood East Europe, various issues.


6. ROMANIA

granted for cultivating agricultural land, and the list of eligible crops in 2002 included:

wheat, barley, two-row barley, rapeseed (sown in fall 2001), sugar beet, beet for animal feed,

wheat, sunflower and maize (both for consumption and seed production), two-row barley,

oats, new fodder crops, sorghum, soybeans, white beans, potatoes, vegetables (from

greenhouses or open air crops), medicinal and spice crops, flax and hemp for fibre (all sown

in spring 2002); vineyards with high quality varieties, mother-plants vines, vine nurseries,

fruit tree and shrubs plantations, fruit-tree nurseries, perennial fodder, medicinal plants

and spice crops. The conditions are to use the appropriate technologies, fertilisers, certified

seeds etc. There is a minimum size limit for receiving support: 1 hectare, except for sugar

beet and vegetables, for which the minimum limit is 0.5 hectare.

Variable input support

Commercial crop production is supported using various input payments as follows:

● Reduced prices for use of certified seeds: This is a subsidy paid to authorised seeds

producers and dealers, covering 40% or 50% of the price, depending on the crop, for the

spring seeding campaign if purchased by mid-May. The agricultural producer purchases

those seeds at 50% or 60% of the nominal price. The subsidy rate increased in March 2001

(it used to be 37%). For the autumn campaign, the price for wheat seeds was reduced by

20% only, if purchased before end-October. Maize was no longer eligible in 2004.

● Support for artificial insemination of cattle and pigs: The price of the selected seminal

material is subsidised 100%. Annual expenditures on reproduction subsidies in 2003-05

were much below the 2002 level.

● Support for land reclamation/irrigation systems. This covers the running and maintenance

costs of land reclamation systems (dams, dikes and embankments), irrigation and drainage

systems; the necessary electric power to bring water to pumps in the irrigation systems and

evacuating the water from the drainage systems belonging to the National Company for

Land Reclamation. The irrigation and drainage systems on 900 000 hectares were repaired

and started functioning again. Expenditures amounted to RON 0.2 million (EUR 64 200) in

2002-03, RON 0.18 million (EUR 44 390) in 2004 and RON 0.12 million (EUR 29 600) in 2005.

Extra funds, amounting to RON 5.7 million (EUR 1.83 million) in 2002, RON 13 million

(EUR 3.47 million) in 2003, RON 14.8 million (EUR 3.65 million) in 2004 and RON 30 million

(EUR 8.28 million) in 2005, were granted directly to the water users’ associations.

● Farmers receive coupons of RON 135 (EUR 37) per hectare for purchases of seeds, fertilisers

and pesticides, plus RON 40 (EUR 11) for diesel; for private farmers, for an area up to

5 hectare in 2005. They also received coupons of RON 150 (EUR 41) per hectare for

anticryptogamic treatments in registered vineyards larger than 0.1 hectare, cultivated with

quality varieties. Disaster payments in 2005 were partly delivered in the form of such

coupons.

● Under a government decree issued in April 2006, farmers will receive up to a maximum

of RON 7 000 (EUR 1 933) per hectare provided they take crop insurance. Half of the funds

will be paid in the form of coupons for seeds, crop material and diesel fuel, the other half

being paid into the farmer’s bank account. The list of crops to be supported includes

sugar beet at RON 1 500 (EUR 414) per hectare, soybeans at RON 500 (EUR 138) per hectare

and early potatoes and field vegetables at up to RON 1 000 (EUR 276) per hectare.

● Biomass producers will be exempt from excise duties (August 2006).


6. ROMANIA

Credit policies

A support programme for agricultural producers and service suppliers for purchasing

tractors, other agricultural machinery and irrigation equipment domestically produced was

in force over 2002-05. It was funded from the Special Programme on Sustainable

Development of Cereal, Pulses, Industrial Plants, Potatoes, Vegetables, Fruit and Grapes

Production, which grants a subsidy equivalent to 45% of the price of the agricultural

machinery purchased from domestic manufacturers (VAT included). The beneficiaries of this

programme are: agricultural producers registered in the Agricultural Register, and natural or

legal persons, who are not benefiting from similar programmes with foreign funding

(e.g. SAPARD). In 2003, contracts for agricultural machinery purchased under this scheme

amounted to RON 60 million (EUR 16.6 million), but only RON 25 million (EUR 6.9 million) in

2005. In September 2005, RON 100 million (EUR 27.6) were earmarked as subsidies to

producers’ associations of up to 60% for purchases of new milking and cooling equipment.

SAPARD

Support to agricultural producers and to rural regions in the country under the EU

SAPARD (Box 6.1) started in 2002. SAPARD measures in Romania focus on infrastructure

improvement and development and diversification of rural activities. SAPARD has

provided EUR 150 million (RON 543 million) per year for investment in the agriculture and

food industries, of which one-quarter was earmarked for the milk and milk products

sector. Priority funding for 2006 includes EUR 41 million (RON 148 million) for improving

food controls and consumer protection, EUR 13 million (RON 47 million) for investments

in farms, EUR 39 million (RON 141 million) for agri-environmental measures and

EUR 127 million (RON 460 million) for forestry.

The level of fund absorption throughout the entire SAPARD programme was rather low

by March 2005 (Table 6.3). In June 2005, the government launched a campaign to promote

SAPARD and a rush for applications was recorded later in 2005 and in 2006. As a result,

Romanian SAPARD funds, which totalled EUR 1.5 billion (RON 5.4 billion) over the period

2002-06, were completely exhausted by August 2006, five months before the end of the

programme.

Structural policies and privatisation

The government which came into office in January 2005 made the finalising of land

reform one of its primary objectives. The main laws (Land Law No. 18/1991, Law 1/2000,

Cadastre Law 7/1996) were amended. Law 54/1998 regarding the land market was replaced

and a new law regarding the acceleration of legal actions in court on land restitution was

introduced. One objective was to modernise them, bring them up to date and speed up the

procedures, taking into account the huge procedural delays that these laws created in their

previous versions. An essential provision of the Land Law, which will enter into force when

Romania joins the EU, is the removal of the ban against foreign natural and legal persons

buying agricultural land in Romania.

A programme offering an old-age pension in exchange for land was introduced in

2005. It offers a state pension to farmers over 62, who own a maximum of 10 hectares. The

pension rate is EUR 50 (RON 181) per hectare per year for land which is leased and EUR 100

(RON 362) per hectare for land sold. The programme has so far attracted little interest

among owners of small plots of land.


6. ROMANIA

Disaster measures

Romania was hit by floods in 2005 and 2006. They damaged crops on more than

450 000 hectares and destroyed 50 000 hectares of wheat in 2005; and 130 000 hectares of

farmland, including 25 000 hectares of wheat, in 2006. As a result, assistance to farmers for

the autumn 2005 sowing campaign increased by 39% compared to the previous year. It

Box 6.1. The EU SAPARD in Romania

The SAPARD (Special Accession Programme for Agriculture and Rural Development) is aEU programme, which provides financial and technical assistance for agriculture and ruraldevelopment in candidate countries as they prepare for EU accession. SAPARD fundsinvestment projects:

Priorities for SAPARD assistance include:

● Implementing the Community acquis (Acquis communautaire) [cf. Article 2 of Regulation1268/1999].

● Implementing veterinary, phytosanitary and marketing requirements.

● Upgrading food processing standards.

● Restructuring the agri-food sector to improve competitiveness.

● Implementing coherent structural and rural development policies.

SAPARD eligible measures include:

● Investments in agricultural holdings.

● Improving processing and marketing.

● Improving structures for quality, veterinary and plant-health controls.

● Agricultural production methods protecting environment and maintaining the countryside.

● Economic diversification.

● Setting-up farm relief and farm management services.

● Setting-up producer groups.

● Renovation and development of villages.

● Land improvement and reparcelling.

● Creating and updating land registers.

● Improving vocational training.

● Developing and improving rural infrastructure.

● Water resource management.

● Forestry measures.


SAPARD implementation: Candidate countries first submit to the Commission forapproval a multi-year SAPARD plan, which identifies the specific measures chosen by thecountry among the list of measures eligible for funding under SAPARD. The country’sSAPARD agency selects and manages projects, arranges finance and carries out controls.All projects are co-financed by the EU and the candidate country. EU contribution may

reach 75% of public financing. For investments generating revenues, the minimum rate forprivate investment is 50%.

Source: EU Commission website: http://ec.europa.eu/agriculture/external/enlarge/back/sapard_en.pdf.


http://ec.europa.eu/agriculture/external/enlarge/back/sapard_en.pdf

6. ROMANIA

included coupons for the purchase of seeds, pesticides and diesel fuel worth RON 175

(EUR 48) per coupon with a maximum of five coupons per farmer. Farmers also received per

hectare payments as compensation for crop damage, amounting to RON 55.5 million

(EUR 15 million) in 2005. Those who had already harvested their wheat crop were granted

free access to storage facilities.

Romania took measures to eliminate swine fever, which struck in 2005. These

included the slaughtering of animals and temporary quarantine and closure of pig

markets. Romania was also affected by numerous outbreaks of bird flu (125) since

May 2006. Quarantine zones were established and disinfected. Nearly 1 million birds were

culled. The government announced a further RON 20 million (EUR 5.66 million) to fight bird

flu. In July and August 2006, payments per broiler chicken delivered to slaughterhouses

doubled from RON 1.4 (EUR 0.39) to RON 2.8 (EUR 0.77) per chicken to support farmers

affected by the bird flu crisis. Payment rates returned to their original level in

September 2006.

Institutional changes related to EU accession

The institutional changes necessary for the implementation of the CAP include the

establishment of a Paying Agency, a Management Authority for Orientation Funds, a Farm

Accountancy Data Network (FADN), a Sanitary-Veterinary and Food Safety Agency,

extension services, and agricultural statistics.

In February 2005, a Ministerial Order set up the Paying and Intervention Agency, as a

two-fold entity: a paying agency for rural development and a paying agency for market

measures and direct payments. However, a number of issues still remained to be addressed

with regard to the functioning of the paying agency and the Integrated Administration and

Control System (IACS) in September 2006 (Commission of the European Communities, 2006).

In 2006, Romania passed a law banning the cultivation of GM soybeans as from

1 January 2007.

Budget plan

Expenditures on agriculture in 2006 were expected to increase to RON 2.86 billion

(EUR 960.1 million), compared to RON 1.7 billion (EUR 469 million) in 2005. RON 1 billion

(EUR 300 million) were allocated to the co-financing of investment projects, of which

RON 0.9 billion (EUR 250 million) was for SAPARD projects.

Table 6.3. Use of SAPARD funds in Romania by March 2005

Accredited measuresNumber of

applicationsNumber of enforced

contractsDisbursements (million EUR)

Degree of funds used (%)

Processing and marketing 213 149 40.77 38

Rural infrastructure 1 354 607 264.03 87

Technical assistance 16 13 0.37 25

Investment in farms 364 268 7.02 15

Activity diversification 309 201 1.05 3

Professional training 1 1 0.00 0

Source: SAPARD Office, 2006.


6. ROMANIA

Agro-food trade policiesThe Government Decision 1521/2003 effective from January 1, 2004 sets out the new

applied import schedule of Romania for 2004. A number of tariff reductions, offered on a

Most-Favoured-Nation basis (i.e., to all WTO members) were initiated in the process of

reviewing Romania’s status as a Generalized System of Preferences (GSP) recipient. Duty

exemptions for pork cuts were introduced in October 2003 and continued until June 2004.

This is because domestic supply, while slightly increasing, is not able to meet consumption

demand in the short run. The pork carcass duty rate was increased to 45% (from 20%) in

June 2003, basically to protect the domestic market from cheap Polish exports of swine

meat. In the case of poultry meat, the duty rate was maintained at 45% in 2005. The

government raised it to 70% for a six-month period starting in February 2006 as huge stocks

Box 6.2. Introducing the Common Agricultural Policy in Romania

Romania will enter the EU in January 2007. It will join the common market and adopt theEU trade regime, as well as domestic measures of the Common Agricultural Policy (CAP).

Romania’s milk quota under EU CAP policy will amount to 3.057 million litres of cow’smilk, of which 1.093 million are for deliveries to processors and 1.964 million for directsales.

In addition to market price support measures such as import protection, exportsubsidies and intervention on the domestic market, the main budgetary measures*

available to Romania are:

● Direct payments, at a rate of 25% of the EU15 level in 2007, rising by steps to 100% in 2016.During a transition period of a maximum of five years, direct payments can beimplemented as a uniform payment per hectare, the Single Area Payment Scheme

(SAPS). The Single Payment Scheme (SPS) currently implemented in the EU15 will thenapply.

● Possibility to top-up payments (until EU15 rate is reached) according to two options: 1) upto 55% of EU15 level in 2007, rising by steps to 100% as from 2010; 2) up to the directsupport level applicable in 2006 under a CAP-like national scheme, on a product-by-product basis, and increased by ten percentage points. Top-up payments can be partially

funded (20% on average) under the rural development envelop. The remaining share mayonly come from national budgets.

● Measures under the national Rural Development Plan, replacing SAPARD. Romania willhave to choose between a list of measures such as less-favoured area payments, agri-environmental payments, investments in farm holdings, etc. As for member stateswhich entered the EU in 2004, additional specific measures will be available: special

support to semi-subsistence farmers undergoing restructuring; support for meeting EUstandards for food safety, animal welfare and the environment; and the possibility to co-finance top-up payments.

Romania will have to adapt to EU sanitary and phytosanitary standards. Transitionalarrangements have been agreed until 31 December 2009 concerning milk deliveries, meat

and milk processing plants, and the use of active substances in plant protection products.

* The overall ceiling for market expenditures and direct payment decided for the EU25 will apply for theEU27.

Source: Commission of the European Communities (2005), Report on the Results of the Negotiations on the Accessionof Bulgaria and Romania to the European Union, DG E I 5859/05, February.


6. ROMANIA

accumulated in the country because of a sharp decline in consumption following the

numerous bird flu outbreaks. Custom duties on sugar imports increased in October 2003,

from 45% to 60% for raw sugar and from 45% to 90% for refined sugar.

Within the Uruguay Round Agreement on Agriculture, Romania obtained non-zero

commitments on export subsidies for most agricultural commodities: live animals, meats,

cereals, oilseeds, sugar, dairy products. The commitments under WTO regulations are by

no means restrictive, but the use of export subsidies is limited by a lack of funding for this

kind of support. In 2003, no actual export subsidies were made. In 2004, the only product

for which export subsidies were used was wine. Export subsidies were used for wheat and

wine in 2005.

Bibliography

AgraFood East Europe, various issues.

Commission of the European Communities (2005), Report on the Results of the Negotiations on the Accession ofBulgaria and Romania to the European Union, DG E I 5859/05, February.

Commission of the European Communities (2006), Monitoring Report on the State of Preparedness forEU Membership of Bulgaria and Romania, COM(2006)249/final, 29 September.

Eurostat (2005), “Farm Structure in Romania 2002”, Statistics in Focus, Agriculture and Fisheries, November.

Gavrilescu, C. (2006), “Report on Main Policy Developments in Romania”, Report submitted to OECD.

Box 6.3. Romania’s trade agreements

Romania currently grants trade preferences to the EU (within the European Agreement)and is signatory to free trade agreements with Bulgaria and Croatia (within CEFTA) and the

European Free Trade Area (EFTA) countries.

Romania joined CEFTA – the Central European Free Trade Agreement – in 1997. A newfree trade agreement within CEFTA was signed with Croatia when it entered CEFTA in 2003.After the Czech Republic, Hungary, Poland, Slovakia and Slovenia joined the EU in 2004,CEFTA was left with three participant countries only (Bulgaria, Croatia and Romania).When Romania and Bulgaria join the EU in 2007, the only CEFTA participant will be Croatia.

Romania signed a double profit agreement with the EU in October 2002. The Commissionestimates that the agreement represents an increase in the value of preferential trade ofaround EUR 200 million (RON 725 million). Romania was granted duty-free quotas forwheat and maize exports and an in-quota tariff of 10% for beef. All restrictions on trade insheepmeat were removed. Romania gave duty-free access to rice from the EU. Export

subsidies were abolished on either side for products covered by the agreement.




Chapter 7

Russia


● The agricultural sector benefited from the overall economic growth, which strengthenedfood demand and prices. With increased tax revenues at government’s disposal, moredirect assistance was also provided. However, these impacts were counterbalanced by arise in fuel prices and by an appreciation of the ruble.

● After a substantial reduction following the 1998 financial crisis, support to agriculturalproducers rose in 2003-05, but was still below the pre-crisis level. Market price support,

input and output payments remained the dominant policy instruments.

● There has been further decentralisation of agricultural support, with regionaladministrations assuming responsibility for implementation of support measures,previously attributed to the federal government. The latter now focuses onimplementation of special national projects.

● The majority of producer support is provided to the livestock sector. A government’s priorityis to increase livestock output and halt the decline in animal numbers. These goals, at leastin the medium term, will largely determine the set of agricultural measures and the overalllevel of producer support.

● There has been greater emphasis on improving the sector’s efficiency, with moreassistance provided for capital and technological improvements on farms. Allocations togeneral services to agriculture, such as research, education, inspection, infrastructure, and

marketing and promotion, increased slightly in real terms, but their share in overallagricultural support remains small.

● Broader issues related to sustainable land use, rural development, the quality of agriculturallabour and quality of life in rural areas have become more pronounced on the policy agenda,as evidenced by several federal targeted programmes to be implemented in 2006-10.

● Despite greater emphasis being given to the sector’s long-term competitiveness, inefficientsupport, particularly that distorting input and output prices, continues to be the policymainstream. With the ruble appreciating and negotiations on the WTO entry at animportant phase, the government will likely be under domestic pressure not to reduce thisdistorting support.

● However, a substantive reallocation of resources towards measures that improvecompetitiveness in the agricultural sector would benefit consumers and, in the longer

term, provide superior gains to producers.

111

7. RUSSIA


● The %PSE was at 17% in 2003-05, comparedto 20% in 1995-97. Producer support hasbeen gradually returning to levels before the1998 financial crisis.

● Adjustment of producer prices to strongdepreciation of the national currency,t ightened bo rder protec ti on for keyimported products and some increase inbudgetary transfers, altogether contributedto this rise in support.

● Around 74% of the PSE was represented bymarket price support, due mostly to importprotection for livestock products and sugar.The livestock sector also received implicitsupport through feed grain prices being belowworld levels.

● Budgetary assistance made up theremaining 26% of the PSE, with inputsubsidies accounting for almost 57% of totalbudgetary support, output payments for11%, while another 10% was due to animplicit subsidy from debt rescheduling.

● Market price support, input and outputpayments collectively accounted for 92% ofthe aggregate PSE.

● As measured by the Nominal Protection Co-efficient (NPC), producer prices were onaverage 13% above world levels. The averageNPC disguises considerable variationsacross commodities, with prices stronglysupported for livestock products and taxedfor crop products (except sugar).

● The %CSE rose to an implicit tax of 9% in2003-05, compared to 5% in 1995-97.

● Support for general services to agricultureincreased slightly in real terms but its sharein total support remained small, at 12%in 2003-05.

● Total agricultural support relative to GDP(%TSE) was 1.4% in 2003-05, down from 2.8%

in 1995-97.

Source: OCDE, PSE/CSE database, 2006.


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Table 7.1. Russia: Estimates of support to agriculture RUB million

1995-97 2003-05 2003 2004 2005

Total value of production (at farm gate) 201 986 1 147 699 1 028 882 1 203 708 1 210 507


Total value of consumption (at farm gate) 259 391 1 517 306 1 377 927 1 530 928 1 643 063




Payments based on output 4 737 5 831 6 200 6 027 5 265





Payments based on overall farming income 110 5 034 3 767 5 343 5 993

Miscellaneous payments 1 593 11 815 12 806 17 175 5 464


Producer NPC 1.11 1.13 1.10 1.18 1.11

Producer NAC 1.25 1.20 1.19 1.24 1.18


Research and development 329 2 371 1 832 2 487 2 792

Agricultural schools 934 8 225 6 473 8 125 10 076

Inspection services 824 11 006 10 383 13 530 9 105

Infrastructure 1 302 4 728 4 679 6 661 2 844



Miscellaneous 6 673 1 411 966 821 2 444




Other transfers from consumers 2 649 9 578 11 899 14 770 2 066


Excess feed cost –1 835 –15 650 –23 350 –10 792 –12 809


Consumer NPC 1.05 1.08 1.06 1.12 1.08

Consumer NAC 1.06 1.10 1.08 1.13 1.08




Budget revenues 2 649 9 578 11 899 14 770 2 066


GDP deflator 1995-97 = 100 100 635 525 630 751

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for Russia are: wheat, maize, other grains, oilseeds, sugar, milk, beef and veal, pigmeat, poultry andeggs.Source: OECD, PSE/CSE database, 2006.

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Summary of key policy developmentsThe basic agricultural policy measures remained unchanged in 2004-06. Interest rate

concessions, input subsidies and output payments for livestock products constituted the core

of domestic support. A fuel subsidy was introduced in 2006 to compensate producers for the

strong rise in prices for this input. Substantial border protection for livestock markets based on

tariff rate quotas was extended up to 2009. The protective sugar regime was maintained. The

WTO accession negotiations have advanced, however the agreement on agricultural domestic

support and export subsidies is yet to be reached. A National Priority Project for Development

of the Agro-Industrial Complex in 2006-07 was launched, providing additional funding for

areas such as investment credit for the livestock sector, credit and development of

co-operatives for small producers, and improved housing for young agricultural specialists.

Policy contextRussian agriculture absorbs around 11% of total employment, and contributes 5% to

the country’s GDP. Both shares have been falling since the late 1990s, as the non-

agricultural sectors grew more rapidly. Russia is a large agro-food importer, with agro-food

items accounting for 17% of total merchandise imports. Agriculture has important welfare

implications in the economy where 18% of the population have an income below the

official minimum level, and food takes up 36% of household expenditures.


Russia’s economy continued to grow robustly, albeit at decelerating rates of 7.2% in

2004 and 6.4% in 2005. In 2006 the GDP increased by 6.7%. Significant terms-of-trade gains,

owing mainly to strong world prices for hydrocarbons, have fed into domestic demand,

which became the major driver of growth. The unemployment rate fell to 7.1% at the end

of 2005, from 7.9% in 2004 (and 9.8% in 2000). Real disposable incomes were up by 9.9% and

8.8% in 2004 and 2005 respectively, and private consumption boomed. Investment grew

rapidly as well, although still not enough to approach the investment rate observed in

other catching-up economies.

Russia’s current account surplus rose to a record high USD 84 billion in 2005 (11% of

GDP), while the merchandise balance almost doubled compared to 2003, reaching

USD 118 billion. The positive terms of trade effect more than offset the slowdown in export

volumes and strong growth in imports. However, the sustained strengthening of the

current account balance, combined with substantial productivity gains, led the ruble to

appreciate rapidly. The real effective exchange rate has returned to its pre-1998 crisis level.

The currency appreciation squeezed the competitiveness of domestic production,

particularly for non-energy exports and import substitutes.

Monetary and fiscal management were directed at containing both the real exchange

rate appreciation and inflation. Despite growing fiscal surpluses, the government resisted

pressures for large tax cuts or strong increases in public spending. “Surplus” fiscal revenues

from natural resource extraction and oil exports were sterilised in the Stabilisation Fund and

partly used for early repayment of external public debt. Monetary and fiscal prudence helped

to hold inflation at 10.9% in 2004 and 12.7% in 2005 (average CPI), although still above the

government’s inflation targets. The macroeconomic situation continues to demand cautious

fiscal and monetary steering, while the need for transition to sustained growth is crucially

dependent on acceleration of structural reforms (OECD, 2006).


7. RUSSIA


Output

Agricultural output expanded by 3.1% in 2004 and 2.0% in 2005 (Figure 7.4). The overall

growth was moderated by the modest performance of the livestock sector, whose output

fell in 2004 and stagnated in 2005. One general factor constraining growth was the

deterioration of the sector’s terms of trade, largely due to the rise in fuel prices. Another

was the impact of the ruble appreciation, which intensified competition from imports on

domestic markets, while weakening the position of Russia’s exporters on external markets.

Agricultural prices strengthened on average by 28% in 2004, with crop prices rising by

40% and livestock prices by 20%. In 2005, price growth slowed to 10%, and was mainly

driven by livestock prices, which increased by 18%. Crop prices declined by 2% in 2005, with

the strongest falls registered for wheat (14%) and maize (15%).

The slow-down of agricultural price growth in 2005 coincided with a large increase in

fuel prices. As a result, the agricultural sector saw a considerable deterioration of its terms

of trade, which reached the lowest level observed since the late 1990s (Figure 7.5).

The share of profitable agricultural enterprises fell slightly in 2005, from 62% to 60%.

However, this percentage is an improvement over the beginning of the 2000s when only

46% of agricultural enterprises reported profit. The aggregate figures on farm performance

and sector growth, however, disguise a highly varied situation across farms and

commodity sub-sectors (see below).

Crops

Crop yields in Russia depend strongly on weather conditions, causing substantial

annual variations in output. The crop sector performed well in 2004 and 2005, with the

aggregate output rising respectively by 4.2% and 7.0%. Production of grain, the main crop

group in Russia, reached 78.1 million tonnes in 2004 and 78.0 million tonnes in 2005, less

Figure 7.4. Evolution and annual changes of agricultural output in Russia, 1995-2005

Source: Federal Service for State Statistics, 2006.1 2 http://dx.doi.org/10.1787/227847286306

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than the bumper harvests of 2001 and 2002, but above the 10-year average. The Ministry of

Agriculture’s provisional estimate of grain output for 2006 is between 73 and 74 million

tonnes. Sunflower production remained almost unchanged in 2004, but rose by 33% in 2005

to 6.4 million tonnes, and is expected to drop to 5.9 million tonnes in 2006. The sugar beet

harvest was high for the third consecutive year since 2003, and is forecast to increase from

21.4 million tonnes in 2005 to 23.2 million tonnes in 2006. Maize, soybean, flax and

vegetable production also expanded. Overall, the crop sector shows signs of steady

recovery since the early 2000s, with yields improving, not least due to increased fertiliser

application, better technologies and withdrawal of cultivation from marginal lands.

Livestock

The performance of the livestock sector in 2004-05 was mixed. The aggregate output

fell by 2.4% in 2004 and in 2005 grew only by 0.1%. Downsizing of animal inventories

continued. Milk, beef and pigmeat output fell, while egg production increased marginally

in 2005 after the previous year’s fall. Poultry is the only sector to have registered stable

growth – with a 75% increase in output between 2000 and 2005. For the most recent years,

this can partly be attributed to significant border protection provided to this sector.

Livestock production is stagnant or contracting in many commercial units

(“agricultural enterprises”), so that a large part of the overall commercial output comes

from only a small number of producers, who have adjusted successfully. The strong

differentiation in farm performance is particularly manifest in the pigmeat, poultry and

egg sectors, where a small percentage of producers account for a disproportionately large

share of total commercial production (Table 7.2).

One positive trend in the livestock sector is the stable rise in animal productivity,

reflecting to a certain degree rational downsizing, investment inflows and technical

improvements in successfully restructuring farms. This is accompanied by re-location of

production to areas with more favourable conditions. Points of growth of intensive milk,

poultry and pigmeat production are emerging in the Central, Southern, Volga and Siberian

regions of Russia.

Figure 7.5. Russia’s agricultural terms of trade: ratio of index of prices received over index of prices paid

Source: Federal Service for State Statistics, 2006.1 2 http://dx.doi.org/10.1787/224667702375

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Structures

The traditional farm classification distinguishes three types of producers: i) agricultural

enterprises (organisations), the privatised successors of the former collective and state

farms; ii) household plots, tiny land parcels in rural areas owned by individuals; and

iii) family (“peasant”) farms, emerging since the early 1990s as a result of policy to develop

family-type farms in Russia. According to the official estimate, agricultural enterprises

contributed 41% to total agricultural output in 2005, households 53%, and individual farms

6%. There is a distinct “distribution of labour” between the two principal types of producers,

with agricultural enterprises producing in 2004-05 the bulk of total grain (81%), sugar beet

(88%), and sunflower seeds (75%), and household plots providing the majority of potatoes

(92%), vegetables (79%) and fruits (87%). Livestock output is roughly equally distributed

between the two sub-sectors: in 2004-05 agricultural enterprises accounted for 45% of both

meat and milk output, while households provided the remaining 55%. It should be stressed

though that many households produce primarily for self-consumption, and the importance

of this sector in marketed output is much smaller than in the overall production.

Since the early 1990s, there has been growing differentiation in the performance, size

and market activity within both the agricultural enterprise and household sectors. Among

the agricultural enterprises, a group of successfully developing, investing and modernising

producers is emerging. In 2002-04, 20% of total marketing receipts and 70% of profits of all

agricultural enterprises were generated by 300 enterprises. This group represents only 1.5%

of total number of agricultural enterprises and 3.5% of farmland occupied by producers of

this category (VIAPI, 2005; Uzun, 2004). On the other hand, there are enterprises that have

become marginalised, but so far have not been subjected to bankruptcies due to social or

political considerations, or administrative hindrances. Nevertheless, the process of farm

bankruptcies has moved on: in 2004, 3 455 cases were opened, and in 2005, 6 210 cases

were under examination (Serova et al., 2006b).

Another structural development within the sector of agricultural enterprises is the

emergence of so-called agro-holdings and agro-firms. These represent complex

arrangements, usually involving the take over of assets of insolvent or bankrupt farms by

non-agricultural and agribusiness investors. These are highly diversified formations,

incorporating agricultural, processing and service units. For example, in the Belgorod region

in Russia’s black soil area there are currently four super-large agro-holdings (one of the four,

Orel Niva, operates on 277 000 hectares of arable land and employs around 16 000 people).

There are also 37 agro-firms in the region, counting in total 581 000 hectares of arable land,

173 agricultural, 37 processing and 36 service enterprises (Gataulina et al., 2006).

Table 7.2. Share of top 100 producers in livestock production in Russia

Total number of agricultural enterprises involved in production, 2004

Percentage of 100 top producers1 in totals, 2002-04

Agricultural enterprises Output volume Cash receipts

Milk 15 854 0.6 6.6 9.4

Beef 16 407 0.6 7.1 8.1

Pigmeat 6 462 1.5 45.0 44.3

Poultry meat 607 9.1 52.0 56.1

Eggs 626 16.0 57.0 55.9

1. Top 55 producers for poultry.Source: VIAPI, 2005.

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7. RUSSIA

The creation of agro-holdings and agro-firms intensified with the commodity boom,

when oil, gas and other companies began looking for new investment options. Apart from

this, the process is driven by the usual motivations for vertical integration within the agro-

food system. There is also a political interest. Some local authorities support this process,

seeing take over of non-viable enterprises by outside investors as a way of reviving local

agriculture and easing social difficulties in rural areas. In some cases local administrations

hold a stake in the assets of such agro-holdings and provide various preferences to them,

such as low-interest credit or credit guarantees. Thus, agro-holdings are additionally

perceived by the administrations as vehicles for control and support of local production.

(Gataulina et al., 2006; Rylko and Jolly, 2003). There has been public concern about potential

detachment of rural people from control over agricultural assets and excessive market

power from such super-companies. Although the “holdingisation” in Russian agriculture

received much media attention, the evidence of its actual scale and impacts is limited.

The sector of small household producers is also undergoing structural change.

Originally subsistent, some households are rapidly evolving into small-scale commercial

producers and becoming suppliers of fresh produce, meat and milk for retailing and

processing. Between 2000 and 2005, the volume of meat marketed by households almost

doubled, while the amount of marketed vegetables grew by 50%, and that of potatoes by 20%.

In brief, the farm structure in Russia has been undergoing important transformations,

which so far have not been well captured statistically. It is expected that the 2006

comprehensive Agricultural Census will shed more light on structural shifts in Russia’s

farm organisation over the post-reform period.

Inputs

Production of agricultural inputs nearly collapsed at the beginning of the 1990s,

following the withdrawal of state support to this sector and recession in agriculture. The

only sector which avoided collapse – not recession though – was the fertiliser industry,

which was able to switch supplies to external markets. Fertiliser output has been steadily

rising throughout most of the 1990s and 2000s, to reach the pre-reform level in 2005. In

contrast, the recovery in agricultural machinery has been slow and fragile. There was some

growth in the manufacturing of grain harvesters and some other specialised equipment,

while tractor production saw an important drop in 2005. Overall, the farm machinery

sector needs substantial investment and technological overhaul. The main driver for the

recovery in the input sectors would be sustained investments by the agricultural sector.

Agricultural investment was unstable throughout the 1990s and has been stagnant in most

recent years. Structural improvements, such as developed long-term lending for

agricultural producers, are also crucial for the agricultural input sectors to attract resources

and withstand competition on the domestic market and abroad.

Manufacturer prices for petrol products in Russia nearly doubled between

December 2003 and December 2005, which compares to a 30% price rise for the

manufacturing industry on average. High petrol prices pushed up automobile transportation

tariffs and led to several upward adjustments in controlled railway rates. In order to limit

inflation, the government announced a temporary freeze on petrol prices at the end of

2005. The Ministry of Agriculture requested an introduction of compensation to producers

for increased fuel prices, which was finally approved.


7. RUSSIA

Food processing and retailing

Aggregate output in food and beverage processing has been rising since the late 1990s,

although the rate of growth declined in the most recent years; in 2005 it was 4.4%. As in

primary agriculture, the situation across food sub-sectors is differentiated. Beverage, flour

and bakery, confectionery and vegetable oil industries have been recovering and

modernising most rapidly. Meat and dairy processing have experienced demand constraints,

but are catching up thanks to fast strengthening of consumer incomes. The food industry is

the part of the agro-food system where structural changes are most dynamic. This sector has

been consistently attracting a larger amount of investment than primary agriculture. A

remarkable trend is the rapid development of supermarkets, representing both national and

international food retailing chains. To ensure quality supplies, supermarkets are actively

integrating upstream in all agricultural zones of the country.


Russia’s agro-food trade turnover – exports and imports combined – was at a record

high USD 20.7 billion in 2005 (Figure 7.6). After a significant reduction in 1998-2000

following the financial crisis, both agro-food exports and imports rose consistently to reach

USD 4.0 billion and USD 16.7 billion respectively in 2005. Export growth was more than

offset by strong expansion of imports due to appreciation of the ruble and strengthening of

consumer incomes. The result has been the continued widening of the negative agro-food

trade balance since 2000, which reached USD 12.7 billion in 2005.

Russia’s agro-food exports are small relative to agro-food imports and are marginal

compared to the country’s overall exports. The main export group is grain, which

accounted for 34% of total agro-food export earnings in 2004-05. In the current decade, the

country turned into a consistent net grain exporter with annual exports of 8 million tonnes

Figure 7.6. Agro-food trade in Russia, 1996-2005


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7. RUSSIA

(12 million tonnes in 2005 and an official estimate of 10 million tonnes in 2006). Russia is

also a net exporter of oilseeds and in recent years has been expanding exports of sunflower

oil. Infrastructural bottlenecks in export shipments during the bumper grain harvests in

2001-02 prompted private and public investments in export infrastructure, particularly in

seaport facilities. Nevertheless, in 2006 exports were again hampered by strong rises in the

cost of transportation and port services. Other important agro-food exports are fish (11% of

the total), animal and vegetable fats and oils, prepared foods, and tobacco products, each of

the latter three categories accounting for 6%. Russia’s largest agro-food buyers in 2004-05

were Kazakhstan, Ukraine, Egypt, Azerbaijan and Georgia.

Agro-food imports constitute 17% of Russia’s merchandise imports. Meat products

represent the largest import group (18%), followed by fresh and processed fruits and

vegetables (17%), and beverages and spirits (9%). Dairy products, sugar and confectionary,

and tobacco products each account for 6%. Russia is among the world’s largest importers of

some agro-food products and a key market for several of its trade partners. For example, in

2004-05 Russia absorbed one-third of the United States’ exports of frozen cut poultry, and

two thirds of Brazil’s pigmeat exports. Overall, the EU is Russia’s largest agro-food supplier,

with Germany and Netherlands being the main partners. Other key suppliers are Brazil,

Ukraine and the United States.


Price and income support

The major source of price support in Russia is border protection (see below), but

several domestic measures are also applied. One is output subsidies, traditionally paid to

all livestock products, with about 78% of the total going to milk. Originally financed from

the federal budget, they are now channelled from the regional budgets. In addition to

livestock subsidies, there is also a small subsidy for flax and hemp provided under the

programme for recovery of national flax and hemp growing.

Since 2001, Russia has implemented federal grain interventions. Purchases are carried

out at commodity exchanges in six principal grain producing regions. Interventions have

been limited and targeted mainly to smoothing seasonal price fluctuations. In 2005,

1.66 million tonnes of grain were purchased, which amounted to about 3% of total grain

marketed.

Input subsidies

Input subsidies constitute the majority of budgetary support. Most important are

interest rate subsidies on working capital loans and various payments for variable inputs,

such as fertiliser, elite seeds, and insemination material. In 2006, the federal government

introduced a fuel and lubricants subsidy in response to producer pressure for protection

against substantial rises in prices for these inputs. RUB 5 billion (USD 178 million) were

allocated for this purpose in 2006, and the amount is expected to be doubled in 2007.

In 2006, a disaster relief worth RUB 1.5 billion (USD 54 million) was also provided to

producers.

With increased availability of fiscal resources in recent years, more funds are

channelled for support of capital improvements. This area of assistance traditionally

includes state leasing of machinery and pedigree livestock, capital grants for construction

and renovation of livestock complexes, and since 2005, for the purchase of progressive


7. RUSSIA

technologies. A variety of activities on land and infrastructure improvements are financed

under a Federal Soil Fertility Enhancement Programme. Additional assistance for long-

term investment has been introduced in 2006 within the framework of the National Priority

Project for Development of Agro-Industrial Complex (see below).

Debt rescheduling

Since the mid-1990s, a series of large-scale debt restructurings for agricultural

enterprises has been implemented (in 1994, 1998, 2001, and 2002). The majority of schemes

concerned overdue federal tax debts and contributions to Pension and Social Insurance

Funds. Consequent restructurings often included some re-packaging of previous schemes.

Conditions of most recent restructurings provide that beneficiaries carry no overdue debts

on current liabilities and fully observe the repayment schedule for restructured debt. In 2004,

a new rescheduling was implemented, covering overdue fines and penalties on tax debt to

the federal budget. Slightly less than one-half of the total number of agricultural enterprises

are involved in this scheme. As of end-2006, the overall amount of restructured debt under

the 2004 scheme was estimated at approximately RUB 81.7 billion (USD 2.9 billion), of which

RUB 71.6 billion (USD 2.6 billion) were fines and penalties (Serova et al., 2006b). The debt

restructurings have to a certain degree contributed to a fall in overdue debt in agricultural

enterprises and in the number of overdue debtors, observed since 2001.

New distribution of functions between the federal and regional authorities

An important policy change concerned the distribution of functions between the

federal government and regional administrations in producer support, informally denoted

as the “regionalisation” of agricultural support. This change constituted part of the broad

administrative reform initiated in Russia in 2004. The regional administrations now

assume the main responsibility for implementation of agricultural support within their

regions. This implies that regional administrations receive more discretion in developing

and financing regional support programmes. In addition, several important federal support

programmes were delegated under the responsibility of regional administrations. Regions

are now free to define procedures, beneficiaries and payment rates under these

programmes. The respective financing continues to be in large part provided from the

federal budget as federal budgetary subventions to the regions. These funds, however, are

transferred on the condition that the regions co-finance these programmes from their own

resources. The broadening of responsibilities of the regional administrations will further

shift the decision making and implementation of support measures away from the federal

government.

The “regionalisation” of agricultural support bears several risks. First, with the notion

of self-sufficiency strong in many regions, there is chance that “rich” regions would provide

high support to local producers. This may lead to stronger inefficiencies in allocation of

resources across the country. Second is the potential for aggravation of regional

protectionism, including discrimination against outside agents, bans on movements of

agricultural commodities in and outside regions, and a perpetuation of command

methods. Third is the risk of reduced policy transparency, which would complicate policy

monitoring and effective decision making. Policy monitoring in Russia is already

complicated, not least due to the existing national budget classification which does not

always allow for clear traceability of agricultural payments, in particular those made at

regional levels.


7. RUSSIA

Box 7.1. National Priority Project for Development of Agro-Industrial Complex: Russia

This two-year Project is one of the four National Priority Projects launched in 2006.* ApproximatelyRUB 31 billion (USD 1.1 billion) over two years are allocated for its implementation, which representsa 20% increase to the federal budget spending on agriculture. The Project includes three sub-projects:1) accelerated development of the livestock sector; 2) support of smallholder farms, and 3) provisionof accessible housing for young specialists and their families in rural areas.

A sub-project Accelerated Development of the Livestock Sector targets to increase overall meatand milk production by 7.0% and 4.5% respectively over 2006-07 and to stabilise the decline in cattlenumbers. It includes the following:

● Eight-year preferential investment loans for construction and modernisation of livestock complexes.

Investors are to be selected through tenders organised by the Ministry of Agriculture. The support isprovided in the form of interest rate subsidy on such loans, which is set at two-thirds of the CentralBank of Russia (CBR) refinancing rate. RUB 3.45 billion (USD 120 million) in 2006 and RUB 3.18 billion(USD 114 million) in 2007 are budgeted for subsidising the interest rates. Some 1 160 investmentprojects have been selected, and loans worth RUB 105 billion (USD 3.75 million) were raised underthis facility as of September 2006.

● Additional leasing of pedigree animals and equipment for livestock farms through the existingfederal leasing programme, implemented by the state company Rosagroleasing. The leasing

margin will be reduced compared to regular operations and the leasing period extended up toten years. For this activity Rosagroleasing receives RUB 4 billion (USD 143 million) per year.

● No changes to TRQ schedule for meat imports as currently adopted for 2006-09; elimination ofimport duties on livestock equipment having no domestically-manufactured analogues.

The sub-project Support of Smallholder Farms targets to increase the volume of output marketedby small producers by 6%. The following main activities are included under this component:

● Subsidised bank loans for individual (peasant) farms and household producers (with the subsidyequal to 95% of the CBR refinancing rate). The loans are given only for agricultural production,and eligible recipients are selected by the municipal administrations. RUB 2.9 billion(USD 103 million) in 2006 and RUB 3.7 billion (USD 132 million) in 2007 are allocated forsubsidising interest rates on such loans.

● Support for setting-up, modernisation and infrastructural development of marketing, supply andcredit cooperatives of agricultural smallholders. Rosslekhozbank is to provide loans andtechnical assistance to these co-operatives, and receives for this purpose a budgetary allocationof RUB 3.6 billion (USD 129 million) in 2006 and RUB 4.5 billion (USD 161 million) in 2007.

● Development of the land mortgage system in rural areas. Rosselkhozbank will implement severalpilot projects, for which RUB 100 million (USD 4 million) are earmarked for 2006 andRUB 1.2 billion (USD 43 million) for 2007.

The third component, Provision of Accessible Housing for Young Specialists in Rural Areas, isdestined to facilitate inflow of qualified labour to rural areas, mainly in agriculture. It is envisagedto provide financial assistance to rural employers who construct housing for young specialists. Thetotal amount of assistance is to reach RUB 2 billion (USD 71 million) annually in 2006-07. Around16 200 families of young specialists are expected to benefit from new housing.

Some analysts note imbalances between the short (2-year) budget horizon and the longer-termimplementation nature of some key activities under the Project. Another weakness is theexclusivity of state companies (e.g. Rosagroleasing, Rosselkhozbank) in provision of some servicesforeseen in the Project (Serova et al., 2006b).

* The other three National Priority Projects concern health, education and housing.

Source: Ministry of Agriculture and Food of the Russian Federation; www.mcx.ru/index.html?he_id=909.


http://www.mcx.ru/index.html?he_id=909

7. RUSSIA

Under the new division of responsibilities between the federal and regional levels, it is

envisaged that the federal government focuses on formulation of strategic policy directions

and the implementation of special national programmes. In 2006, the federal Ministry of

Agriculture was responsible for three large federal programmes:

● Soil Fertility Enhancement and Rehabilitation of Agro-landscapes as Russia’s National

Heritage for 2006-10, which foresees such activities as land reclamation, soil

rehabilitation, erosion prevention, creation of forest shelter belts for agricultural lands,

and other agricultural land protection measures.

● Social Development of Rural Areas for 2006-10, providing federal co-financing of regional

rural development projects, in particular construction of housing, schools and

healthcare institutions, as well as development of road, electric, gas, and water networks

and telecommunication systems.

● National Priority Project for Development of Agro-Industrial Complex for 2006-07 (Box 7.1).

In the past few years there have been efforts to create a more stable mid- to long-term

regulatory framework for the government’s activities in agriculture. A Strategy of

Development of Agro-Industrial Complex for 2006-10, adopted by the Ministry of

Agriculture, is seen to serve as a base for mid-term federal budget allocations to the sector.

A Federal Law on Development of Agriculture was adopted by the Parliament in

December 2006. It is destined to provide a comprehensive legal framework for government

regulation, containing main definitions, formulation of agricultural policy goals and

principles, and policy measures. The law is intended to introduce the State Agricultural

Programmes which would set concrete parameters of agricultural support every five years.

Budget

The consolidated budgetary expenditures on agriculture, which include disbursements

from the federal, regional and local budgets, rose in current terms in 2001-06. However, they

tended to fall in constant terms and in per cent of the total consolidated budget (Table 7.3).

Up to 2004, approximately one-half of the overall spending was allocated at the regional and

local level, and one-half at the federal level. The federal share declined sharply in 2005, when

administrative reform shifted responsibility for implementation of agricultural support to

the regional administrations. Much of the incremental regional funding in 2005-06

represented federal subventions to the regional budgets.

Table 7.3. Consolidated budgetary expenditures on agriculture in Russia in 2001-06

2001 2002 2003 2004 20052006

(allocation)

Consolidated agricultural expendituresin current RUB, million 70 700 63 600 68 101 78 589 77 887 87 383

of which the percentage share of:

Federal budget 39 48 48 53 24 22

Regional and local budgets 61 52 52 47 76 78

Consolidated agricultural expenditures

in constant 2000 prices, RUB million 58 189 45 204 42 570 44 298 38 955 n.c.

as per cent of overall state budget 2.7 1.6 1.5 1.7 1.2 1.2

n.c.: not calculated.Source: Serova et al., 2006a, based on Ministry of Finance and the Federal Service for State Statistics data.

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7. RUSSIA

Agro-food trade policiesRussia’s officially reported applied import tariff1 on agricultural goods is 14.70% – this

compares with 9.73% for industrial goods and 10.92% for all goods (MERT 2006). For key

agro-food imports, such as meat and milk products, ad valorem and specific duties are set,

of which the higher one is applied.

Since April 2003, poultry imports from outside the CIS area have been restricted by a

physical quota, while imports of red meat were under a tariff rate quota (TRQ), with all

quotas allocated annually to countries based on historical imports. The quotas played the

role of a bargaining tool in recent negotiations on Russia’s accession to WTO. In 2005, Russia

extended the meat TRQ regime up to 2009, but agreed to a gradual increase in the quota

volumes and a downscaling of over-quota tariff rates. In addition, as of 2006, the physical

quota for poultry is replaced with a TRQ (Table 7.4). Official trade data show that in

2004-05 actual imports of beef, pigmeat and poultry have been above the TRQ. In addition to

tariff protection, Russia actively employs restrictions on meat imports on sanitary,

veterinary, or technical grounds. These, for example, concerned imports of US poultry, meat

products (along with some plant products) from Poland, and dairy and meat products from

Ukraine. The outbreak of foot and mouth disease in Brazil at the end of 2005 led to a ban on

imports of beef and pigmeat from certain regions in this country (relaxed gradually since

then), while the concerns about propagation of bird flu in 2006 prompted bans on poultry

imports from a number of EU and CIS countries, Turkey, and Israel.

Sugar is another commodity in Russia under a special import regime. White sugar

imports originating from areas outside CIS are levied a specific duty of USD 340 per tonne.

The CIS imports, accounting for the majority of Russia’s white sugar imports, are free of

duty if white sugar is processed from sugar beet,2 otherwise a USD 340 per tonne duty is

also applied. Raw sugar imports are subjected to a more complex regime. At the end of

Table 7.4. Russia’s meat import quotas in 2005-09

2005 2006 2007 2008 2009

Beef fresh and chilled

TRQ, thousand tonnes 27.5 27.8 28.3 28.9 29.5

In-quota tariff 15%, n.l. 0.2 EUR/kg 15%, n.l. 0.2 EUR/kg 15%, n.l. 0.2 EUR/kg 15%, n.l. 0.2 EUR/kg 15%, n.l. 0.2 EUR/kg

Over-quota tariff1 40%, n.l. 0.53 EUR/kg 40%, n.l. 0.4 EUR/kg 50%, n.l. 0.65 EUR/kg 45%, n.l. 0.6 EUR/kg 40%, n.l. 0.53 EUR/kg

Beef frozen

TRQ, thousand tonnes 430 435 440 445 450


Over-quota tariff1 40%, n.l. 0.4 EUR/kg 40%, n.l. 0.4 EUR/kg 52.5%, n.l. 0.53 EUR/kg 50%, n.l. 0.5 EUR/kg 40%, n.l. 0.4 EUR/kg

Pigmeat

TRQ, thousand tonnes 467.4 476.1 484.8 493.5 502.2


Over-quota tariff1 80%, n.l. 1.06 EUR/kg 60%, n.l. 1.0 EUR/kg 55%, n.l. 0.9 EUR/kg 50%, n.l. 0.83 EUR/kg 40%, n.l. 0.55 EUR/kg

Poultry meat

TRQ, thousand tonnes 1 090.0 1 130.8 1 171.2 1 211.6 1 252.0


Over-quota tariff1 No over-quota imports 60%, n.l. 0.48 EUR/kg 50%, n.l. 0.4 EUR/kg 50%, n.l. 0.4 EUR/kg 40%, n.l. 0.32 EUR/kg

n.l.: “but not less than”.1. Over-quota rates shown for 2005 are those in effect between June and December. Over-quota rates for 2007-09 represent the

ceiling level, with the government to set actual rates each year.Source: GRF, 2005.

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7. RUSSIA

2003, a variable import levy was introduced to replace the previous TRQ system. Raw sugar

imports are now subject to a specific tariff, whose rate varies between USD 140 per tonne

and USD 270 per tonne depending on the level of average monthly price at the New York

Board of Trade (NYBOT). A higher NYBOT price commands the lower tariff rate of the range

specified above, and vice versa. The ad valorem equivalent of applied variable tariff on raw

sugar imports was approximately 98% in 2004 and 61% in 2005.

There were several changes in the tariff regime in 2004-05. In order to limit rises in

bread prices, temporary export duties on wheat and rye were in effect between January and

May 2004; the uncertainty which accompanied the introduction of the duties hampered

exports for some time. On the other hand, imported maize, soybeans and fish flour were

freed from duties. High world prices prompted the elimination of import duties on coffee,

cocoa and peanuts in 2006, to the benefit of the booming domestic confectionary industry.

Russia applied for the WTO membership in 1993 and is now at the advanced stage of

accession negotiations. By the end of 2006, bilateral talks on market access for goods have

been closed with 56 of 58 WTO members who requested such negotiations, exceptions

being Georgia and Moldova. Bilateral agreements on market access for services were

completed with 27 out of 30 requesting countries. The most recent development in

bilateral talks was the signing of market access and sanitary and phytosanitary

agreements between Russia and the United States in November 2006. With respect to

agricultural goods, the US-Russia market access agreement stipulated special concessions

to US exporters to be built into Russia’s meat import regime after 2009 (i.e. after expiration of

the current regime). Russia has also committed to bind at zero import tariffs for maize,

soybeans and soybean meal and at 5% for wheat and barley. Other tariff concessions included

in this agreement concern fresh fruits, several dairy products, prepared foods, and wine.

To complete the accession negotiations, Russia needs to sign all bilateral market

access agreements and conclude multilateral talks. Two principal agricultural issues,

subject to multilateral agreement, remain open. These concern the amount of domestic

support that Russia will be able to provide to its agricultural sector after the accession and

the possibility for Russia to provide export subsidies for agricultural commodities.

With respect to domestic support, the discussion continues to centre on the base

period to define the starting level of domestic assistance for future reductions, and also the

amount of this assistance as measured by the Aggregate Measurement of Support (AMS).

As it stands currently, Russia has agreed to move the reference period from 1991-93,

originally proposed, to 1993-95 and to reduce the AMS from USD 16.2 billion to

USD 9 billion. These parameters continue to be considered disputable by several

negotiating parties: the reference period is seen as too distant and the amount of domestic

support as highly inflated as regards Russia’s current situation. Russia argues that the

current situation does not reflect agricultural conditions adequately, given the gravity of

the recession agriculture experienced in the 1990s. For export subsidies, the current

Russian position foresees moving the reference period from 1990-92, originally proposed,

to 1993-95, and reducing the export subsidy from USD 726 million to USD 157 million

(MERT 2006). Several negotiating parties challenge the inclusion of export subsidies in

Russia’s proposal, while Russia argues that this is not yet prohibited under the current

rules, and that export subsidies are justified by the long distances which create a natural

competitive disadvantage for Russian exporters. These issues will likely be in the focus of

future multilateral agricultural negotiations on Russia’s accession to the WTO.


7. RUSSIA

Box 7.2. Russia’s regional and bilateral trade relations

Russia participates in several integration agreements between the countries of theCommonwealth of Independent States (CIS). In the first half of the 1990s, it signedbilateral free trade agreements with the majority of CIS countries. In 1994, all twelve CISmembers concluded an Agreement on Creation of Free Trade Zone, providing for duty-freetrade, non-use of quantitative restrictions, and harmonisation and unification of trade

regulations between the participants. The agreement allows for exceptions from the freetrade principle for sensitive commodities or when it concerns, for example, “protection oflife and health of people”, “protection of animals and plants”, or the environment. Theagreement also contains a clause on special safeguards, allowing for quantitativerestrictions, special import duties, or antidumping and countervailing duties.

In the second half of the 1990s-early 2000s, Russia joined other CIS agreements aimed atdeeper economic integration. In 1999, Belarus, Kazakhstan, Kyrgyzstan and Russia signedthe Treaty on Customs Union and Common Economic Space. Tajikistan later joined this

initiative, and in 2001 the five countries created the Eurasian Economic Community (EAEC),which superseded the 1999 customs union agreement. In 2006, Uzbekistan joined theEAEC. The main goal of the EAEC is to complete formation of the customs union. Thisimplies, in particular, a common customs territory for union members, no tariff and non-tariff trade restrictions on mutual trade, a common external tariff (CET), and harmonisationof customs regulations and procedures. The implementation period for the CET was set atfive years after the coming into effect of EAEC, with possible prolongation by mutualagreement of all parties. In 2005, the EAEC common tariff covered 6 156 tariff lines out of the11 086 identified in the EAEC classification. The remaining tariffs are set independently bythe members and are subject for further binding (Tumbarello, 2005). One particular problemof tariff unification is that in many cases Russia applies higher tariffs than other EAECmembers, for example, Kazakhstan or Kyrgyzstan. An extension of the CET to a wider range

of tariff lines has thus difficult political implications. This process also needs to becoordinated with WTO accession negotiations, in which all EAEC participants, exceptKyrgyzstan, are involved. A special objective stated in the agreement is the co-ordination ofthe negotiating positions of the parties with respect to their future WTO commitments. Alonger term goal is the creation of common economic space. The latter implies a guaranteedfree movement of goods, services, capital and labour within the customs territories of EAECmembers. A common economic space also implies co-ordination of trade, monetary, foreignexchange and tax policies of the member countries.

Another CIS agreement appeared in 2003, to accommodate Ukraine in broader CISeconomic integration, when Belarus, Kazakhstan, Russia and Ukraine signed an Agreementon Creation of Common Economic Space (CES). One stated objective is the formation of afree trade zone between members, without exceptions or restrictions, such as anti-dumpingmeasures, countervailing duties and special safeguards. This provision makes an importantdifference with the definition of free trade contained in EAEC, which allows for suchexceptions and restrictions. Another distinction is that under the EAEC, Belarus, Kazakhstanand Russia (together with other EAEC signatories) undertook to form a customs union, whilethe CES does not concern this initiative. The CES agreement also aims at the establishmentof common principles in regulation of natural monopolies in railway transportation,telecommunications, and transit of electricity, oil and gas. However, for Belarus, Kazakhstan

and Russia, the EAEC and CES seem to overlap. The actual implementation of the CISagreements is difficult to evaluate due to a lack of information. Overall, the process ofeconomic integration in the region proves to be uneven and complicated, in part reflectingthe diverging political priorities and economic conditions of the CIS countries.


7. RUSSIA

Notes

1. Weighted average tariff based on rates applied as of January 2001.

2. The duty free treatment for white sugar processed from sugar beet is not applied in trade betweenRussia and Ukraine; both countries mutually apply their MFN tariffs.

Bibliography

AgraFood East Europe, various editions.

EUROPA (2006), The EU’s Relations with Russia, Portal site of the EU, http://ec.europa.eu/comm/external_relations/russia/intro/index.htm.

FSSS (2005), Sotsialno-Ekonomicheskoye Polozhenie Rossii: 2005, Federal Service of State Statistics,Moscow (FSSS), 446 pp.

Gataulina, E.A., V.Y. Uzun, A.V. Petrikov, and R.G Yanbykh (2006), “Vertical Integration in anAgroindustrial Complex: Agrofirms and Agroholdings in Russia”, in: Swinnen J.F.M, ed., The Dynamics ofVertical Coordination in Agrifood Chains in Eastern Europe and Central Asia: Case Studies, Working PaperNo. 42, World Bank, Washington, DC, pp. 45-71.

Government of the Russian Federation (GRF) (2005), Resolution No. 732 of 5 December 2005 “On Imports ofBeef, Pigmeat and Poultry in 2006-2009”, Moscow.

ISC CIS (2006), Commonwealth of Independent States in 2005, Statistical Abstract, Interstate StatisticalCommittee of the Commonwealth of Independent states (ISC CIS), Moscow, pp. 154-157.

MERT (2006), Negotiations on Agriculture in the Framework of Russia’s Accession to the WTO,Information brief, Ministry of Economic Development and Trade of the Russian Federation (MERT),(www.wto.ru).

MID (2006), Russia in Multilateral Structures of the CIS, Ministry of Foreign Economic Relations of theRussian Federation (MID), (www.mid.ru/bul_newsite.nsf/kartaflat/02.02.08).

OECD (2006), OECD Economic Surveys: Russian Federation, OECD, Paris.

Box 7.2. Russia’s regional and bilateral trade relations (cont.)

In 1997 Russia signed a ten-year Partnership and Cooperation Agreement (PCA) with theEU, which sets the broad framework for relations in various areas, such as trade in goods,business and investment, payments and capital, economic co-operation, and other areas.In the area of trade in goods, the parties agreed to accord to one another the general MostFavoured Nation (MFN) treatment, provide free transit of goods, and apply no quantitative

restrictions on imports, except in cases explicitly specified in the Agreement. The partiesalso undertook to align legislation in various key areas, including standards andcertification and customs law. In 2003, under the general umbrella of the PCA, Russia andthe EU agreed to create four common spaces – economic; freedom, security and justice;external security; research, education and culture. A broad objective of the commoneconomic space is to reduce barr iers to trade and investment and promotecompetitiveness. Provisions on agriculture contain alignments of legislation and practices,in particular in the sanitary and phytosanitary areas, animal health and welfare,marketing standards and labelling. The current PCA expires in 2007. Unless a newagreement is negotiated for the next term, the current PCA remains in force unchanged(EC, 2006).

Russia intensified bilateral dialogues with Latin American and Asian countries in recentyears, in particular, with the Mercosur group, China, and India. These contacts, amongother areas, focussed on prospects for greater economic cooperation (MID, 2006).


http://ec.europa.eu/comm

http://www.wto.ru

http://www.mid.ru/bul_newsite.nsf/kartaflat/02.02.08

7. RUSSIA

Rylko, D. and R.W. Jolly (2003), “Organisational Innovation in Russian Agriculture: The Emergence of‘New Agricultural Operators’ and its Consequences”, Report prepared for BASIS Project(www.basis.wisc.edu/russia.html), Moscow, 2004.

Serova, E., N. Karlova, O. Shick, and T. Tikhonova (2006a), “Report on Main Policy Developments inRussia”, Report submitted to OECD.

Serova, E., N. Karlova, O. Shick and T. Tikhonova (2006b), “Osnovnye Tendenzii v RazvitiiAgroprodovolstvennogo Sectora”, in: Rossiskaya Ekonomika v 2005 Godu: Tendenzii I Perspektivy,Institute for Economy in Transition (IET), Moscow, pp. 266-297.

Tumbarello, P. (2005), “Regional Trade Integration and WTO Accession: Which is the Right Sequencingand an Application to the CIS”, IMF Working Paper WP/05/94, IMF.

Uzun V.Y. (2004), “Large and Small Agricultural Business in Russia: Market Adaptability and Efficiency”,Report prepared for BASIS Project (www.basis.wisc.edu/russia.html), Moscow.

VIAPI (2005), Reitingi Selskokhozyaistvennykh Organisatsii Rossii za 2002-2004 gg, All-Russia Institute ofAgrarian Issues and Informatics (VIAPI), Moscow, 138 pp.


http://www.basis.wisc.edu/russia.html

http://www.basis.wisc.edu/russia.html



Chapter 8

South Africa


● Changes in South African agriculture in the past decade have been shaped by substantialreforms implemented from the mid 1990s: deregulation of the marketing of agriculturalproducts, abolishing certain tax concessions favouring the sector and reductions inbudgetary expenditure on the sector. The main development in trade policies was thereplacement of direct controls over imports by tariffs, which were set below the bound ratesof the URAA, and elimination of state controls over exports and of export subsidies. In 2005and 2006, most policy developments were linked with the introduction of programmesproviding support to new farmers emerging from land reforms.

● The average level of producer support in South Africa, measured by the %PSE, indicates arelatively low degree of policy interventions and the overall trend shows some reduction ofsupport from 1994 up to 2001. Support increased in 2002 but then stabilised. Around 80% ofproducer support in South Africa is delivered in the form of Market Price Support (MPS).Budgetary transfers increased in the current decade due to the introduction of the fuel taxrebate and increased spending on land reforms and related programmes.

● An important share of public financial resources is devoted to the implementation of landreforms, especially land redistribution. To support this programme, Land Redistribution andAgricultural Development (LRAD) grants are given to the disadvantaged black population toacquire land or for other forms of on-farm participation. It allows farmers who can providepersonal contributions (financial or own labour) to access or acquire more land. From 2005,new programmes are implemented to support the development of market-oriented familyfarms emerging from the land reform process.

● The black population in rural areas is the target of land reform policies, but it is clear that

adequate supporting infrastructure must also be in place if these new entrepreneurs areto survive. The new entrants into commercial agriculture are at a considerabledisadvantage relative to the more experienced operators in facing the challenges of theliberalised market. The government has to address these issues by implementing welltargeted support programmes and services (including research and development)tailored to the needs of the emerging farms.

● It is essential for the development of small-scale farms and for the less developed regionsof South Africa, to have a financial system able to mobilise savings, allocate capital and

monitor farmers, business firms and micro-enterprises. South Africa has recentlydeveloped programmes targeting those, who with the help of a loan are able to establish aviable business and escape poverty. In this respect, careful client targeting anddevelopment/application of transparent selection criteria are of utmost importance tosecure longer term financial viability of such programmes.

129

8. SOUTH AFRICA


● Support to producers as measuredby the %PSE followed a downwardtrend in the period 1995-2001 whenit reached its lowest level of 2%.After an increase in 2002 to 8%, the

%PSE stabilised around that levelduring 2003-05, which is far bellowthe OECD average of 30% for thesame period.

● The overwhelming share ofproducer support in South Africa is

delivered in the form of Market PriceSupport (MPS). Budgetary transfers,although showing a tendency toincrease from 2001, are a minor partof transfers to producers.

● The producer Nominal Protection

Coefficient (NPC) indicates that onaverage the prices received bydomestic producers (including thepayments based on output) wereonly 7% higher than world marketprices.

● However, the NPC for individualcommodities indicates a large shareof variation in price support. Sugarattracts the highest price support,while price support is much lowerf or l i vesto ck p rod ucts a ndnegligible for crops.

● The cost to consumers (%CSE)halved from an implicit tax of 14%in 1995-97 to an implicit tax of 7% in2003-05.

● Support for general servicesprovided to agriculture represents a

relatively stable share in the TotalSupport Estimate (TSE), increasingslightly from 33% in 1995-97 to 41%in 2003-05.

● The total cost to the economy ofagricultural support as a share ofGDP declined from 1.1% in 1995-97to 0.7% in 2003-05, which implies

that the costs of agricultural policyto the economy is relatively low.



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8. SOUTH AFRICA

Table 8.1. South Africa: Estimates of support to agricultureZAR million

1995-97 2003-05 2003 2004 2005










Payments based on input use 59 812 704 844 889





Producer NPC 1.15 1.07 1.06 1.07 1.08

Producer NAC 1.14 1.09 1.08 1.09 1.10


Research and development 1 797 2 145 2 442 1 997 1 997



Infrastructure 141 925 1 112 832 832







Other transfers from consumers –598 –522 –356 –456 –753


Excess feed cost 141 0 0 0 0


Consumer NPC 1.17 1.07 1.06 1.07 1.09

Consumer NAC 1.16 1.07 1.06 1.07 1.09




Budget revenues –598 –522 –356 –456 –753


GDP deflator 1995-97 = 100 100 177 168 178 186

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for South Africa are: wheat, maize, sunflower, groundnuts, sugar, grapes, oranges, apples, milk, beefand veal, pigmeat, sheepmeat, poultry meat and eggs.Source: OECD, PSE/CSE database, 2006.

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8. SOUTH AFRICA

Summary of key policy developmentsThe main policy development in South Africa is the modification of land reform policies

for redistributing agricultural land. From 2005, new programmes were implemented to support

the development of market-oriented family farms emerging from the land reform process. The

Comprehensive Agricultural Support Programme (CASP) is targeted to the beneficiaries of land

reform willing to establish commercial farms. Support is provided mainly through investment

grants allocated to viable projects. The Micro-Agricultural Finance Scheme of South Africa is a

state-owned scheme to provide micro and retail financial services in rural areas. It was

implemented in three provinces in 2005 and extended to other provinces during 2006. For a

detailed review of agriculture policy reforms in South Africa, see OECD (2006).

Policy contextAgriculture’s share in the GDP has been around 3% for the period 2000–05. This relatively

low share is mainly due to the importance of service activities like trade, transport and finance

in the South African economy (65% of GDP). Although the share of primary agriculture in the

economy is relatively small, its overall importance should be considered in the context of its

linkages with upstream and downstream industries, employment opportunities, its role in

foreign trade and inter-regional linkages. The officially reported employment in primary

agriculture (mainly employment on commercial farms) represents around 10% of total

employment. The share of agro-food trade in total exports is around 10%, while the share of

total imports is around 6%.


The still robust economic growth in 2006 showed some moderation compared to the 4.5%

and 4.9% GDP growth in 2004 and 2005 respectively, and consequently posed little threat to the

inflation outlook. However, in 2006 the inflation rate went up because of robust consumer

spending. The budget deficit for the fiscal year 2005/06 had been a low 0.6% of GDP compared

with the government’s original target of 3.1% of GDP, owing largely to stronger than expected

economic growth (2005 was the highest growth since 1984) and further strong performance in

domestic revenue. The fiscal deficit is expected to increase to 1.5% of GDP in 2006/07.

Monetary policy remains focused on containing inflation within the official target range of

3-6% per year set by the South African Reserve Bank (SARB). After a period of lowering interest

rates (from September 2002) The SARB raised interest rates twice in 2006 (June and August) in

both cases by 50 basis points, reflecting the fears that the economy is overheating and that

inflation targets are at risk. The year-over-year (end of year) inflation rates increased from 1.4%

in 2004 to 3.9% in 2005 and were further increasing in 2006 (August 2006 year-to-year index was

5%). After a strengthening of the rand (from 10.5 ZAR/USD in 2002 to 6.36 ZAR/USD in 2005),

the exchange rate has exhibited considerable volatility and a general tendency to weaken

during 2006. The overall current account deficit rose to 4.2% of GDP in 2005 (compared with

3.5% of GDP in 2004) as the visible and invisible trade deficits both deteriorated. Exports posted

robust growth, but imports grew faster, causing the trade deficit to widen.

The core objective of the government, as set out in 2004, is to halve poverty and

unemployment by 2014. With the improvement in the economic growth rate has come

employment creation, though unemployment remains high at over 26%. The government

announced the introduction of the Accelerated and Shared Growth Initiative (ASGISA) which is

to raise investment, growth and job creation in the formal (first) economy, but also to integrate


8. SOUTH AFRICA

the informal (second economy) in the formal one. Although special attention will be given to

business process outsourcing and tourism, other sectors are encouraged to develop strategies

for focus areas within each sector.1 These sectors are labour intensive, rapidly growing sectors

world wide, suited to South African circumstances, and open to opportunities for Broad Based

Black Economic Empowerment (BBBEE) and small business development.


Overall, the conditions for agricultural production are not favourable in most of the

country. Only 16% of agricultural area is potentially arable and water resources are scarce in

most regions. Natural pastures in desert and semi-desert areas represent 83% of total

agricultural area, with the remaining area is used mostly for field crops and horticulture. South

African agriculture is highly dualistic with a small number of commercial operations run

predominantly by white farmers (although there is a small number of larger scale black

farmers) and large numbers of subsistence farms run by the black farmers. The problems and

opportunities are quite different for each group. Some of these subsistence farms aim to

develop into commercially oriented farms. Agricultural reform continues with a series of

measures to address past injustices including land redistribution, agricultural support

programmes to disadvantaged farming communities, and a broad-based programme of

economic empowerment of the black population in the agriculture and food sector.

Output

The development of Gross Agricultural Output (GAO) is characterised by an upward trend

but with important year-to-year fluctuations (Figure 8.4). In 2004 and 2005, the GAO increased

by 3.4% and 2%, respectively. Overall, the volume of agricultural output has increased by 25%,

between 1995 and 2005. Year-to-year changes demonstrate that horticultural and livestock

1. The agricultural sector will focus on growth points in the targeted areas related to livestockimprovement, rehabilitation of eroded areas, irrigation developments and biofuel initiatives.

Figure 8.4. Evolution and annual changes of agricultural output in South Africa, 1995-2005


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production is less vulnerable to annual fluctuations compared with field crops. Field crops,

horticulture and livestock products accounted, respectively, for 28%, 28.5% and 43.5% of total

agricultural output in 2003-05, with the horticultural sector gaining in relative importance over

the past decade.

Crops

The most important field crop grown in South Africa is maize followed by sugar cane,

sunflower and wheat. The country has traditionally been a net exporter of maize and sugar,

and a net importer of wheat. Field crop production is extensive and mostly without irrigation.

Thus, field crop yields are relatively low (compared with the US or European levels) but also

more variable due to low and erratic rainfall. Maize is used as the major feed grain (yellow

maize) and also as the staple food for the majority of the South African population (white

maize). With an area of more than 3 million hectares, maize is cultivated on around one-

quarter of total arable land. Wheat is produced on 0.8 million hectares, mainly for human

consumption with only small quantities of lower quality wheat marketed as feed. Sunflower

seed is the most important oilseed crop but its area has been steadily declining since 2001, to

460 000 ha in 2004. Sugar cane area is relatively stable at around 430 000 ha.

Horticulture

Horticulture production is concentrated in regions with suitable quality land and

sufficient water resources. Most horticultural production is under irrigation. Horticulture

production, mainly wine and fruit production, has been increasing in the last 10 years. The

share of horticultural production in the value of total agricultural output increased from 21% in

1990 to 29% in 2004. This was largely due to the liberalisation of South Africa’s export regimes

and the opening up of other countries’ markets to South African exports. However, in 2004/05

there was a year-to-year reduction in horticulture production, the first time since 1992/93.

The most important categories of fruit produced are citrus fruits (mainly oranges), apples,

pears, peaches, table grapes and avocados. The fruit sector is mainly export oriented. Around

85% of table grapes and 70% of avocado production is exported, while for the citrus fruits and

apples these shares are around 50% and 33%, respectively. The most important vegetable

produced in South Africa is potato (41% of vegetable area), followed by cabbage, onion and

tomato. Vegetable production is more oriented towards domestic consumption. Although its

area is increasing, the horticultural sector occupies a relatively small share of arable land, but

consumes most of the water used in agriculture. It is also a labour intensive sector and

provides important employment opportunities.

Livestock

Livestock remains the most important category of agricultural production and its share in

total agricultural output remains around 43%. Poultry meat, beef, milk and dairy are the most

important livestock products. In 2003-05, their share was more than 70% of the total value of

livestock production. Other important livestock products are eggs, sheepmeat, wool and

mohair, and pork. There are two important and contrasting patterns of production. The

extensive production of cattle, sheep and goats occurs on most of the pasture land in the arid

and semi-arid areas, as it is the only possible production. The more intensive production of

poultry, milk and pigmeat is located in areas with field production and closer to the main

consumption centres and the ports.


8. SOUTH AFRICA

Production of most livestock products was declining in the early 1990s but stabilised from

1995. The only notable exception was poultry meat for which production has been steadily

increasing. Between 1990 and 2005, production of poultry meat increased by 37% (although the

production showed a tendency to stabilise in 2004 and 2005), while sheep and goat production

halved within the same period.

Structures

South African agriculture is of a dualistic nature, with a developed, capital-intensive,

commercial sector comprising about 45 000 commercial farms (mostly owner-operated and

using hired labour), which occupy 86% of agricultural land. The top 20% of these farms produce

80% of the value of production, which means that, in terms of revenue, most of the remaining

80% of commercial farms are relatively small and the owners often complement household

revenue with off-farm sources of income. There is a large number of small-scale subsistence

and sub-subsistence (communal) farms (operated by family labour) occupy the remaining 14%

of farmland. A limited number of these farms produce for local markets, but most of them

don’t produce enough to cover household needs.

Inputs

Although the relative share of inputs has not changed dramatically over the last two

decades, changes in the cost of intermediate inputs had a substantive impact on the

profitability of farming in South Africa. At present, feed costs comprise 47% of the major

intermediate inputs and over time the main intermediate inputs (feed, fuel, fertilisers,

chemicals and packaging) has increased from about 40% at the start of the 80’s to between 50%

to 60% of gross farming income during the last decade. There is a downward trend in the

purchases of fuel and fertiliser (but not chemicals). Although the move toward minimum

tillage systems was a factor in dampening fuel purchases, this is more a recent phenomenon.

The major factor over the last two decades was a decline in the total hectares planted with

cash field crops due to the withdrawal of marginal agricultural land from production.

In the commercial farming sector, there has been a shift towards higher use of skilled

labour combined with the reduction of the number of hired workers. The decline in the

number of paid employees was combined with increased per capita remuneration in real

terms. These effects are felt more severely in the field crop and livestock sectors, where the

demand for part time workers is small, unlike the horticultural sector, where seasonal workers

are hired more extensively.

Food industry

Although market deregulation lead to an increase of the number of enterprises in the food

sector, in most industries the production and markets are dominated by a relatively small

number of enterprises. In beef production, there is an increasing integration of large-scale

feedlots with slaughtering and marketing activities. The broiler industry has a high degree of

concentration. Two producers produce 70% of broilers, while a multitude of small producers

supply the remaining 30%. Sugar milling and refining activities are concentrated in five sugar

plants. Also food retailing has become highly concentrated with four retail companies

dominating the retail market (totalling almost 90% of the market share).


8. SOUTH AFRICA


The South African economy, including agriculture, is increasingly integrated in world

markets. Three major political and economic developments in the 1990s contributed to this

process: i) the political transformation and democratisation; ii) liberalisation of domestic and

foreign trade; and iii) a relatively stable macroeconomic environment. The opening of the

agricultural sector placed South Africa among the world’s leading exporters of such agro-food

products as wine, fresh fruits and sugar. The country is also an important trader in the African

region. The beginning of the current decade witnessed particularly strong agricultural export

growth. South Africa’s agricultural exports increased during the period 2000–05 (Figure 8.5) and

its revenues reached almost 9% of the total value of national exports. Europe is by far the

largest importer, absorbing almost one-half of the country’s agricultural exports. The African

market is the second most important destination, accounting for around 26% of exports, with

the Asian market slightly less with an 18% share. The United States and Canada play a

relatively modest role as export destinations, absorbing only around 7%, while exports to Latin

America and Oceania are marginal.

Agricultural imports are also growing but less rapidly than exports (Figure 8.5).

Agricultural imports have accounted for 5% to 6% of total imports on an annual basis since

2000. They are distributed more evenly than exports with less emphasis on Europe. Europe,

Latin America and Asia account for roughly equal shares (between 22% and 26%). Combined,

these three regions supply almost three-quarters of South Africa’s agricultural imports. Most

notable is the major role of Latin America as a supplier of agricultural products (24%),

compared with its negligible role as an export destination (1%). Oceania and North America are

also much more important as a source of imports than as export destinations. Conversely,

Africa which is a major export destination is not a major supplier of agricultural imports.

Figure 8.5. Agro-food trade in South Africa, 2000-05


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8. SOUTH AFRICA


Price and income support measures

Important market intervention schemes providing support to commercial farmers

were implemented for decades under the Marketing Act. The Marketing Act was repealed

in 1997, following the promulgation of the Marketing of Agricultural Products Act, Act 47 of

1996. The new Act involves much less state interference, regulation and state involvement

in agricultural marketing and product prices.

Although most sectors of agro-food production are deregulated and price and income

support measures are not applied on domestic markets, Market Price Support (MPS) still

makes up the overwhelming share of agricultural support. This is, in part, explained by a

combination of border protection and a domestic pricing system on a limited number of

commodities, of which sugar is the most important. The government has abolished sugar

cane quotas and the South African Sugar Association (SASA) no longer has statutory

marketing powers nor is it the sole statutory sugar exporter. However, the Sugar

Agreement of 2000 (between different agents in the sugar production chain) still permits

raw sugar to be exported only through a single channel industry arrangement, and

allocates quotas to individual producers for sugar sold on the domestic market. Also,

provisions under the Sugar Agreement, which divides proceeds between growers and sugar

plants, are still in place.

Input subsidies

The most important input subsidy applied in agriculture is the diesel fuel refund

system, introduced in 2000. It provides to targeted sectors, including agriculture, a refund

on the tax and road accident fund levies paid on diesel fuel. (80% of the total eligible

purchases used in primary production qualify for the refund). The refund per litre was

steadily increasing from ZAR 0.42 per litre in 2001 to ZAR 0.715 per litre in 2005. The

increase in the diesel rebate was due to the rise in the total administered diesel price and

not because the rate of the rebate was increased.

Land reform

Land transfers

An important share of public financial resources is devoted to the implementation of

land reforms, especially land redistribution. To support this programme, Land

Redistribution and Agricultural Development (LRAD) grants are given to the black

disadvantaged population to acquire land or for other forms of on-farm participation. It

allows farmers who can provide personal contributions (financial and/or own labour) to

acquire more land. From 1995 to 2006, more than 3.5 million ha of agricultural land were

transferred to black farmers. Most of this land (2.7 million ha) has been acquired through

the land redistribution and land restitution process (Table 8.2).

Support to emerging farmers

From 2005, new programmes were implemented to support the development of

market oriented family farms emerging from the land reform process. The Comprehensive

Agricultural Support Programme (CASP) adds the vital element of post-settlement support,

which is imperative to improve the production and marketing capacity of emerging farmers.

The support is provided mainly through investment grants allocated to viable projects. The


8. SOUTH AFRICA

Micro-Agricultural Finance Schemes of South Africa (MAFISA) is a newly established state-

owned scheme to provide micro and retail financial services in rural areas. It is designed to

be a complementary tool to the CASP. In 2005, the MAFISA scheme was applied in the

Limpopo, Eastern Cape, and KwaZulu-Natal provinces, with ZAR 150 million (USD 24 million)

allocated for the year. It was expected to be rolled out to the other provinces during 2006.

Part of the Knowledge and Information Management System (KIMS) also targets the

emerging commercial farmers. To provide targeted marketing support, a state-aided

programme, aimed at improving agricultural marketing infrastructure to support agrarian

reform beneficiaries in the rural areas will be implemented during 2006-07. The Department of

Agriculture (DoA) will continue with the development, printing and distribution of information

booklets on marketing. These brochures cover the basics of agricultural marketing and are

targeted at small-scale developing farmers in all provinces. A DoA web-based integrated

agricultural marketing information system was created to provide agricultural marketing

information to farmers in rural development centres and will be updated regularly.

There have been developments relating to services at the farm level as well. Two

national computerised economic information support systems were upgraded and

redeployed towards emerging farmers. Both systems are analytical tools that are linked to

area/national databases. One is a farm enterprise budget system (COMBUD) for planning

purposes and the other is a farm record system (FINREC) for monitoring and evaluation as

well as advisory services.

Integrated Food Security and Nutrition Programme (IFSNP)

Support to agriculture also targets food insecure households (estimated at 2.2 million).

Under this programme, an increasing number of food-insecure households are benefiting

from the Agricultural Starter Pack Programme which provides support for agricultural

subsistence production by the households. As part of the IFSNP, the Food Insecurity and

Vulnerability Information Mapping System (FIVIMS) has been established to assess

vulnerable and potentially vulnerable areas in the country. This mapping system serves as

a decision-making and monitoring tool to identify groups requiring food aid (food parcels).


Import measures

South Africa’s import protection for agricultural and food products is based mostly on

specific and ad valorem tariffs. It also provides for tariff rate quotas, which are country and

product specific, as well as anti-dumping and countervailing duties. The average

agricultural tariff protection is lower compared with the overall average. As a member of South

Table 8.2. Land transferred within the process of land reform in South AfricaThousand hectares

1995-2006 2004-05 2005-06

Redistribution 1 555.4 125.7 197.7

Restitution 1 115.6 76.8 212.5

Land tenure 128.4 18.9 28.3

State land 761.8 11.5 53.7

Total 3 561.2 232.9 492.1

Source: Department of Land Affairs, South Africa, 2006.1 2 http://dx.doi.org/10.1787/883444430638


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8. SOUTH AFRICA

African Customs Union (SACU), South Africa applies the common external tariffs established

for all members. For most agro-food products, ad valorem tariffs or specific duties (or a

combination of both) are applied. Tariff quotas exist for a range of agricultural products under

the minimum market access commitments, with tariffs at 20% of the bound rates. For some

products, preferential tariffs are granted to imports from the EU, while imports from Southern

Africa Development Community (SADC) countries outside the SACU are duty free. The

characteristics of the border measures applied to main agro-food products are as follows:

● Grains: For maize, a specific import duty (ZAR/tonne) is applied, calculated according to

a formula based on the world price and the relevant exchange rate. Between 1998 and

2005, the ad valorem equivalent of the duty fluctuated between 0 and 28%. Until July 2005,

a similar formula tariff also existed for wheat, fluctuating in ad valorem terms between

0 to 30%. In July 2005, the formula tariff for wheat was replaced by an ad valorem tariff of

2%. Imports of other grains are duty free.

● Sugar: For sugar and sugar products, import tariffs range from zero on sugar, cane molasses,

and fructose syrup to 37% on sugar confectionery. Additional duty level adjustment (ZAR/

tonne) is applied to sugar imports based on a trigger price system. Hence, the ad valorem

equivalent of the duty for sugar ranged from 12% to 85% between 2001 and 2005. The

ad valorem equivalent import tariff on sugar was close to zero by the end of 2006.

● Oilseeds: For soybeans the applied tariff is 8%, and for sunflower it is set at 9.4%.

● Horticulture: Average tariff for fruits is 5% (citruses, wine grapes, apples and pears),

while that for vegetables is 10.6%.

● Dairy products: are mostly subject to specific tariffs with a ceiling fixed in the form of

ad valorem equivalent (fresh milk and yogurts are imported duty free; concentrated and

powder milk or with sugar 450 c/kg with a maximum of 96%; butter 500 c/kg max. 79%;

cheese and curd 500 c/kg max. 95%, other milk products 450 c/kg max. 96%).

● Beef and sheep: Live animals are imported duty free, while for meat and edible offals

import tariffs are set at up to 40% (or a specific duty of 240 c/kg for beef and 200 c/kg for

sheepmeat), and for meat products up to 50%.

● Pigmeat: Live animals are imported duty free, while for meat and edible offals import

tariffs are set at up to 15% (or a specific duty of 130 c/kg).

● Poultry and eggs: Live animals are imported duty free; for processed chicken (fresh,

chilled or frozen) the tariff is set at 27%; imports of other poultry (turkey, goose, duck)

and eggs in shell are duty free.

● Imports of wool and fine or coarse animal hair are mostly subject to a zero tariff.

Safeguard measures: Although South Africa reserved the right to use special

agricultural safeguards for a number of products, these were not used in the course of the

implementation period as they were not deemed necessary, mainly because of the

substantial margin between bound and applied tariffs which made it possible to raise

tariffs when deemed necessary.

Export measures

Since July 1997, when the General Export Incentive Scheme (GEIS) was abolished, no

export subsidies are applied for agro-food products. However, the price pooling regime for

sugar applied by the South African Sugar Association (SASA) is effectively subsidising

sugar exports, while the costs are born by local sugar consumers.


8. SOUTH AFRICA

Export permits: For those products that need to comply with certain EU or US quota

arrangements, the South African government requires an export permit to ensure that

small and medium-size enterprises, as well as disadvantaged communities, get a fair

chance to export under certain quota windows.

Box 8.1. South Africa’s trade agreements

South Africa was a founding member the General Agreement on Tariffs and Trade (GATT)and the subsequent World Trade Organisation (WTO). The Southern African CustomsUnion (SACU), whose members are South Africa, Botswana, Lesotho, Namibia andSwaziland (BLNS countries) has been in existence since 1910 and was renegotiated in 2002.In 1994, South Africa became a member of the 14 member Southern African Development

Community (SADC). The SADC free trade agreement is to be implemented between 2000and 2008. A very important feature of the SADC is the trade Protocol intended to stimulatetrade between member countries through the reduction of tariffs. SADC incorporated theprinciple of asymmetry: A phase-down of SACU tariffs in five years (by 2005); and those ofother countries in 12 years (by 2012).

The Trade, Development and Cooperation Agreement (TDCA) between South Africa and

the EU and its Member States was signed in October 1999 and implemented on1 January 2000. Under this agreement, a free trade area between the two parties will beestablished by the end of the transition period in 2012. The area will cover approximately90% of total trade between the two parties (including an important segment of agro-foodtrade). The TDCA will be reviewed during the course of 2006. The aim will be to furtherliberalise trade amongst the parties, while also addressing market access issues other thangoods. The amended agreement is expected to come into force during 2007.

SACU-EFTA Free trade agreement: SACU has recently concluded a free trade agreement withthe European Free Trade Association (EFTA) (Liechtenstein, Iceland, Norway and Switzerland).The agreement covers both agricultural and non-industrial market access. It also includessome evolutionary clauses that would allow the future inclusion of other aspects into theagreement, e.g. trade in services. The agreement is expected to come into force during 2006.

Apart from the existing Free Trade Agreements (FTAs), South Africa with other SACUpartners is currently negotiating a FTA with the United States and with Mercosur. Negotiationstowards a comprehensive FTA with the USA started in 2003, and are still underway. Theprocess is not likely to be achieved in the near future as both parties while confirming theircommitment to achieve a mutually beneficial FTA, recognised that a range of substantiveissues have arisen in the negotiations that will require detailed examination over the longerterm. A trade and Investment Cooperation Agreement (TICA) is seen as a potential roadtowards an eventual FTA. This will comprise a series of trade-enhancing agreements.

SACU negotiated a Fixed Preferences Agreement, as a first step towards a FTA, withMercosur. The Agreement and Memorandum was signed in December 2004. TheAgreement grants fixed margins of preferences in a limited number of tariff lines, to eitherparty. The agricultural offers cover approximately 33% of agricultural trade, both ways. Theagreement also has annexes on Safeguard Measures and on Dispute Settlement. Tworounds (in May and October 2005) have taken place since then. Discussions focused on SPS,customs co-operation, Rules of Origin and tariff preference. An SPS annex was agreed andwork on product specific Rules of Origin is in an advanced stage. Attempts are stillunderway to improve the tariff offers.


8. SOUTH AFRICA

Bibliography

EIU (2006), Economic Intelligence Unit, Country Report: South Africa, London.

Jooste, André (2006), “Report on Main Agricultural Policy Developments in South Africa”, Reportsubmitted to OECD.

NDA (2006), National Department of Agriculture of South Africa, 2006 Strategic Plan for the Department ofAgriculture, Pretoria.

OECD (2006), OECD Review of Agricultural Policies: South Africa, Paris.




Chapter 9

Ukraine


● Ukraine’s agriculture has a potential to become an important contributor to globalsupplies of selected commodities, in particular grains and oilseeds. However, it needs ahealthy macroeconomic background as well as consistent and predictable policiesstimulating efficiency-driven agricultural output growth, allowing for efficiency-basedland market transactions, creating more off-farm employment opportunities andimproving rural public services.

● The level of support to agricultural producers (the PSE) remains low, but increased duringthe last three years as a result of growing transfers from consumers and taxpayers.

● Transfers from consumers are due to high level of tariffs on selected importedcommodities and to tightening of border protection in particular on sugar and poultry.

● Growing transfers from taxpayers are facilitated by high rates of economic growth, but asbudgetary support to agriculture remains dominated by input subsidies and outputpayments, the efficiency of these transfers is low with no significant impact on producerwelfare.

● Some progress in reallocation of budgetary support to general services is commendable,but more needs to be done to enhance the long-term competitiveness of Ukrainianagriculture.

● The government needs to invest more in public infrastructure and to improve thefunctioning of public institutions providing services to the private sector. This can bedone without imposing additional cost on taxpayers through reallocation of budgetarysupport from input subsidies and output payments to general services.

● Land reform is yet uncompleted. Lifting of the moratorium on agricultural land sales

should be a priority for both the government and the parliament.

● Ukraine’s WTO negotiations are advancing and membership by 2007 seems feasible.Consistency, transparency and predictability of trade regulations and the adherence toWTO rules and disciplines, would provide a more stable framework for domestic andforeign agents, thus reducing risk and encouraging investment.

● WTO membership could also play a key role in disciplining domestic agriculturalpolicies, making them more predictable to the advantage of producers and consumers.In particular, as Ukraine will not be allowed to apply export subsidies, market pricesupport policies driving prices for exportable commodities above world market levelswill not be a feasible option in a longer term.

143

9. UKRAINE


● Support to producers (%PSE) was 3%in 2003-05 and increased fromimplicit taxation at 10% in 1995-97.This compares with the OECDaverage support of 30% in 2003-05.

● The 2003-05 average disguises aconsiderable increase in the level ofsupport in Ukraine from implicittaxation at 7% in 2003 to support of12% in 2005.

● There are strong differences intrade and domestic policies acrosscommodities as demonstrated bystrong variations in Producer NPCby commodity ranging from 1.79 forpoultry to 0.84 for oilseeds.

● Prices received by farmers were onav erage 2% l ower tha n thosereceived in the world markets in2003-05. A negative market pricesupport was com pensated bypositive transfers from taxpayers.Budgetary transfers to producers

remain dominated by output andinput-based payments, accountingfor 68% of the total.

● Consumer support (%CSE) was verylow at 1% in 2003-05, but there is a

visible switch from an implicitsupport in 2003 to an implicit taxin 2005.

● Support provided to generalservices for agriculture accountedfor 44% of the TSE in 2003-05.

● The total cost of agriculturalsupport to the economy (%TSE)increased to 1.39% and was higherthan the OECD average of 1.14%in 2003-05.



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9. UKRAINE

Table 9.1. Ukraine: Estimates of support to agricultureUAH million

1995-97 2003-05 2003 2004 2005




Producer Support Estimate (PSE) –1 746 3 253 –4 067 2 571 11 256

Market Price Support (MPS) –2 838 –2 225 –8 243 –3 380 4 949

of which MPS commodities –1 553 –1 340 –4 917 –2 206 3 105

Payments based on output 16 1 425 549 1 549 2 176



Payments based on input use 523 2 305 2 059 2 372 2 483


Payments based on overall farming income 525 1 569 1 400 1 900 1 407


Percentage PSE –10 3 –7 3 12

Producer NPC 0.89 0.98 0.90 0.97 1.08

Producer NAC 0.94 1.03 0.94 1.03 1.13

General Services Support Estimate (GSSE) 521 2 603 1 979 2 571 3 259




Infrastructure 329 724 494 707 971




GSSE as a share of TSE (%) –42.6 44.4 –94.8 50.0 22.5

Consumer Support Estimate (CSE) 3 138 69 4 714 1 790 –6 298

Transfers to producers from consumers 3 384 1 595 6 683 2 876 –4 775

Other transfers from consumers 100 –1 484 –2 462 –670 –1 319


Excess feed cost –346 –42 493 –415 –204

Percentage CSE 18 1 8 3 –7

Consumer NPC 0.88 0.99 0.93 0.97 1.08

Consumer NAC 0.89 0.99 0.93 0.97 1.08

Total Support Estimate (TSE) –1 224 5 856 –2 088 5 142 14 514

Transfers from consumers –3 484 –111 –4 222 –2 206 6 094


Budget revenues 100 –1 484 –2 462 –670 –1 319

Percentage TSE (expressed as share of GDP) –3.08 1.39 –0.78 1.49 3.47

GDP deflator 1995-97 = 100 100 328 280 322 381

For the definition of OECD indicators of support to agriculture, see Annex A.1. NPC: Nominal Protection Coefficient.NAC: Nominal Assistance Coefficient. Market price support is net of producer levies and excess feed costs. MPScommodities for Ukraine are: wheat, maize, other grains, oilseeds, sugar, milk, beef and veal, pigmeat, poultry andeggs.Source: OECD, PSE/CSE database, 2006.

1 2 http://dx.doi.org/10.1787/675681201553


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9. UKRAINE

Summary of key policy developmentsIn 2005, the law On State Support to Ukrainian Agriculture came into effect. The law

provides a broad framework for increased budgetary support to agriculture and introduces

new market intervention mechanism such as minimum and maximum prices for selected

crops. Significant implicit support continues to be provided through tax exemptions and

privileges. Some input subsidies have been replaced by direct payments. Ad valorem tariffs

decreased, but prohibitively high levels of specific tariffs on selected commodities

remained unchanged. Free Economic Zones were abolished and tariff quota for raw sugar

imports was not announced, thus increasing effective border protection against imports, in

particular for poultry meat and sugar.

Agriculture is an important sector of the Ukrainian economy, accounting for 11% of GDP

and 19% of employment in 2005. Together with the food processing industry, its contribution

to GDP and employment increases to 15% and 24%, respectively. Agro-food trade accounts for

13% of total exports and almost 8% of total imports. Food represents as much as 58% of

households’ expenditures, which indicates a low level of incomes in Ukraine.

Policy context


Real GDP growth slowed from 12.1% in 2004 to 2.4% in 2005, mostly due to adverse

investment conditions and poor export performance. The growth rate accelerated to

almost 7% in 2006, helped by improved exports and strong domestic demand. GDP per

capita reached an estimated USD 6 806 (PPP) in 2005, around 25% of the EU average.

Inflation increased to almost 12% year-on-year in November 2006, largely due to a strong

increase in prices of communal services. The currency appreciated in 2005 and 2006 in real

effective terms against major currencies exerting a competitive pressure on tradables,

including agricultural commodities. Trade in goods returned to deficit in 2005, as rising

incomes and high oil prices pushed up import expenditures. Real wages were up by almost

one-fifth in 2005 and continued to grow at a high rate in 2006. However, Ukrainian wages

remain low with the average monthly disposable income at UAH 1 080 (USD 214) as of

August 2006, around half of what is earned in neighbouring Russia. The unemployment

rate is trending downwards and in October 2006 was estimated at between 5%-7% of the

workforce (EIU, January 2007).


Output

After a fall in Gross Agricultural Output (GAO) by about 50% in the 1990s, Ukrainian

agriculture started to recover in 2000 and by 2004 it had increased by about 30% to roughly

70% of its pre-independence level. In 2005, GAO fell marginally by 0.1% due to a fall in crop

output by 2.7% as livestock output increased by 4.5% (Figure 9.4).

Price signals for farmers were mixed in 2005 with wheat, rye and sunflower seed prices

falling by 15%-20% and sugar beet and most livestock prices increasing by above 30%

compared to 2004. While the fall in prices for selected crops was due to large volumes

produced in 2004 and 2005, not fully absorbed by domestic and international markets, the

increase in livestock prices was driven primarily by an increase in domestic demand and

high border protection on livestock imports. Overall, price trends for agricultural producers


9. UKRAINE

were unfavourable with output prices increasing by 9% compared to an increase in input

prices of 15%.

Crops

Ukraine is a large producer and a significant net exporter of grains. Grains account for

almost 60% of total area sown. A 2005 gross grain crop of 38 million tonnes was one of the

highest over the last decade, but almost 4 million tonnes less than in 2004, partly due to

worse weather conditions during the summer, resulting in lower yields. Good harvests in

the two consecutive years combined with competitive prices allowed for a record grain

export of 13.2 million tonnes in the marketing year of 2005/06. However, grain output in

2006 fell again to about 35 million tonnes leading to smaller grain exports predicted at

about 9 million tonnes in the marketing year of 2006/07.

The sunflower crop, another major export oriented commodity, proved even better

with a gross harvest of 4.7 million tonnes in 2005, about 50% above the preceding year, and

a record harvest of 5.0 million tonnes in 2006. The rise was due to higher yields and high

profitability of oilseed production inducing farmers to increase area sown. The sugar beet

harvest, in contrast, was lower than in the preceding year, mostly due to lower area sown.

A sharp increase in sugar prices in 2005 and in the first half of 2006, partly due to new

barriers on raw cane sugar imports (see below), taxed consumers but stimulated domestic

production of sugar beet.

Livestock

Livestock production started to recover in 2001 and since then registered positive rates

of growth every year with the exception of 2003. In 2004 and 2005, strong increases in real

incomes stimulated demand for livestock products which in turn contributed to sharp

increases in retail and farm gate prices for meat and milk products. Domestic livestock

prices were further pushed up by stricter regulations on livestock imports, in particular for

poultry, applied in 2005.

Figure 9.4. Evolution and annual changes of agricultural output in Ukraine, 1995-2005


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Milk production stabilised in 2005 as a continued fall in the number of cows was

counterbalanced by an increase in productivity per cow. Milk production is concentrated in

tiny household plots providing 81% of milk produced and 67% of milk marketed in Ukraine.

Poor sanitary conditions and low quality of milk supplied by households remains a major

problem for milk processors. According to a report by the Ukrainian Dairy Union an average

large dairy producer procures milk from as many as 20 000 suppliers (Tarassevych, 2005).

The Ukrainian livestock sector has been severely affected by a ban imposed by Russia

on 20 January 2006 on all dairy, red meat and poultry products imported from Ukraine or

transported through the Ukrainian territory. The Russian veterinary authority claimed the

ban was introduced because Ukraine failed to implement veterinary controls over

imported meat products, including those transhipped through its territory, and due to the

generally low quality of Ukrainian dairy products. The ban resulted in a collapse in the

price of Ukrainian raw milk and accelerated the slaughter of dairy cattle for beef

production. In July 2006, wholesale prices for pigmeat and beef were respectively 36% and

26% lower than in July 2005. The ban led Ukraine to introduce similar measures on

livestock imports from some neighbouring countries. As of the end of November 2006,

limited exports of meat and milk products to Russia from selected processing enterprises

have been resumed.

Structures

There are three major categories of farms in Ukraine. In line with the Ukrainian

definition, household plots are parcels of land that are owned by private individuals and do

not exceed 2 ha. Independent private farms are owned by private individuals and are larger

than 2 ha. Agricultural enterprises (generally large farms) are legal entities such as

production cooperatives, partnerships, collective agricultural enterprises, joint stock

companies or owned by private individuals. Individual owners may choose to register their

holdings as either agricultural enterprises or as private farms (WB/OECD, 2004).

Over 65% of arable land is owned by former state and collective farm members and

rented out to large-scale operators. Around 30% of land is privately owned and individually

operated in the form of household plots and independent private farms. Less than 5% of

the country’s arable land is owned by the state.

By the beginning of 2006, over 6.8 million citizens received land share certificates and

85% of them obtained state acts confirming their land property rights. The average size of

land share is 4 ha. The process of physical delimitation of specific land plots has almost

been completed. In most cases, the allocation of land plots was by drawing lots.

According to the Land Code adopted in October 2001, agricultural land sales are

subject to moratorium, now extended up to the end of 2007. In addition, until the end of

2014, individuals and legal entities will not be allowed to purchase agricultural land if the

total land owned would exceed 100 ha. According to the 2005 survey led by the FAO, almost

half of the rural population is against and only about one-third in favour of agricultural

land sales and purchases.

Household plots provide about 60% of the gross value of agricultural production, in

particular fruits, vegetables and livestock products. While the number of independent

private farms stabilised at around 42 thousand and their average size increased to about

80 ha, they remain a rather small sector operating on about 15% of arable land (some data

suggest that the share is even lower at between 5% and 8%).


9. UKRAINE

Most land is rented by land-holders to large scale farms of about 3 000 ha on average,

operating on about 25 million hectares and dominating in cereal and oilseed production.

More than half of them are registered as partnerships. Just 1% of land used by these

enterprises is owned by their founders. Land rents are calculated at 1.5% of the normative

price of land determined by a legal act and differentiated regionally depending on relative

land productivity at the end of the 1980s.

Within the large-scale sector, there is a strong differentiation of performance with

about 20% of farms relatively efficient, well managed and competitive. They are the major

contributors to a rebound in Ukraine’s agricultural production in the 2000s. Some of them

develop into huge holdings through vertical integration with the upstream and

downstream sectors or through investments by non-agricultural investors, such as coal

mining in the Donieck area. The remaining 80% of farms are unprofitable and may survive

only due to tax exemptions, debt rescheduling, and weak land market mechanisms, still

not permitted to function. Many of them have not yet been restructured and they continue

to cross-subsidise household plots through limited employment income (often in-kind),

low-priced inputs (mainly feeds), machinery services and basic infrastructure (von

Cramon-Taubadel et al., 2006).

Inputs

After a decade of disinvestment, capital investments in agriculture started to increase

at the beginning of the 2000s. This trend strengthened in 2005 with investment growth of

45%. However, this growth has not yet benefited the Ukrainian agricultural machinery

industry, still under crisis, producing poor quality and high priced machines, lacking

modern marketing strategies, delinked from markets and non-competitive with imports.

As a result, the recovery in demand for agricultural machinery is satisfied to a large extent

by imports, mostly from Russia and Germany.

The average use of fertilisers is low at 24 kg of active substance per hectare. There is a

risk that the sharp rise in prices for imported gas will translate into high prices for

fertilisers, as natural gas accounts for about 80% of total costs of fertiliser production. This

may lead to smaller application rates of fertilisers and a fall in crop yields.

Food industry

In contrast to the upstream industry, food-processing, the second largest manufacturing

sector, has developed rapidly in the past five years with an average growth over 15%. In 2005,

the sector’s output increased by 13.7% driven by a strong growth in demand. The highest

rates of growth were registered in production of juices, canned vegetables, processed liquid

milk, cheese, meat products and chocolate and cocoa products.


Ukraine is a consistent net exporter of agro-food products and since the lows at the

end of the 1990s, exports have been rapidly increasing to the record level of USD 4.5 billion

in 2005. Imports tended to increase as well but on average at lower rates. Net agro-food

exports amounted to USD 1.7 billion in 2005 and were a major factor reducing an overall

negative balance in 2005 (Figure 9.5).

Agro-food exports are quite strongly concentrated with the three major commodity

groups (at HS 2-digit tariff lines) accounting for almost 60% of the total agro-food exports


9. UKRAINE

in 2005. These are cereals which accounted for 31%, fats, animal and vegetable oils for 13%

and dairy products for 12% of the total. Imports are more diversified with tobacco

accounting for 13%, miscellaneous edible preparations (including coffee extracts, essences,

concentrates and preparations) for 11% and cocoa and cocoa preparations for 8% of total

agro-food imports in 2005.

The largest export markets for Ukrainian agro-food products are countries belonging

to the Commonwealth of Independent States (CIS) accounting for 44% of the total in 2005,

followed by EU25 (22%) and Asian countries (21%). Before the January 2006 import ban,

Russia was the key market for milk and meat products. Asian countries absorb half of

Ukrainian cereal exports, with Saudi Arabia being a major importer of barley. The EU

countries, in particular Spain, are important markets for wheat. Other products exported

to the EU include vegetable oil and sunflower seeds. Export of livestock products to the EU

market is negligible as only a few food processors comply with the EU food safety and

packaging standards.

EU25 is the main supplier of agro-food products to the Ukrainian market, accounting

for 36% of the total in 2005, followed by the CIS countries (24%). Major products imported

from the EU countries include miscellaneous edible preparations, tobacco, meat and meat

by-products. From the CIS countries Ukraine imports meat, fish and dairy products, alcohol

and non-alcohol drinks and confectionery. Asian countries prevail in supplies of fats,

animal and vegetable oils, as well as fruits and vegetables while South American countries

are important providers of meat and sugar. From the USA, Ukraine imports poultry, tobacco

and fish products.

Figure 9.5. Agro-food trade in Ukraine, 1996-2005


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9. UKRAINE


Price and income support

The law On State Support to Ukrainian Agriculture voted in 2004 and implemented as

from 2005 defines the principles of the state agricultural policy in the fields of budgetary

support, credit, price, and insurance. State regulation of wholesale prices through setting

of minimum and maximum prices, commodity and financial interventions, state pledge

purchases, credit and insurance subsidies are to be applied to key crop products, in

particular grains. The Agrarian Fund was designated to implement interventions on the

market, to form the State Food Reserve, to issue credit subsidies, and to carry out state

pledge purchases of grain.

The Ministry of Agrarian Policy fixed minimum purchasing prices for grains and

sunflower seeds for the marketing year 2005/06. The level of minimum prices was

determined on the basis of market prices over the preceding five years and adjusted by the

rate of inflation. The Agrarian Fund was charged to intervene to keep the level of prices

between the minimum and the maximum levels and to make purchases for the State Food

Reserve. Due to delays in the implementation process, the Agrarian Fund purchased at the

minimum prices just 95 000 tonnes of grains instead of the 1 million tonnes instructed by the

government for 2005. In mid-2006, minimum purchasing prices were approved for the 2006/07

marketing year to be implemented by the Agrarian Fund for purchases of 565 000 tonnes of

wheat and rye for the State Food Reserve. The Ministry warned that sanctions could be

imposed against anyone buying or selling grain at prices that are lower than the set prices.

The minimum purchasing prices were also applied for state pledge purchases in 2005.

The budget loan per tonne was set at the level of 80% of the minimum price. The Agrarian

Fund took 645 000 tonnes of grains as a pledge, which was almost completely redeemed by

agricultural producers. A total of UAH 278 million (USD 54 million) was provided in budget

loans. The interest rate was set at 8.95% per annum compared to the commercial rate

of 17.9%.

During 2005 and again in June 2006, the government tried to establish minimum prices

for milk to protect incomes of milk producers, but at the cost of processors and consumers.

The level of prices was two-fold higher than the actual prices paid for milk supplied by

households. This policy measure met significant resistance from dairy processors and due

to the lack of an effective enforcement mechanism the policy has been ignored by the

industry (Tarassevych, 2006).

The programme called Financial Support to Animal Husbandry, first implemented in

2003 and 2004, was continued in 2005 and included payments for cattle, pig, broiler

chicken, sheep, wool, honey, ecological milk, heifer and silkworm producers. Eligible

producers receive direct payments on the presentation of receipts confirming sales to

processing enterprises. In 2006, the list was extended, some implementation rules changed

and the total allocation increased by 60% from UAH 594 million (USD 116 million) in 2005 to

UAH 943 million (USD 187 million).

In 2006, a new programme of per-hectare payments was launched at a cost of

UAH 1.1 billion (USD 208 million). The objective was to reverse the process of the reduction

in area sown to crops observed, in particular, in the 1990s, mostly due to a substantial

fall in the level of agricultural support, slow farm restructuring and unfavourable

macroeconomic conditions (World Bank/OECD, 2004). Payments were granted on the basis

of area sown at the following rates per hectare: UAH 100 (USD 20) for winter crops (wheat,


9. UKRAINE

triticale, rye, barley and rapeseeds); UAH 65 (USD 13) for spring crops (wheat, barley, oats,

pea, maize, soy, rape, buckwheat, millet and rice); and UAH 380 (USD 75) for long-fibred flax

and hemp. An additional subsidy of UAH 53 (USD 10) per hectare was granted for crops

grown on irrigated land.

Reduction of input costs

In 2004, there were two programmes applied to diminish variable input costs and both

intended to stimulate production after very low grain harvests in 2003. A programme called

Partial Reimbursement for Expenses Related to Spring and Winter Cereal Crop Sowing was

to support agricultural enterprises in payments for wage arrears and in purchases of fuel

and lubricants, spare parts, seeds, fertilisers and plant protection chemicals. Its budgetary

cost was UAH 349 million (USD 66 million). Another programme was called Partial

Reimbursement for Domestically Produced Fertilizers and the budgetary allocation for its

implementation was UAH 123 million (USD 23 million), an equivalent of 13% of the total

value of fertilisers purchased by agricultural enterprises in 2004. Both programmes were

discontinued in 2005.

The Partial Reimbursement for Domestically Produced Complex Agricultural

Machinery programme was implemented in 2002. Budgetary financing of this programme

gradually increased to UAH 151 million (USD 29 million) in 2005 and then cut down to

UAH 32 million (USD 6.3 million) in 2006. The partial reimbursement was set at 30% of

the purchase price of the machinery and was in fact aimed at supporting Ukrainian

agricultural machinery industry.

State support for plant, cattle and poultry breeding programmes has been increasing

every year to reach UAH 158 million (USD 31 million) in 2005. The largest part of these

funds is allocated to partial reimbursement for seeds and pedigree animals purchased by

agricultural producers.

A more stable macroeconomic framework and falling interest rates make access to

agricultural credit easier compared to the tight credit constraints of the 1990s (World Bank/

OECD, 2004). In addition, since 2000 the government implements a programme of partial

compensation of interest rates on commercial bank loans for agricultural producers.

Budgetary allocation for interest rate subsidies on such loans was small, but increased

from UAH 142 million (USD 27 million) in 2004 to UAH 415 million (USD 81 million) in 2005.

A small budgetary allocation of UAH 27 million (USD 5.3 million) in 2005 was also provided

for partial reimbursement for electric power used for irrigation of crops.

Tax concessions

Even if budgetary payments to support agriculture increased substantially in recent

years, foregone budgetary revenues from agriculture remain key instruments in supporting

the sector. These instruments include:

● Reduced taxes compared to other sectors of the economy through the so called “fixed

agricultural tax”. Any enterprise receiving more than 75% of its gross receipts from sales

of agricultural commodities is eligible for the fixed agricultural tax based on the

estimated value of land. Eligible enterprises do not have to pay profit taxes and

contributions to social funds. This system has been extended until the end of 2009.

● The repayment (“redirection”) of VAT paid by milk and meat processing plants back to

meat and milk producers as a per tonne subsidy.


9. UKRAINE

● “Accumulation of VAT amounts”, which allows agricultural enterprises (except milk and

meat producers) to retain the difference between “incoming” VAT on agricultural goods

and services of own production, including manufactured agro-food products for which

own raw materials are used, and “outgoing” VAT on inputs for agricultural production.

These amounts are not channelled to the State budget, but to special accounts

agricultural producers keep in commercial banks and can use for purchases of such

inputs as fuel, seeds, fertilisers, pesticides, and agricultural equipment and machinery.

These preferences provide substantial benefits to agricultural producers. For example,

according to official estimates, the annual benefits from the fixed agricultural tax

amounted to UAH 1.4 billion (USD 275 million) between 1999 and 2003, UAH 1.9 billion

(USD 357 million) in 2004 and UAH 1.34 billion (USD 262 million) in 2005, including

compensation of UAH 1.21 billion (USD 237 million) paid by the State Budget to the Pension

Fund.

Benefits from the two VAT-based instruments amounted to UAH 0.8 billion

(USD 147 million) in 2000 and then increased each year to UAH 3.3 billion (USD 645 million)

in 2005. While all categories of producers (small, large and household plots) are eligible for

this type of support, in fact it is the largest producers which benefit most. This is partly

linked with the fact that small-scale farms produce mostly for their own use or for local

markets and do not have receipts which would allow them to benefit from subsidies. As a

result, according to one survey, just 7% of livestock producers received 75% of all livestock

subsidies in 2004, including VAT expenditures and limited direct budget transfers

(Zorya, 2006).

General services

A new and positive feature of agricultural policies in Ukraine is a significant increase

in support to general services from UAH 410 million (USD 75 million) in 2000 to

UAH 3 259 million (USD 637 million) in 2005. The main beneficiaries of this increase are

agricultural schools, inspection services, infrastructure (in particular irrigation and

drainage systems) and public stockholding, which accounted for above 90% of total public

expenditures on general services in 2005. Since 2003, there is a yearly allocation of

UAH 400 million (USD 75 million) for the State Committee of Ukraine for the State Material

Reserve aimed at the formation of the State Reserve for security purposes.

Overall budgetary support

In total, budgetary support to agriculture, including budgetary payments to producers,

tax benefits and general services increased from UAH 2.8 billion (USD 515 million) in 2000

to UAH 8.5 billion (USD 1.6 billion) in 2004 and to 9.6 billion (USD 1.9 billion) in 2005. There

is a visible change in the structure of support with the share of tax benefits declining from

as much as 77% in 2000 to 49% in 2005, the share of payments to producers increasing from

8% to 17% and the share of general services increasing from 15% to 34% (OECD PSE/CSE

databases).


Import policy

Ukraine has a complex system of border protection with the vast majority of agro-food

imports charged with specific duty or with combined ad valorem and specific duty. The


9. UKRAINE

higher of the two is applied. The specific duties in ad valorem terms are very high and for

frozen beef, fresh and frozen pork, poultry meat, potato, sunflower oil, and sugar are well

above 100%. In addition to tariffs, Ukraine applies a number of non-tariff barriers, including

quotas, licences and import bans, which often lack transparency and impose additional

costs on importers (WB/OECD, 2004).

In recent years, an intensification of negotiations on Ukraine’s accession to WTO

(Box 9.1) led to a partial harmonisation of Ukraine’s legislative framework with WTO rules

and standards and to some lowering of border protection. However, any move in the

direction of tariff reduction is strongly opposed by the agrarian lobby. By using domestic

industry protection arguments, they have managed to pressure the government to maintain

tariffs at prohibitive levels. A law passed in mid-2005 (No. 2775) led to a reduction in the

average level of MFN ad valorem tariffs on agro-food imports from 19.8% in 2004 to 13.8% in

2005. However, for some tariff lines (such as 02-meat, 04-dairy products, 17-sugar), a

combined ad valorem and specific duty was preserved, with the ad valorem rate decreased and

the former specific rate kept unchanged. The specific tariff remains very high and varies

from EUR 600-1 000 per tonne of beef, from EUR 500-1 000 per tonne of pork and from

EUR 400-1 500 per tonne of poultry meat. On the date of Ukraine’s accession to the WTO,

Ukraine will not apply specific import duties for agricultural products and the average

ad valorem rate for imported agricultural products (1-24 HS) will be set at a level not exceeding

10%. Phasing out of specific duties should lead to an important fall in border protection.

Some other changes in legislation led, in effect, to an increase in border protection. For

example, in line with the government resolution passed in December 2005, licensing

became obligatory for imports of frozen beef, pork (fresh, chilled or frozen) and for live

cattle and pigs. Moreover, until spring 2005, imports could enter into Ukraine through Free

Economic Zones (FEZs) and priority development areas free of import duties and other

charges. With amendments to the law On State Budget of Ukraine for 2005 voted in

March 2005, these privileges disappeared and all imports are now subject to the same taxes

(including import duties) and charges. The elimination of FEZs, through which most

imports of poultry entered Ukraine, and the prohibitively high import duties restricted

imports of poultry products into Ukraine, in particular from the USA.

Another measure leading to an effective increase in border protection is suspension of

the system of tariff quota for raw cane sugar imports. The system was implemented

between 1998 and 2004 with the exception of 2002. For example, in 2003 the quota allowed

imports at preferential rates of 560 000 tonnes of raw sugar. In 2004, the quota was reduced

to 125 000 tonnes with the in-quota tariff of EUR 30/tonne and the above quota at 50% but

not less than EUR 300 per tonne. In 2005 and 2006, no such quota was announced. Changes

in the sugar quota regime contributed to a sharp fall in raw sugar imports from

1 402 000 tonnes in 2003 to 176 000 tonnes in 2005 and were one of the factors leading to a

drastic increase in domestic wholesale prices for sugar from USD 470 per tonne in March to

USD 890 per tonne in July 2005, labelled by the Ukrainian press as the “sugar crisis”.

Following Russia’s import ban, in March 2006 Ukraine introduced similar import bans

for meat from Poland, Belarus and Moldova. Later limited imports from Belarus were

allowed. A separate ban was imposed for live hog imports from Poland. Multiple meetings

between Polish and Ukrainian officials and experts led to some progress on veterinary

procedures, but meat imports have not been resumed as of the end of November 2006.


9. UKRAINE

Export policy

Since 1996, Ukraine has applied export duties on live cattle, live sheep, as well as on

cattle, sheep and pig hides and since 1999 on exports of sunflower seeds, flax seed and

false flax seeds. The rate on sunflower seeds is currently at 17%. Expected WTO

membership will lead to partial liberalisation of Ukraine’s agro-food exports. For example,

in line with the law voted in July 2005, export duties on sunflower and other oil crop seeds

Box 9.1. Ukraine’s trade agreements

Ukraine is at the final stage of negotiations on its WTO accession. The 16th official

meeting of the Working Party on Ukraine's accession to the WTO was held on 15 June 2006.About 90% of the draft report of the Working Party has been agreed. Forty-six bilateralprotocols on access to markets of goods and services have been signed (16 of them in 2005–06).Protocols with Chinese Taipei and Kyrgyzstan are still to be signed.

Ukraine accrued the status of a country with market economy from the EU(December 2005) and the USA (February 2006), which strengthens the position of Ukrainian

producers in antidumping investigations.

During the negotiation process, Ukraine has already declared non-application of exportsubsidies for agricultural products in the future. The AMS level and base period forassuming commitments regarding reduction of domestic support to Ukrainian agricultureare still under negotiation. As a base period, Ukraine proposes 1994-96 with the resultingAMS at USD 1.14 billion but there are demands to change that period for more recent years.

Differentiated VAT rates to be applied for imported and domestically producedagricultural products also gave rise to comments on the part of WTO member countries.According to the law On value added tax voted in April 1997, Ukraine is to introduce, as fromJanuary 2007, new VAT rates for domestically produced agricultural products at 9% and forfishery and forestry products at 6%. These rates are lower than the rate of 20% to be appliedfor imported agricultural products. The rate on imports is considered discriminatory

compared with taxation of like products of national origin.

Regarding technical barriers to trade (TBT), Ukraine will not be able to bring its technicalrequirements and standards in full compliance with the WTO regulations by the presumeddate of its WTO accession. Several related laws were voted in 2005 and 2006, but in linewith the roadmap presented in Geneva in June 2005, full compliance will not be achievedbefore the end of 2011. In an effort to comply with international standards, Ukraine joined

the Codex Alimentarius Commission and the International Plant Protection Convention,acceded to the European and Mediterranean Plant Protection Organization (EPPO) andbecame a member of the World Organisation for Animal Health.

Action Plan Ukraine-EU for 2005-07 was developed and signed in February 2005 withinthe framework of the European Neighbourhood Policy. This document includes such issuesas food safety improvement for consumers and simplification of trade through reforming

and modernisation of sanitary and phyto-sanitary rules and services. The Action Planmakes it incumbent upon Ukraine to ensure progress in conformity of Ukrainian SPSlegislation and institutions to those of the EU.

Ukraine’s trade relations with the CIS countries are oriented towards the creation ofbilateral free trade regimes without any exclusions and a formation of free trade zones.The Ukrainian government has agreements on the complete abolishment of exclusions

from the free trade regime with Moldova (as from Ukraine’s accession to the WTO), Belarus(from 2007) and Russia (from 2009).


9. UKRAINE

will be annually diminished by one percentage point starting from January 2007 (on

condition of obtaining the WTO membership) until the rate falls to 10%. Another law

drafted in September 2006 envisages gradual reduction of duties on exports of live cattle

until it falls to 10% and on exports of hides down to the level of 20%.

In 2005, contradictory government resolutions were passed relating to the role of state

trading companies (Joint Stock Company Bread of Ukraine) on grain markets. While an

earlier resolution, passed in July, provided for privileged conditions for the state agents, the

later resolution, passed at the end of August 2005 and aimed at invigorating exports of

grain, repealed all rules and measures that were intended to secure interests of state

trading enterprises and stipulated that all entities operating on the grain market should

have equal conditions. However, other measures suggest that the government still opts for

keeping grain trade flows under its control. For example, in October 2006, it decided to

introduce a new licensing system for grain exports and proposed grain export quotas for

the last two months of the year as a precaution against possible grain shortages following

the lower than expected 2006 grain harvest. The restrictions slowed down Ukrainian grain

exports and created a climate of uncertainty about future grain deliveries from this country

(AgraFood East Europe, Nos. 289 and 290).

Bibliography

AgraFood East Europe, various editions.

von Cramon-Taubadel, Stefan., Emanuel Elsner von der Malsburg, Veronika. Movchan, Oleg Nivyevski(2006), “Poverty Reduction through Reducing Distortions to Agricultural Incentives, Ukraine CaseStudy”, Draft Final Report, 26 May.

EIU (2007), Country Report: Ukraine, The Economist Intelligence Unit, London, January.

Kobouta, Irina (2006), “Report on Main Policy Developments in Ukraine”, Report submitted to OECD.

Tarassevych, Oleksandr (2005), Ukraine Dairy and Products Annual 2005, USDA Foreign AgriculturalService, GAIN Report Number: UP5018, October.

Tarassevych, Oleksandr (2006), Ukraine Livestock and Products Country Report 2006, USDA Foreign AgriculturalService, GAIN Report Number: UP6014, August.

World Bank/OECD (2004), Achieving Ukraine’s Agricultural Potential: Stimulating Agricultural Growth andImproving Rural Life, World Bank, Washington, DC and OECD, Paris.

Zorya, Sergiy (2006), “Improving Agricultural Fiscal Policy in Ukraine”, Paper prepared for the PublicFinance Review of Ukraine, 2005-06, World Bank, 10 May.




ANNEX A

Measuring Agricultural Support

157

ANNEX A

1. DEFINITIONS OF THE OECD INDICATORS OF AGRICULTURAL SUPPORTProducer Support Estimate (PSE): the annual monetary value of gross transfers from

consumers and taxpayers to agricultural producers, measured at the farm gate level,arising from policy measures that support agriculture, regardless of their nature, objectivesor impacts on farm production or income. It includes market price support and budgetarypayments, i.e. gross transfers from taxpayers to agricultural producers arising from policymeasures based on: current output, area planted/animal numbers, historical entitlements,input use, input constraints, and overall farming income. The %PSE measures the transfersas a share of gross farm receipts.

Market Price Support (MPS): the annual monetary value of gross transfers fromconsumers and taxpayers to agricultural producers arising from policy measures thatcreate a gap between domestic market prices and border prices of a specific agriculturalcommodity, measured at the farm gate level.

Producer Nominal Protection Coefficient (NPCp): the ratio between the average pricereceived by producers (at farm gate), including payments per tonne of current output, andthe border price (measured at farm gate).

Producer Nominal Assistance Coefficient (NACp): the ratio between the value of grossfarm receipts including support and gross farm receipts valued at border prices.

Consumer Support Estimate (CSE): the annual monetary value of gross transfers to(from) consumers of agricultural commodities, measured at the farm gate level, arisingfrom policy measures that support agriculture, regardless of their nature, objectives orimpacts on consumption of farm products. If negative, the CSE measures the burden onconsumers by agricultural policies, from higher prices and consumer charges or subsidiesthat lower prices to consumers. The %CSE measures the implicit tax (or subsidy, if CSE ispositive) on consumers as a share of consumption expenditure at the farm gate.

Consumer Nominal Protection Coefficient (NPCc): the ratio between the average pricepaid by consumers (at farm gate) and the border price (measured at farm gate).

Consumer Nominal Assistance Coefficient (NACc): the ratio between the value ofconsumption expenditure on agricultural commodities (at farm gate) and that valued atborder prices.

General Services Support Estimate (GSSE): the annual monetary value of gross transfersto general services provided to agriculture collectively, arising from policy measures thatsupport agriculture regardless of their nature, objectives and impacts on farm production,income, or consumption.

Total Support Estimate (TSE): the annual monetary value of all gross transfers fromtaxpayers and consumers arising from policy measures that support agriculture, net of theassociated budgetary receipts, regardless of their objectives and impacts on farmproduction and income, or consumption of farm products. The %TSE measures the overalltransfers from agricultural policy as a percentage of GDP.

Source: OECD (2002), Methodology for Measurement of Support and Use in Policy Evaluation, www.oecd.org/agr/policy.


http://www.oecd.org/agr/policy

ANNEX A

2. RECENT DEVELOPMENTS IN THE OECD PRODUCER SUPPORT ESTIMATES

IntroductionEach year since the mid-1980s the OECD has been measuring the monetary transfers

(support) associated with agricultural policies in OECD countries (and increasingly, in non-

OECD countries), using a standard method. For this purpose the OECD has developed several

indicators of transfers, the most important and central one being the Producer Support

Estimate (PSE). The results, published annually by the OECD, are the only available source of

internationally comparable and transparent information on support levels in agriculture.

The support estimates have provided an important contribution to the international policy

dialogue on agricultural and trade policy, and the methodology underpinned the measure of

support (Aggregate Measure of Support) used in multilateral trade negotiations in the WTO.

Over the years, while the fundamental methodology to measure support has not

changed, policy measures have evolved, which have been partially reflected in the

breakdown of the component parts of the overall PSE to improve the evaluation of policy

reform and for use in policy analysis. With the further evolution of policies, following a two-

year period of discussion among experts, OECD member countries have decided, as from the

2007 report on Agricultural Policies in OECD Countries: Monitoring and Evaluation, to adopt a new

classification of the generic policy categories in the PSE, to change the measurement of

support to commodities, and the presentation of the relevant indicators. These changes reflect

the evolution of agricultural policies in OECD countries, and thus should enhance the ability to monitor

and evaluate those policies. This chapter explains the new PSE classification, and how the data

and indicators can be used to monitor policy developments.

Measuring agricultural supportThe Producer Support Estimate (PSE) measures the annual monetary transfers to

farmers from three broad categories of policy measures that:

● Maintain domestic prices for farm goods at levels higher (and occasionally lower) than

those at the country’s border (market price support).

● Provide payments to farmers based on, for example, the quantity of a commodity

produced, the amount of inputs used, the number of animals kept, the area farmed, an

historical reference period, or farmers’ revenue or income (budgetary payments).

● Provide implicit budgetary support through lowering farm input costs, for example for

investment credit, energy, and water (budgetary revenue foregone).

The classification of support resulting from agricultural policies is based on how

policies are actually implemented – and not on the intended objectives or impacts of those

policies. A crucial point to emphasise is that the estimates of support not only comprises

budget payments that appear in government accounts (which is often the popular

understanding of support), but also budgetary revenues foregone, and the gap between

domestic and world market prices for farm goods – market price support. The latter element

represents in many countries the largest component of the PSE, but has been decreasing as

a share of overall support in many countries in recent years.

The PSE indicators are expressed in both absolute monetary terms (in national

currencies, in US dollars and in Euros) and in relative terms – in the case of the %PSE as a

percentage of the value of gross farm receipts (including support payments) in each

country for which the estimates are made. The %PSE shows the amount of support to


ANNEX A

farmers irrespective of the sectoral structure and inflation rate of a country, making this

indicator the most widely acceptable and useful indicator for comparisons of support

across countries and time.

The main purpose of the calculations is to show the estimates and composition of

support each year, and to compare the trends across countries and through time, in order to

monitor and evaluate the extent to which OECD countries are making progress in policy

reform to which all OECD governments are committed. This monitoring and evaluation

exercise is complemented by integrating the indicators of support in models to inform policy

makers about the efforts made to meet their various objectives, and to analyse the effects of

different policy instruments on production, trade, farm incomes and the environment.

Changes in the PSE methodology

Previous classification of PSE and related indicators

The PSE classification that has been used in recent years (including the 2006 report on

Agricultural Policies in OECD Countries: at a Glance) is shown in Box A.1, with the definitions

of the various elements shown in Box A.2.

Box A.1. Previous classification of PSE and related support indicators

Producer Support Estimate (PSE) (A-H)

A. Market price support of which MPS commodities

B. Payments based on output

C. Payments based on area planted/animal numbersD. Payments based on historical entitlementsE. Payments based on input useF. Payments based on input constraintsG. Payments based on overall farm incomeH. Miscellaneous payments

Percentage PSE (PSE as a % of gross farm receipts)Producer Nominal Protection Coefficient (NPC)Producer Nominal Assistance Coefficient (NAC)

General Services Support Estimate (GSSE)

Consumer Support Estimate (CSE)

Transfers to producers from consumersOther transfers from consumersTransfers to consumers from taxpayersExcess feed costs

Percentage CSE (CSE as a % of farm-gate value of consumption)Consumer NPCConsumer NAC

Total Support Estimate (TSE) (A+B+C-budget receipts)

Transfers from consumersTransfers from taxpayers

Budget receipts

Percentage TSE (as a share of GDP)


ANNEX A

New classification of PSE and related indicators

In recent years in the process of policy reform, policies in many OECD countries have

been moving – to different degrees and speeds – towards providing support that is less

dependent on producing a specific commodity. However, in some cases policies provide

support to groups of commodities or on the condition that some commodity is produced,

even if it is not specified as to what it should be. Policies are also increasingly providing

support based on farm area or on historical criteria, which may be land, animal numbers,

or income, for example. In some cases, production is required (but the actual commodities

produced – currently or in the past – are not specified), in other cases no commodity

production is required or support is provided for the production of non-commodity outputs

(such as environmental goods and services). In many cases, there are other criteria that

farmers must also meet in order to be entitled to support, such as implementing

constraints on the use of inputs, or leaving land idle from commodity production but kept

in “good agricultural or environmental condition”.

The thrust of many of the changes in policies has been to move in the direction of

decoupling the basis for providing support from specific commodity production to other

criteria. While there is increasingly more flexibility in what farmers can produce in order to

be entitled to support, there is often less flexibility in how farmers manage their

operations, with greater regulatory constraints or conditions. The consequence is that

although the aggregate PSEs remain essentially unchanged, as policies have become more

Box A.2. Definitions of categories in the current PSE classification

A. Market Price Support (MPS) – transfers from consumers and taxpayers to farmers frompolicy measures that create a gap between domestic market prices and border prices of aspecific agricultural commodity, measured at the farm-gate level.

B. Payments based on output – transfers from taxpayers to farmers from policy measuresbased on current output of a specific agricultural commodity.

C. Payments based on area planted/animal numbers – transfers from taxpayers to farmersfrom policy measures based on current plantings, or number of animals, in respect of aspecific agricultural commodity or a specific group of agricultural commodities.

D. Payments based on historical entitlement – transfers from taxpayers to farmers frompolicy measures based on historical support, area, animal numbers or production of aspecific agricultural commodity, or a specific group of agricultural commodities, without

any obligation to continue planting or producing such commodities.

E. Payments based on input use – transfers from taxpayers to farmers from policymeasures based on the use of a specific fixed or variable input, or a specific group of inputsor factors of production.

F. Payments based on input constraints – transfers from taxpayers to farmers from policymeasures based on constraints on the use of a specific fixed or variable input, or a specificgroup of inputs, through constraining the choice of production techniques.

G. Payments based on overall farming income – transfers from taxpayers to farmers frompolicy measures based on overall farming income (or revenue), without constraints orconditions to produce specific commodities, or to use specific fixed or variable inputs.

H. Miscellaneous payments – all transfers from taxpayers to farmers that cannot bedisaggregated and allocated to the other categories of transfers to producers.


ANNEX A

varied and complex, they have also become more difficult to group into the previous PSE

classification in ways that would permit a more accurate monitoring and evaluation of

policy reform and use in quantitative policy analysis.

In reflecting these policy developments, the new PSE classification, which will be

implemented in the 2007 report on Agricultural Policies in OECD Countries: Monitoring and

Evaluation and the 2008 report on Agricultural Policies in non-OECD Countries: Monitoring and

Evaluation, is presented in Box A.3.

The definitions of the categories and labels in the new PSE classification are shown in

Box A.4.

Box A.3. New PSE classification

A. Support based on commodity output

A.1. Market price support

A.2. Payments based on output

B. Payments based on input use

B.1. Variable input use

B.2. Fixed capital formation

B.3. On-farm services

C. Payments based on current A/An/R/I, production required

C.1. of a single commodity

C.2. of a group of commodities

C.3. of all commodities

D. Payments based on non-current A/An/R/I, production required

E. Payments based on non-current A/An/R/I, production not required

E.1. Variable rates E.2. Fixed rates

F. Payments based on non-commodity criteria

F.1. Long-term resource retirement

F.2. Specific non-commodity output

F.3. Other non-commodity criteria

G. Miscellaneous payments

Labels to be attached to each programme in the above categories of policy measures:

● With/without L (with or without current commodity production limits).

● With V/F rates (with variable or fixed payment rates).

● With/without C (with or without input constraints).

● With/without E (with or without any commodity exceptions).

● Based on A/An/R/I (based on area, animal numbers, receipts or income).

● Based on SC/GC/AC (based on a single commodity, group of commodities or allcommodities).

Note: A (area), An (animal numbers), R (receipts) or I (income).


ANNEX A

Box A.4. Definitions of categories in the new PSE classification

Definitions of categories:

Market price support and Payments based on output: as in Box A.2.

Payments based on input use: transfers from taxpayers to agricultural producers arisingfrom policy measures based on on-farm use of inputs to produce commodities:

● Variable input use that reduce the on-farm cost of a specific variable input or a mix ofvariable inputs.

● Fixed capital formation that reduce the on-farm investment cost of farm buildings,equipment, plantations,irrigation, drainage and soil improvements.

● On-farm services that reduce the cost of technical, accounting, commercial, sanitary andphyto-sanitary assistance and training provided to individual farmers.

Payments based on current A/An/R/I, production required: transfers from taxpayers toagricultural producers arising from policy measures based on current areas, animalnumbers, revenue or income.

Payments based on non-current A/An/R/I, production required: transfers from taxpayers toagricultural producers arising from policy measures based on non-current (i.e. historical orfixed) areas, animal numbers, revenue or income, with current production of anycommodity required.

Payments based on non-current A/An/R/I, production not required: transfers fromtaxpayers to agricultural producers arising from policy measures based on non-current

(i.e. historical or fixed) areas, animal numbers, revenue or income, with current productionof any commodity not required but optional.

● Variable rates: payment rates vary with respect of levels of current output or input prices.

● Fixed rates: payment rates do not vary with respect to these parameters.

Payments based on non-commodity criteria: transfers from taxpayers to agriculturalproducers arising from policy measures not based on commodity parameters (area, animalnumbers, revenue, income), but based on:

● Long-term resource retirement: transfers for the long-term retirement of factors ofproduction from commodity production. The payments in this subcategory are

distinguished from those requiring short-term resource retirement, which is based oncommodity production criteria.

● A specific non-commodity output: transfers for the use of farm resources to producespecific non-commodity outputs of goods and services which are voluntarily producedbeyond what is required by existing regulations.

● Other non-commodity criteria: transfers provided equally to all farmers, such as a flat rateor lump sum payment, not based on commodity areas, animal numbers, revenue,income and input use.

Miscellaneous payments: transfers from taxpayers to farmers for which there is a lack ofinformation to allocate them among the appropriate categories.

Definitions of labels:

With or without current commodity production limits: defines whether or not there is aspecific limitation on current commodity production (output, area or animal numbers)that is eligible to receive payments or MPS.


ANNEX A

To reflect the way in which many policies are evolving, with the gradual shift away

from direct commodity-linked support, the total PSE will be broken down into four

categories. These categories are:

● Single commodity transfers (SCT), which are by definition granted by commodity.1

● Group commodity transfers, shown as one (aggregate) figure and complemented by

country specific satellite tables, which will provide more detailed information concerning

country specific groups and transfers related to those groups.

● All commodity transfers, shown as one (aggregate) figure.

● Other transfers, shown as one (aggregate) figure.

However, the PSE database will continue to provide complete information on the list of

commodities to which each policy measure applies, provide the PSE by commodity up to and

including for 2004, and show the basis on which those commodity PSEs were calculated.

3. AGRICULTURAL SUPPORT IN NON-OECD ECONOMIES: SOME MEASUREMENT ISSUES

IntroductionThe OECD indicators of agricultural support, of which the PSE and GSSE are the key

ones,2 provide structure and quantify policies that support the agricultural sector. These

indicators constitute a comprehensive framework for monitoring of annual and long-term

developments in agricultural policies. As such, this exercise offers an important input into

national policy analysis and decision making. The method allows for cross-country

comparison of agricultural policies, thus helping to make national policies more

transparent and facilitating a more informed policy dialogue.

The OECD began evaluating agricultural support for non-OECD economies in the

early 1990s. This analysis now covers a number of transition economies, such as Bulgaria,

Box A.4. Definitions of categories in the new PSE classification (cont.)

With variable or fixed payment rates: defines whether payment rates vary with respect tolevels of current output or input prices or production yields and/or area (variable rates); ordo not vary with respect to these parameters (fixed rates).

With or without input constraints: defines whether or not there are specific requirementsconcerning commodity production practices related to the programme in terms of thereduction, replacement or withdrawal in the use of inputs that are eligible to receivepayments.

With or without commodity exceptions: defines whether or not there are prohibitionsupon the production of certain commodities as a condition of eligibility for paymentsbased on non-current A/An/R/I of commodity(ies).

Based on area, animal numbers, receipts or income: defines the specific attribute (i.e. area,

animal numbers, receipts or income) on which the payment is based.

Based on a single commodity, a group of commodities or all commodities: defines whetherthe payment is granted for production of a single commodity, a group of commodities orall commodities.


ANNEX A

Romania, Russia and Ukraine,3 and has recently been extended to large developing

economies such as Brazil, China, and South Africa (OECD, 2006b).

The purpose of this document is to continue the practice of informing governments

and analysts about the approaches to the measurement of agricultural support in non-

OECD economies.4 It is important to stress that the evaluation of support for these

countries is based on the same methodology as applied to OECD members. A consistent

methodological treatment of countries is one of the key principles guiding the OECD

analysis in this area. However, the evaluation of support in non-OECD economies has its

specificities. First, because it often concerns policy measures that have relatively little

prominence in OECD countries. Second, there is a greater need for careful interpretation of

support estimates due to the fact that agricultural policies are being evaluated for the

economies that undergo profound structural transformations and adjustment. Clarity

about what underlies the estimates of support in non-OECD economies is important to

facilitate understanding and interpretation of these estimates.

The document focuses on several support measurement issues that were encountered

in the most recent OECD Agricultural Policy Reviews for Brazil, China and South Africa (OECD,

2005a; OECD, 2005b; OECD, 2006a). Where relevant, experience with other monitored non-

OECD economies is also referred to.

The paper first looks at the measurement and interpretation of market price transfers

for non-member economies. This issue has been discussed at previous OECD meetings and

in publications,5 but deserves regular consideration due to a growing interest in support

estimates for non-OECD economies and the broadening base of data users. The second

part of the document discusses several salient features of estimation of budgetary support,

such as assistance though preferential credit, large-scale debt forgiveness, and support

associated with developmental and social assistance programmes. None of these issues

are relevant exclusively for non-OECD economies, but in these economies they become

more distinct and therefore deserve more attention.

Support measurement issues

Market price support

The traditional way of supporting (or taxing) agricultural producers has been to alter

the level of market prices they receive. Various measures are applied to this effect, such as

imposition of taxes on imports or exports, often in combination with domestic market

interventions, or direct price administration. Capturing the implicit support (or tax) arising

from such measures is thus one of the principal tasks in estimating the government’s

policy transfers to (from) producers.

When only an import tariff or an export duty is in place, the task may seem

straightforward – the applied tariff represents an implicit policy transfer. However

identification of an applied tariff is often complicated by practical difficulties of estimating

the “average” tariff applied in the presence of tariff rate quota regimes, seasonal variations

in tariff protection, preferential trade agreements, and high diversification of tariff rates for

certain products. The effects of formal tariffs can be substantially modified if quantitative

trade restrictions, state trading or non-tariff measures are also in place. The measurement

of price policy transfers becomes further complicated when border measures are applied in

combination with other price interventions. In some cases such interventions are strictly

formalised as, for example, the EU’s Common Market Organisations (CMOs). However, as is


ANNEX A

often the case in non-OECD economies, domestic market interventions may have an

informal or ad hoc nature, or may be the responsibility of regional administrations, with

variable application across regions.

Formal policy parameters of price interventions – import tariffs or export duties,

subsidies, and levies – are thus often neither accurate nor sufficient indicators of price

policy transfers. Given that, the basic OECD approach to the measurement of market price

support has been to estimate an effective tariff, or a differential between domestic and world

prices, which would reflect the totality of policy interventions affecting market prices.

Estimates based on the measurement of price differentials mean, however, that non-

agricultural policy impacts may be captured in these estimates as well. The differential

between domestic and world prices is theoretically the result of government interventions

preventing market forces arbitraging away the price differences between domestic and

external markets. “Theoretically” in particular means assuming a perfectly competitive

market structure and that market agents can immediately absorb information and implement

new contracts in response to price changes. In the real world these conditions rarely hold, as

markets are characterised by various imperfections, while it takes time and cost for agents to

react to new market signals. Therefore, market inertia creates price differentials

independently of government price interventions. The degree of such non-policy “noise”

increases in the case of non-OECD economies. Markets in these economies are characterised

by underdeveloped physical infrastructure, poor information and weak market institutions,

which impede price arbitrage. These deficiencies are even more pronounced in the countries

with large territories, like Brazil, China, or Russia, where natural vastness exacerbates the

effects of weak market organisation. The consequences of deficient arbitrage in the monitored

countries become particularly visible in their crop markets, when temporary deficits or excess

supplies due to weather conditions produce sharp market price reactions.

Another factor interacting with agricultural policies, and also contributing to the

emergence of differentials between domestic and world prices, is macroeconomic

instability. The majority of non-OECD economies went through periods of serious

macroeconomic adjustments. Such adjustments – whether controlled or crisis – brought

about shocks to relative prices. For example, macroeconomic reforms in Brazil, South

Africa, and Russia were associated with massive exchange rate devaluations. Following the

major reforms, all these countries saw additional currency shocks of varying intensity. The

exchange rate devaluations pushed world prices, expressed in local currencies, above

domestic price levels, and opened wide price gaps. Such abrupt and strong price

disparities, emerging due to factors not related to agricultural policies, take time to

dissipate and inevitably affect the measured price gaps.

In principle, if the PSE is to measure transfers arising from agricultural policies, the

non-agricultural policy impacts should be filtered out from the measured domestic-to-

world price gaps. This task is not trivial. One possibility would be to model producer prices,

which would prevail with the given agricultural policies and in the absence of other

impacts, such as structural impediments to transmission of international prices to

domestic markets and exchange rate shocks. Price gaps calculated on the basis of these

modelled domestic prices would provide approximations of agricultural policy impacts.

However, this approach involves applying assumptions about various parameters of the

model, which introduces its own bias into estimations. What is also important is that the

modelling approach would transform the OECD PSE from a conventional measure based on

observed data, to one based on non-observed variables.


ANNEX A

The convention in the case of non-OECD economies has been to follow the same

approach as for OECD countries that the PSE is a measure based on observed data. It has

been considered appropriate to apply, as it is done in some cases for the OECD countries,

certain assumptions to factor out non-agricultural policy impacts from the measured

market price support. These assumptions can be better explained by concrete examples:

● When for exported commodities it is revealed that domestic prices are below the world

price levels, but no taxing agricultural measures are applied – such as export duties,

export restrictions, or administrative barriers to inter-regional movement of goods6 – the

price differentials are set to zero. The underlying assumption is that the lower domestic

prices are due to factors not related to agricultural policies, which is equivalent to

assuming that agricultural policies as such create a zero producer price effect.7

● When for imported commodities it is revealed that domestic prices fall below the world

price levels, but these commodities effectively receive border protection and/or domestic

price support – the negative price differentials are also set to zero. In this case it is

assumed that the lower domestic prices are due to factors not related to agricultural

policies and the net effect of market price support equals zero.8

● In all other cases, when positive or negative price differentials are revealed in the

presence of agricultural policies respectively supporting or taxing producer prices, the

measured price differentials are fully accounted for in the market price support.9

The assumptions described above are founded on standard economic principles and

the facts about agricultural policy measures in particular countries. This approach permits

the best approximation of measured transfers to those attributable to agricultural policies.

However, because in many cases price differentials enter into the estimation of MPS

directly, the MPS estimates for non-OECD economies remain overall composite transfers,

resulting from interaction of agricultural measures, structural weaknesses and

macroeconomic impacts.

Transfers from taxpayers

Preferential lending

One prevalent government practice in non-OECD economies is to reduce the cost of

borrowing for agricultural producers. When agricultural producers are able to borrow at

more favourable terms compared to other businesses, implicit policy transfers are created,

which need to be accounted for in producer support.

In some countries, like in Russia or Ukraine, the governments do not intervene directly in

lending conditions, but subsidise interest rates charged to agricultural borrowers. Usually, the

lending banks receive budgetary compensation which covers part of the interest rate due on

specified agricultural loans. In such cases the estimation task is straightforward, as transfers to

producers associated with such support correspond to the budgetary disbursements.

However, some non-OECD governments operate under considerable fiscal rigidities,

leading them to rely on such ways of credit support that do not imply actual budgetary

disbursements. This is the case of Brazil, where the government imposes special

conditions on lending to agricultural producers. The banks and credit co-operatives are

required to allocate certain shares of their credit resources for agricultural lending at

interest rates fixed by the government. Additional credit resources for agricultural lending

come from special extra-budgetary funds, and are also lent at fixed interest rates.


ANNEX A

When the government sets the interest rates and directs resources for lending, the

estimation of the associated support is based on the measurement of a difference between

the interest rate payments, which agricultural borrowers would have paid based on a

“market” interest rate and the payments which they actually made based on preferential

interest rates. This task demands good knowledge of agricultural lending conditions,

which may vary by lending programmes and types of beneficiaries and may be subject to

frequent changes. It is also important to have adequate information on allocations of

preferential credit and the values of outstanding debt. A choice of appropriate “market”

interest which would best represent an opportunity cost for preferential credit demands a

good overall knowledge of credit market in a given country.

The importance of support through preferential credit can be illustrated by the fact in

2003-05 it accounted for almost one-half of Brazil’s PSE and 4% of Russia’s PSE (13% in 1992-95).

Agricultural debt restructuring

The fundamental market reforms that the majority of monitored countries

implemented in the 1990s had, as their immediate effect, a considerable deterioration of

agricultural terms of trade. Brazil, Russia, Ukraine, and Romania – all saw deep farm

financial crises in the first half of the 1990s (Box A.5). The governments responded by the

Box A.5. Agricultural debt rescheduling in Brazil and Russia

Hyperinflation plagued the Brazilian economy in the late 1980s and continued into the1990s, with extreme volatility of inflation, the real exchange rate and relative prices. Afterthe implementation of the Real Plan in 1994, inflation was tamed. However an exchange ratepeg made the real overvalued and restrained growth in export-oriented and import-competing sectors. By 1995, the value of non-performing agricultural loans reached 30% oftotal outstanding agricultural credit, and the new bank lending virtually stopped. Understrong pressure from the agricultural and banking sectors, the Brazilian government decidedon a broad rescheduling of agricultural debt. The repayment period for the overdue debt wasextended by 20 and 24 years, depending on types of borrowers, and the interest rate was setat below-market rates. At the beginning of the 2000s, another rescheduling decision

followed, this time concerning loans to small farmers and land reform beneficiaries, alsoproviding for prolongation of repayments at reduced interest rates, partial write-offs and“good payer” rebates. At the end of 2005, the total outstanding restructured debt stood atBRL 17.3 billion (USD 7.6 billion) with overdue repayments reaching BRL 4.5 billion(USD 2.0 billion).

The Russian agricultural sector plunged into a deep financial crisis in the first half of the

1990s. Between 1992 and 1995, the share of unprofitable agricultural enterprises rose from5% to 57%. As of January 1995, approximately 70% of agricultural enterprises had overduedebt on accounts payable, 43% on state taxes and contributions to the Pension and SocialSecurity systems, and 28% on bank loans. The first large-scale agricultural debtrescheduling was implemented in 1994, covering the government’s directed credit toagricultural producers. Additional restructurings followed in 1998, 2001, 2002, and themost recent in 2004. These concerned overdue taxes and contributions of agriculturalenterprises to the Pension and Social Security systems, providing for extension ofrepayments for five to ten years and partial write-offs.

Source: OECD, 2005a; FSSS, 1995.


ANNEX A

large-scale restructurings of accumulated bad debt, often followed by other restructurings

involving additional bad debts, and/or repackaging of previous schemes. All schemes

incorporated concessions to debtors, such as extensions of repayment periods, reduced

interest on overdue debt, and partial write-offs of debt. These restructurings were probably

unavoidable measures of financial rehabilitation given the cash flow problems which the

agricultural sector experienced at the time.

Estimation of subsidies arising from large-scale debt restructurings is therefore an

important element of the evaluation of support in many monitored non-OECD economies.

The approach to estimation is similar to that applied for preferential credit, i.e. the subsidy

represents the difference between repayments due at “market” and at preferential interest

rate. Where information is available on written-off debt and additional incentives for

timely repayment, these are also accounted for. The implicit transfers to producers

associated with debt rescheduling constituted 13% of the Brazil’s aggregate PSE in 2003-05.

For Russia, this support accounted for 1% of the aggregate PSE in 2003-05, but it was very

important in 1992-95, compensating for a large part of producer price taxation.

Alleviation of poverty and social inequality

Alleviation of poverty and social inequality are key issues on the policy agenda of the

monitored non-OECD economies. Access to farmland and to farming activity for

disadvantaged social groups is viewed as one of the principal remedies in combating

poverty and social division. Thus, Brazil and South Africa implement large-scale land

reform programmes, which transfer agricultural land to the poor free of charge or at low

cost. Land allotment is complemented by a plethora of programmes to subsidise

investment, current production costs, and build infrastructure on emerging or existing

farms run by the poor. Measures to involve the rural poor in agriculture are supported by

investments in education, training and extension.

Programmes of this kind have a broad developmental nature and are fundamentally

driven by social equity objectives. The conceptual issue is whether these programmes

should be considered in the countries’ agricultural support estimates. The answer to this

question is yes, if these social objectives are pursued though support of agricultural

activity. This approach is consistent with the PSE definition as transfers to support

agricultural producers “… arising from policy measures which support agriculture, regardless of

their nature, objectives or impacts on farm production or income” (OECD, 2006b).

In some cases land and small farmer programmes may be partly financed by

international donors. In this respect another specific question emerges. Should this

assistance, based on taxpayer transfers originating outside the national economy

framework, be included into the country’s support estimates? It has been agreed to include

the support based on foreign aid, because it is the national policies that create and deliver

this support. Although for the countries monitored to date international grants for

domestic agricultural support is a marginal issue, it may potentially have important

implications for those developing countries whose agricultural support relies heavily on

official development assistance (ODA).

A challenge that developmental programmes pose in terms of their treatment in the

PSE/GSSE is linked with the difficulties of separating clearly the elements of programmes

related to agricultural production activity. Packages targeted to land reform and assistance

to poor rural households are typically heterogeneous, encompassing, along with measures


ANNEX A

supporting farming, assistance for education, territorial and infrastructural development,

housing and healthcare improvements; activities which go beyond the support of

agricultural producers or the agricultural sector. In some cases, even if the amount of

agricultural expenditures can be identified, it is too aggregated to distinguish between

support to individual producers and to general services. Two examples in Box A.6 illustrate

the variability of elements that may be aggregated under the budgetary lines

corresponding to programmes of this kind. It is therefore important to have access to more

detail on such programmes, as well as their cost elements – a task, which can be best

achieved through close co-operation with national governments.

ConclusionsMacroeconomic instability and structural weaknesses are characteristic of non-OECD

economies. Agricultural policies create implicit transfers to, or from, agricultural producers

in interaction with these factors, which may amplify or offset the impacts of agricultural

measures as such. The non-policy impacts can not be perfectly filtered out of these

transfers. It is therefore important to interpret the support estimates for non-OECD

economies with care. In particular, long-term trends in support should take precedence

over the estimates for one particular year. This, however, does not diminish the relevance

Box A.6. Programmes combining social assistance and agricultural support

Among other types of assistance, land reform beneficiaries in Brazil, receive preferentialloans under the programme “Credit for Families Settling on Agricultural Lands”. Theseloans are given for construction of family houses, purchase of food, but also for purchaseof agricultural inputs, such as fertiliser, seeds, small animals and tools. These allocationstherefore combine elements of purely social assistance, which should not be included inestimation of agricultural support, and elements that actually represent agriculturalsupport. Another programme is called “Support of Municipal Projects on Development ofInfrastructure and Services for Family Agriculture”. It finances investments ininfrastructure for collective use of families involved in small agricultural production,including electricity networks, irrigation, processing and storage, construction andoverhaul of internal roads and ways for transporting harvested crops, construction and

renovation of rural schools, communal centres, healthcare points, and public telephones.It means that this programme encompasses investments, some of which relate only toagriculture, some serve both agricultural and social purposes, and some are exclusivelysocial.

A Comprehensive Development Plan for Agriculture in China supports (original wording):

“improvement of low and medium-yielding fields; building of small-scale reservoirs;building of irrigation and drainage systems; building of electrical pumping wells;improvement of soil; purchase of agro-facilities for dry farming; building of roads; buildingof shelter-forests, building of agro-technical service stations and facilities for farmers’training”. While part of the above mentioned (and similar) budgetary expenditures whichhave the objective of supporting rural infrastructure could be treated as input subsidies(e.g. “purchase of agro-facilities for dry farming”), other expenditures (e.g. on water supplyor flood prevention included in other programmes under the general label of agriculturalinfrastructure) provide benefits to urban and industrial centres (e.g. township and villageenterprises) in the vicinity.

Source: OECD, 2005a; OECD, 2005b.


ANNEX A

of PSE/GSSE estimates for policy analysis and monitoring, particularly given that market-

oriented reforms in non-OECD economies have substantially progressed towards more

developed market systems and macroeconomic stability.

As governments in non-OECD economies operate under fiscal rigidities, the assistance

is often provided in forms which do not imply actual budgetary disbursements. Such

implicit support as controlled (preferential) terms of lending to agricultural borrowers and

large-scale debt restructurings have been common to many monitored non-OECD

economies. Identification and evaluation of this support is an important task. Another

characteristic of budgetary support to producers in non-OECD economies is that it may be

partly based on international funds, i.e. ultimately financed by foreign taxpayers.

Many non-OECD economies are facing serious poverty and social equity problems.

These problems are largely based in the rural population and solutions are often sought

through support to agricultural activity among the poor. Evaluation of support arising from

these actions, fundamentally inspired by social considerations, but largely pursued

through agricultural support, is another notable feature of non-OECD economies, which

requires attention. In particular, there is a need for careful separation of agricultural

support from broad based assistance provided under poverty alleviation and development

programmes.

Broadening the policy information and improving the quality of data underlying the

PSE/GSSE estimates for non-OECD economies is an ongoing process. Success can only be

achieved through an interest and active co-operation on the part of the governments of the

countries concerned.

Notes

1. In the previous PSE classification, commodity PSEs were calculated through adding support frompolicy measures specific to each commodity and from other policy measures through the use ofallocation keys, such as based on the share of the commodity in total production.

2. See Section 1 in this Annex for definitions of indicators of support. For detailed definitions of theOECD agricultural support indicators see OECD 2006c.

3. Other non-OECD transition economies, Estonia, Latvia, Lithuania and Slovenia, are monitored aspart of the European Union.

4. The OECD’s experience with the measurement of agricultural support in non-OECD economies hasbeen first reviewed by Harley (1996), and Kwiecinski and Pescatore (2000). This issue was alsobroadly addressed at the OECD Global Forum on Agriculture and the Workshop on AgriculturalPolicies in China after WTO Accession, both held in 2002 (Melyukhina 2002a and 2002b).

5. See, for example Melyukhina 2002a and 2002b.

6. Administrative barriers to movement of goods are a common practice in Russia and Ukraine.Regional controls of product movements on various grounds – “regional” food security, or need tosupport local processors, and consequently, the local economy – are frequent in these countries.Technical barriers are also widespread, such as licensing, special permissions of localadministrations to ship agricultural products outside the regions, as well as other administrativerequirements for internal and external movement of agricultural products.

7. In the case of Brazil, such an assumption is applied in the estimation of MPS for soybeans, sugar,beef, pigmeat and poultry, all being net exports, whose domestic prices are actually below theexport parity levels. In the case of China, this concerns peanuts, apples, beef, pigmeat poultry andeggs; and in the case of South Africa – grapes, oranges, apples and eggs.

8. In the case of Brazil, this assumption is applied in the estimation of MPS for key importedproducts – wheat, rice and maize. Specifically, in years when domestic price is below the worldreference price, the MPS for these commodities is assumed to equal zero, while in years when thedomestic-to reference price differential is positive, it is fully accounted for in the MPS. A similar


ANNEX A

approach is applied in estimation of MPS for imported products in South Africa, such as wheat,maize, sunflower, peanuts, beef, pigmeat, and poultry.

9. In the case of Brazil, this approach is applied in the estimation of MPS for milk, and between 1995and 1999, for sugar cane. In the case of China this occurs for wheat, maize, rice, rapeseed andsoybeans; and for South Africa – sugar, milk, and sheepmeat. A full accounting of price gaps is alsothe case for the estimation of MPS for all commodities for Russia, and Ukraine.

Bibliography

FSSS (1995), Selskhoye Khozyaistvo Rossii: 1995, Federal Service of State Statistics, Moscow (FSSS), 1995,pp. 101-106.

Harley, M. (1996), “Use of Producer Subsidy Equivalents as a Measure of Support to Agriculture inTransition Economies”, American Journal of Agricultural Economics, 78 (August 1996), pp. 799-804.

Kwiecinski, A. and N. Pescatore (2000), “Sectoral Agricultural Policies and Estimates of PSEs for Russiain the Transition Period”, in P. Wehrheim et al. ed., Russia’s Agro-Food Sector Towards Truly FunctioningMarkets, Boston, pp. 111-121.

Melyukhina, O. (2002a), “The Measurement of the Level of Support in Selected Non-OECD Countries”,Agricultural Policies in China After WTO Accession, OECD, Paris, pp. 262-283.

Melyukhina, O. (2002b), “Policy and Non-Policy Sources of Agricultural Price Distortions: Evidence fromMeasurement of Support in Selected Transition Economies”, Agricultural Trade and Poverty: MakingPolicy Analysis Count, OECD, Paris, pp. 119-139.

OECD (2004), “Agricultural Support: How is it Measured and What Does it Mean?”, Policy Brief, OECD,Paris.

OECD (2005a), OECD Review of Agricultural Policies: Brazil, OECD, Paris.

OECD (2005b), OECD Review of Agricultural Policies: China, OECD, Paris.

OECD (2006a), OECD Review of Agricultural Policies: South Africa, OECD, Paris.

OECD (2006b), Producer and Consumer Support Estimates: OECD Database 1986-2005, OECD, Paris,www.oecd.org/document/55/0,2340,en_2649_33727_36956855_1_1_1_1,00.html.

OECD (2006c), Producer and Consumer Support Estimates: OECD Database 1986-2005, User’s Guide, OECD,Paris, www.oecd.org/dataoecd/60/57/37034570.pdf.


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ANNEX B

ANNEX B

Statistical Annex


ANNEX B

Table B.1. Population, mid-year estimatesMillion

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 146.59 149.09 151.55 153.99 156.43 158.88 161.32 163.78 166.25 168.75 171.28 173.82 176.39 178.99 181.59 184.18

China 1 143.33 1 158.23 1 171.71 1 185.17 1 198.50 1 211.21 1 223.89 1 236.26 1 247.61 1 257.86 1 267.43 1 276.27 1 284.53 1 292.27 1 299.88 1 307.56

India 849.42 866.53 883.74 901.01 918.29 935.57 952.83 970.04 987.18 1 004.20 1 021.08 1 037.81 1 054.37 1 070.80 1 087.12 1 103.37

South Africa 30.58 36.20 36.99 37.80 38.63 39.48 40.58 41.23 42.13 43.05 43.69 44.56 45.45 46.43 46.59 46.89

Bulgaria 8.72 8.64 8.55 8.46 8.38 8.30 8.23 8.16 8.11 8.05 8.00 7.94 7.89 7.83 7.78 7.73

Romania 23.21 23.19 22.79 22.76 22.73 22.68 22.61 22.55 22.50 22.46 22.44 22.41 21.80 21.73 21.67 21.62

Russia 148.37 148.73 148.81 148.67 148.44 148.19 147.95 147.69 147.40 147.03 146.56 145.99 145.33 144.62 143.90 143.20

Ukraine 51.89 51.94 52.06 52.24 52.11 51.73 51.33 50.89 50.50 50.11 49.57 48.90 48.46 47.63 47.27 46.92

Source: IMF, International Financial Statistics, 2006; OECD Secretariat, 2006.1 2 http://dx.doi.org/10.1787/450455587522

Table B.2. Share of agriculture in total employmentPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 25.5 25.9 26.4 26.1 25.4 26.1 23.3 22.8 21.9 23.0 20.7 18.9 18.8 18.9 n.a. n.a.

China 51.5 52.2 51.5 49.8 48.5 47.5 46.8 46.8 46.2 46.1 45.5 44.4 43.4 42.0 40.7 39.5

India n.a. n.a. n.a. 63.8 n.a. n.a. n.a. n.a. n.a. 59.9 n.a. n.a. n.a. n.a. 55.9 n.a.

South Africa n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 10.9 14.5 9.7 12.2 10.3 n.a. n.a.

Bulgaria 17.9 19.1 20.7 21.7 22.8 23.8 24.2 23.3 24.7 25.9 26.2 25.8 25.8 25.4 24.9 n.a.

Romania1 28.2 28.9 32.1 35.2 35.6 33.6 34.6 36.8 37.4 40.6 40.8 40.4 36.4 35.6 31.6 33.3

Russia1 12.9 13.1 14.0 14.3 15.0 14.7 14.0 13.3 13.7 13.3 13.0 12.3 11.8 11.0 11.2 10.6

Ukraine2 19.5 19.1 20.1 20.4 20.6 22.2 21.4 21.8 21.5 22.8 23.5 24.9 25.23 20.4 19.7 19.4

n.a.: not available.1. Includes forestry.2. Includes agriculture, forestry and fishing.Source: OECD Secretariat, 2006; World Bank, World Development Indicators, 2006.

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Table B.3. GDP growthAnnual per cent change

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil –4.2 1.0 –0.5 4.9 5.9 4.2 2.7 3.3 0.1 0.8 4.4 1.3 1.9 0.5 4.9 2.3

China 3.8 9.2 14.2 14.0 13.1 10.9 10.0 9.3 7.8 7.6 8.4 8.3 9.1 10.0 10.1 10.2

India 5.8 0.9 5.3 4.9 7.5 7.6 7.4 4.5 6.0 7.1 4.0 5.3 3.6 8.3 8.5 8.5

South Africa –0.3 –1.0 –2.1 1.2 3.2 3.1 4.3 2.6 0.5 2.4 4.2 2.7 3.7 3.0 4.5 4.9

Bulgaria –9.1 –8.4 –7.3 –1.5 1.8 2.6 –10.9 –6.9 3.5 2.4 5.8 4.1 4.9 4.5 5.6 5.5

Romania –5.6 –12.9 –8.8 1.5 3.9 7.1 3.9 –6.1 –4.8 –1.2 2.1 5.7 5.1 5.2 8.3 4.1

Russia –3.0 –5.0 –14.5 –8.7 –12.7 –4.1 –3.6 1.4 –5.3 6.3 10.0 5.1 4.7 7.3 7.2 6.4

Ukraine –6.4 –8.7 –9.9 –14.2 –22.9 –12.2 –10.0 –3.0 –1.9 –0.2 5.9 9.2 5.2 9.6 12.1 2.4



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Table B.4. Share of agriculture in GDPPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 8.1 7.8 7.7 7.6 9.9 9.0 8.3 8.0 8.2 8.3 8.0 8.4 8.8 9.9 10.1p 8.4p

China 28.4 26.2 23.6 21.5 21.6 20.8 20.4 18.3 18 17.6 16.4 15.8 15.3 14.6 15.2 12.5

India 28.5 29.0 28.4 28.4 27.8 25.9 26.9 25.4 25.4 24.0 22.3 22.3 20.2 20.7 19.6 18.6

South Africa 4.6 4.5 3.8 4.2 4.6 3.9 4.2 4.0 3.8 3.5 3.3 3.5 4.2 3.6 3.1 n.a.

Bulgaria 18.0 14.2 11.5 11.1 12.3 13.4 15.4 26.6 21.1 17.3 14.5 13.4 12.1 11.6 10.9 9.3

Romania 21.2 18.3 18.6 20.6 19.4 19.8 19.2 18.0 14.4 13.3 11.1 13.4 11.4 11.7 13.0 8.9

Russia 16.5 14.2 7.3 8.1 6.3 7.6 7.3 7.2 6.5 7.4 6.4 6.6 6.3 6.2 5.6 5.0

Ukraine 25.4 22.2 20.8 21.5 15.3 14.6 13.1 13.7 13.7 13.5 16.2 16.3 14.6 12.1 11.9 10.9

p: preliminary; n.a.: not available.Source: OECD Secretariat, 2006; World Bank, World Development Indicators, 2006.

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Table B.5. Inflation, end year changes in consumer pricesPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 1 621.0 472.7 1 119.1 2 477.2 916.5 22.4 9.6 5.2 1.7 8.9 6.0 7.7 12.5 9.3 7.6 5.7

China 3.1 3.4 6.4 14.7 24.1 17.1 8.3 2.8 –0.8 –1.4 0.4 0.7 –0.8 1.2 3.9 1.8

India 9.0 13.9 11.8 6.4 10.2 10.2 9.0 7.2 13.2 4.7 4.0 3.8 4.3 3.8 3.8 4.2

South Africa1 14.3 15.3 13.9 9.7 8.9 8.7 7.4 8.6 6.9 5.2 5.3 5.7 9.2 5.9 1.4 3.4

Bulgaria 50.6 473.7 79.5 63.9 121.9 32.9 223.0 1 182.3 22.3 1.8 11.4 7.4 5.8 2.3 6.1 5.0

Romania1 n.a. 230.6 211.2 255.2 136.8 32.2 38.8 154.8 59.1 45.8 45.7 34.5 22.5 15.3 11.9 9.0

Russia n.a. 160.0 2 509.0 840.0 215.0 131.0 22.0 11.0 84.4 36.7 20.2 18.6 15.1 12.0 11.7 10.9

Ukraine n.a. 290.0 2 000.0 10 156.0 401.0 181.7 39.7 10.1 20.0 19.2 25.8 6.1 –0.6 8.2 12.3 10.3

n.a.: not available.1. Annual average.Source: OECD Secretariat, 2006; World Bank, World Development Indicators, 2006.

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Table B.6. Agricultural input price indexPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 2 645.3 412.8 985.0 1 852.9 2 163.4 78.6 14.5 7.2 3.3 13.4 10.4 8.6 19.2 29.0 10.0 6.4

China 5.5 2.9 3.7 14.1 21.6 27.4 8.4 –0.5 –5.5 –4.2 –0.9 –0.9 0.5 1.4 10.6 8.3

India n.a. 19.7 5.3 11.7 10.2 10.2 3.8 6.6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

South Africa 11.6 12.0 6.3 9.5 7.5 8.9 12.8 9.5 2.0 5.0 9.9 14.2 19.9 5.9 3.0 n.a.

Bulgaria n.a. 502.0 53.0 37.0 71.6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Romania n.a. 1 602.2 62.0 139.0 103.7 38.1 62.4 146.5 48.9 28.7 69.9 32.7 9.1 1.4 n.a. n.a.

Russia n.a. 90.0 1 520.0 970.0 320.0 232.0 63.6 19.0 9.0 61.0 48.5 18.1 12.2 18.6 25.0 16.0

Ukraine n.a. 60.0 3 768.8 5 522.6 729.1 469.0 71.4 12.0 8.6 25.7 31.9 11.3 2.5 8.0 17.8 14.7

n.a.: not availableSource: OECD Secretariat, 2006.

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Table B.7. Agricultural output price indexPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 2 933 426 995 2 234 2 535 49 12 9 7 8 8 10 22 32 5 –3

China –3 –3 3 13 40 20 4 –5 –8 –12 –4 3 0 4 13 1

India 12 20 5 12 10 10 4 7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

South Africa 7 8 19 1 11 14 6 7 4 0 6 14 28 7 –6 n.a.

Bulgaria 93 167 21 51 77 75 124 1 061 7 –11 13 11 –10 3 –1 11

Romania n.a. 542 118 215 123 28 55 90 21 20 55 49 17 3 n.a. n.a.

Russia n.a. 60 845 712 225 235 44 9 11 100 37 25 3 9 28 10

Ukraine n.a. 90 1 750 3 860 570 330 64 5 10 29 56 5 –13 21 6 9

n.a.: not available.Source: OECD Secretariat, 2006.

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Table B.8. Retail food price indexPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 1 413 472 1 152 2 468 1 024 8 2 1 2 8 3 10 19 7 4 2

China 0 3 8 14 35 25 8 0 –3 –4 –3 1 0 3 10 3

India 9 16 10 7 9 13 9 5 11 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

South Africa 14 16 14 11 7 9 7 9 7 5 5 6 9 6 1 n.a.

Bulgaria n.a. 376 71 56 91 59 121 611 –3 1 2 3 6 –1 7 n.a.

Romania n.a. 186 237 249 136 32 36 151 48 28 44 36 18 15 9 n.a.

Russia n.a. 136 2 526 805 214 123 18 9 96 36 18 17 11 10 12 10

Ukraine1 n.a. n.a. n.a. 12 080 370 150 17 14 22 26 28 8 –2 11 15 11

n.a.: not available.1. December to December.Source: OECD Secretariat, 2006.

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Table B.9. Exchange rate, annual averageLocal currency per USD

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil BRL/USD 0.00 0.00 0.00 0.03 0.64 0.92 1.01 1.08 1.16 1.81 1.83 2.35 2.93 3.07 2.93 2.43

China CNY/USD 4.78 5.32 5.51 5.76 8.62 8.35 8.31 8.29 8.28 8.28 8.28 8.28 8.28 8.28 8.28 8.19

India INR/USD 17.50 22.74 25.92 30.49 31.37 32.43 35.43 36.31 41.26 43.06 44.94 47.19 48.61 46.58 45.32 44.10

South Africa ZAR/USD 2.59 2.76 2.85 3.27 3.55 3.27 4.30 4.61 5.55 6.12 6.95 8.62 10.53 7.56 6.45 6.36

Bulgaria BGN/USD 0.00 0.02 0.02 0.03 0.05 0.07 0.18 1.68 1.76 1.84 2.12 2.18 2.08 1.73 1.58 1.57

Romania RON/USD 0.00 0.01 0.03 0.08 0.17 0.20 0.31 0.72 0.89 1.53 2.17 2.91 3.31 3.32 3.26 2.91

Russia RUB/USD n.a. n.a. n.a. 0.99 2.19 4.56 5.12 5.78 9.71 24.62 28.13 29.17 31.35 30.69 28.81 28.28

Ukraine UAH/USD n.a. n.a. n.a. 0.05 0.33 1.47 1.83 1.86 2.45 4.13 5.44 5.37 5.32 5.33 5.32 5.12

n.a.: not available.Source: IMF, International Financial Statistics, 2006; OECD Secretariat, 2006.

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Table B.10. Merchandise trade balanceUSD million

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 10 747 10 578 15 239 14 329 10 861 –3 157 –5 453 –6 652 –6 603 –1 261 –698 2 650 13 121 24 794 33 666 44 757

China 9 165 8 743 5 183 –10 654 7 290 18 050 19 535 46 222 46 614 35 982 34 474 34 017 44 167 44 652 58 982 134 189

India –5 151 –2 992 –2 911 –2 093 –4 150 –6 719 –10 052 –10 028 –10 752 –8 679 –10 640 –6 418 –3 559 –8 870 n.a. n.a.

South Africa 6 474 5 750 6 292 7 532 4 398 2 379 2 859 2 319 1 991 4 008 4 698 5 255 4 756 3 431 –281 –1 878

Bulgaria –1 314 –32 –212 –885 –17 121 188 380 –381 –1 081 –1 176 –1 580 –1 594 –2 519 –3 643 –5 399

Romania –3 344 –1 106 –1 194 –1 128 –411 –1 577 –2 470 –1 980 –2 625 –1 092 –1 684 –2 969 –2 611 –4 537 –6 665 –9 618

Russia n.a. n.a. n.a. n.a. 16 928 19 816 21 591 14 913 16 429 36 014 60 172 48 121 46 335 59 860 85 825 118 266

Ukraine n.a. 1 994 –622 –2 519 –2 575 –2 702 –4 296 –4 205 –2 584 244 779 198 710 518 3 741 –1 135

n.a.: not available.Source: IMF, International Financial Statistics, 2006.

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Table B.11. Agriculture and food trade balanceUSD million

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 6 362 5 071 6 904 6 446 7 929 6 714 7 147 9 539 8 782 9 384 8 529 12 734 13 685 17 673 24 565 28 396

China 417 2 195 6 010 7 483 7 137 2 210 3 407 4 978 5 475 5 214 4 212 3 996 5 434 2 122 –5 152 –1 464

India 2 466 2 625 2 377 3 144 2 183 4 273 4 938 4 328 2 465 1 925 3 586 2 594 2 970 2 987 3 397 5 374

South Africa 929 829 64 225 577 259 531 626 688 826 1 056 1 322 1 289 1 536 1 244 1 773

Bulgaria 1 455 556 634 350 453 720 484 226 268 266 128 84 221 144 207 317

Romania –1 265 –625 –796 –710 –314 –458 –260 –169 –636 –348 –618 –803 –777 –1 207 –1 449 –1 732

Russia n.a. n.a. –7 967 –4 285 –9 300 –11 700 –9 344 –11 297 –8 781 –7 134 –5 951 –7 495 –7 853 –8 877 –10 657 –12 716

Ukraine n.a. n.a. –268 –255 1 101 1 677 1 714 1 000 382 576 556 790 1 360 633 1 685 1 707

n.a.: not available.Source: Data from national sources for China for 1990-91; South Africa for 1990 to 1999; Bulgaria for 1990 to 1995; Russia for 1992to 1995; Ukraine for 1992 to 1995; otherwise, UN, UN Comtrade database, 2006.

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Table B.12. Agriculture and food exportsUSD million

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 8 997 8 215 9 447 10 097 12 976 13 799 14 734 16 806 15 507 14 151 13 173 16 591 17 430 21 718 28 363 32 201

China 10 208 11 624 11 307 11 434 14 288 14 360 14 250 14 963 13 848 13 541 15 621 15 974 18 024 21 242 23 090 27 182

India 3 495 3 364 3 669 4 178 4 403 6 346 7 133 6 904 6 279 5 905 6 475 6 327 7 025 7 925 8 518 10 774

South Africa 1 918 1 838 1 792 1 580 2 118 2 284 2 489 2 516 2 411 2 187 2 489 2 639 2 800 3 517 3 920 4 487

Bulgaria 2 026 752 1 011 764 915 1 119 938 722 708 632 516 534 749 828 1 100 1 297

Romania 72 264 298 343 423 548 719 613 449 499 372 467 467 610 776 874

Russia n.a. n.a. 1 653 1 666 1 400 1 400 2 113 1 868 1 759 958 1 525 1 623 2 318 2 811 2 602 4 023

Ukraine n.a. n.a. 743 723 2 102 2 861 3 193 1 931 1 480 1 501 1 500 1 965 2 518 3 100 3 920 4 470


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Table B.13. Agriculture and food importsUSD million

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 2 635 3 144 2 543 3 651 5 047 7 085 7 587 7 267 6 725 4 767 4 644 3 857 3 745 4 046 3 797 3 805

China 9 791 9 429 5 297 3 951 7 151 12 151 10 842 9 986 8 373 8 327 11 410 11 978 12 590 19 120 28 242 28 645

India 1 030 739 1 291 1 034 2 220 2 073 2 195 2 576 3 814 3 980 2 890 3 734 4 055 4 938 5 121 5 401

South Africa 989 1 009 1 727 1 355 1 541 2 026 1 958 1 890 1 724 1 361 1 434 1 317 1 510 1 981 2 675 2 714

Bulgaria 571 196 377 414 462 400 454 496 440 365 388 450 527 684 893 980

Romania 1 338 889 1 094 1 053 737 1 007 979 782 1 086 847 989 1 271 1 244 1 817 2 225 2 606

Russia n.a. n.a. 9 620 5 951 10 700 13 100 11 457 13 165 10 540 8 092 7 476 9 119 10 171 11 688 13 259 16 739

Ukraine n.a. n.a. 1 011 978 1 001 1 184 1 478 931 1 098 925 943 1 175 1 158 2 467 2 235 2 764


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Table B.14. Share of agriculture and food exports in total exportsPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 28.6 26.0 26.3 26.1 29.8 29.7 30.9 31.7 30.3 29.5 23.8 28.5 28.9 29.7 29.9 27.7

China 17.2 15.8 13.3 12.5 11.8 9.7 9.4 8.2 7.5 6.9 6.3 6.0 5.5 4.8 3.9 3.6

India 19.5 18.8 17.7 18.8 16.7 20.0 21.3 19.8 18.9 16.0 14.3 14.3 13.4 12.6 10.7 10.4

South Africa 7.6 7.4 7.1 6.6 8.9 8.0 9.4 8.7 9.3 8.9 8.2 9.4 12.1 11.1 9.7 9.5

Bulgaria 15.1 21.9 25.8 20.5 23.0 17.5 19.2 14.6 16.5 16.1 10.7 10.4 13.0 11.0 11.1 11.1

Romania 1.2 6.2 6.8 7.0 6.9 6.9 8.9 7.3 5.4 5.9 3.6 4.1 3.4 3.5 3.3 3.2

Russia1 n.a. n.a. n.a. n.a. n.a. n.a. 2.4 2.1 2.4 1.3 1.5 1.6 2.2 2.1 1.4 1.7

Ukraine n.a. n.a. n.a. n.a. 10.5 20.7 22.2 13.6 11.7 13.0 10.3 12.1 14.0 12.4 11.1 13.1

n.a.: not available.1. The share is calculated based on export value not adjusted for barter and shuttle trade.Source: Data from national sources for China for 1990-91; South Africa for 1990 to 1999; Bulgaria for 1990 to 1995; Ukraine for1994 to 1995; otherwise, UN, UN Comtrade database, 2006.

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Table B.15. Share of agriculture and food imports in total importsPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 11.7 13.7 11.4 13.4 14.2 13.2 13.4 11.2 11.1 9.2 7.9 6.6 7.5 8.0 5.8 5.0

China 16.1 13.7 6.6 3.8 6.2 9.2 7.8 7.0 6.0 5.0 5.1 4.9 4.3 4.6 5.0 4.3

India 4.3 3.8 5.3 4.4 7.7 5.7 5.6 6.2 9.0 8.0 5.6 7.2 6.6 6.4 4.7 3.6

South Africa 4.4 4.7 8.5 6.5 6.2 7.0 6.7 6.7 6.6 6.1 5.4 5.4 5.8 5.7 5.6 4.9

Bulgaria 4.3 7.2 8.4 8.2 11.0 7.1 8.9 10.1 8.8 6.8 6.0 6.2 6.6 6.3 6.2 5.4

Romania 14.7 15.3 17.5 16.2 10.4 9.8 8.6 6.9 9.2 8.2 7.6 8.2 7.0 7.6 6.8 6.4

Russia1 n.a. n.a. n.a. n.a. n.a. n.a. 18.7 19.5 24.1 26.7 22.0 21.8 22.0 20.4 17.5 17.0

Ukraine n.a. n.a. n.a. n.a. 3.4 7.6 8.4 5.4 7.5 7.8 6.8 7.4 6.8 9.6 6.8 7.7

n.a.: not available.1. The share is calculated based on export value not adjusted for barter and shuttle trade.Source: Data from national sources for China for 1990-91; South Africa for 1990 to 1999; Bulgaria for 1990 to 1995; Ukraine for1994 to 1995; otherwise, UN, UN Comtrade database, 2006.

1 2 http://dx.doi.org/10.1787/848061525288


http://dx.doi.org/10.1787/213440078605

http://dx.doi.org/10.1787/263260214002

http://dx.doi.org/10.1787/848061525288

AN

NEX

B

AG

RIC

U

Table B.16. Top five agro-food export commodities by countryPercentage share of agro-food exports

1998 1999 2000 2001 2002 2003 2004 2005

8 11 12 15 16 17 20 22

14 11 17 17 18 20 19 17

13 14 10 14 13 11 10 13

12 11 13 13 13 12 12 9

16 17 13 8 8 7 7 8

63 64 65 68 67 66 67 69

9 10 12 13 13 13 15 16

13 14 15 16 16 16 18 16

7 8 8 9 10 10 11 11

11 11 10 11 10 10 11 11

11 8 11 6 9 12 3 5

50 53 55 56 58 61 58 60

24 12 12 15 23 19 23 15

16 20 22 19 20 15 15 13

8 7 7 8 4 9 8 10

18 17 13 11 10 9 9 8

8 12 9 8 8 7 8 8

74 68 63 62 65 59 64 55

n.a. n.a. 23 21 21 25 30 28

n.a. n.a. 15 15 16 18 19 18

n.a. n.a. 10 10 10 10 10 9

n.a. n.a. 9 7 8 8 8 7

n.a. n.a. 12 13 9 7 6 7

n.a. n.a. 69 66 64 70 73 69

LTU

RA

L POLIC

IES IN

NO

N-O

ECD

CO

UN

TR

IES: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OEC

D 2007

179

1990 1991 1992 1993 1994 1995 1996 1997

Brazil

Meat and edible meat offal HS-02 5 8 9 10 8 7 8 8

Oil seed, oleagic fruits, grain, seed, fruit, etc. HS-12 10 6 9 10 10 6 7 15

Sugars and sugar confectionery HS-17 6 6 7 9 8 15 11 11

Residues, wastes of food industry, animal fodder HS-23 20 18 19 20 17 16 20 17

Coffee, tea, mate and spices HS-09 13 18 11 11 18 15 12 17

Sum of above 55 56 55 59 61 58 59 67

China

Meat, fish and seafood food preparations HS-16 n.a. n.a. 4 5 5 8 10 9

Fish, crustaceans, molluscs, aquatic invertebrates HS-03 n.a. n.a. 12 11 13 15 12 13

Vegetable, fruit, nut, food preparations HS-20 n.a. n.a. 6 6 6 8 7 7

Edible vegetables and certain roots and tubers HS-07 n.a. n.a. 9 10 11 12 11 10

Cereals HS-10 n.a. n.a. 13 13 11 1 1 8

Sum of above n.a. n.a. 44 45 46 42 42 47

India

Cereals HS-10 8 11 10 10 9 23 15 13

Fish, crustaceans, molluscs, aquatic invertebrates HS-03 15 17 18 19 25 16 16 17

Residues, wastes of food industry, animal fodder HS-23 10 11 16 18 13 11 14 14

Coffee, tea, mate and spices HS-09 24 22 16 15 17 14 12 16

Edible fruit, nuts, peel of citrus fruit, melons HS-08 9 10 10 10 11 7 7 7

Sum of above 65 72 71 72 76 72 64 68

South Africa

Edible fruit, nuts, peel of citrus fruit, melons HS-08 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Beverages, spirits and vinegar HS-22 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Fish, crustaceans, molluscs, aquatic invertebrates HS-03 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Vegetable, fruit, nut, food preparations HS-20 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Sugars and sugar confectionery HS-17 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Sum of above n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

AN

NEX

B

180

13 15 16 13 22 8 13 17

8 13 7 9 12 14 11 15

16 16 15 11 8 9 13 9

6 6 7 9 6 7 8 9

20 14 15 13 9 10 8 8

62 63 59 55 58 48 53 57

12 17 26 21 23 25 23 20

19 19 9 14 16 3 7 14

10 21 11 10 8 16 13 12

16 11 6 5 2 6 10 9

4 5 5 8 8 6 6 7

62 72 57 59 57 56 59 61

9 6 6 17 43 40 25 34

20 27 21 24 17 15 13 11

2 3 6 4 2 3 5 6

2 2 3 4 3 4 6 6

0 0 1 3 3 4 5 6

33 38 37 51 68 65 53 62

21 34 8 25 40 14 23 31

9 8 16 11 14 20 15 13

4 4 9 14 6 9 12 12

4 2 3 4 3 6 7 9

2 1 4 5 5 6 6 5

40 49 40 58 67 54 63 71

1 2 http://dx.doi.org/10.1787/666084761804

Table B.16. Top five agro-food export commodities by country (cont.)Percentage share of agro-food exports

1998 1999 2000 2001 2002 2003 2004 2005

AG

RIC

ULT

UR

AL P

OLIC

IES

IN N

ON

-OEC

D C

OU

NT

RIE

S: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OE

CD

2007

Bulgaria

Cereals HS-10 n.a. n.a. n.a. n.a. n.a. n.a. 0 2

Oil seed, oleagic fruits, grain, seed, fruit, etc. HS-12 n.a. n.a. n.a. n.a. n.a. n.a. 4 5

Tobacco and manufactured tobacco substitutes HS-24 n.a. n.a. n.a. n.a. n.a. n.a. 27 23

Meat and edible meat offal HS-02 n.a. n.a. n.a. n.a. n.a. n.a. 6 7

Beverages, spirits and vinegar HS-22 n.a. n.a. n.a. n.a. n.a. n.a. 19 20

Sum of above n.a. n.a. n.a. n.a. n.a. n.a. 58 57Romania

Live animals HS-01 24 24 25 16 20 16 10 13

Cereals HS-10 0 5 1 1 2 26 40 15

Oil seed, oleagic fruits, grain, seed, fruit, etc. HS-12 6 5 4 2 2 2 2 3

Animal,vegetable fats and oils, cleavage products HS-15 n.a. 2 3 18 11 15 10 21

Edible vegetables and certain roots and tubers HS-07 12 5 4 6 6 5 4 4

Sum of above n.a. 41 37 44 41 63 65 55

Russia


Fish, crustaceans, molluscs, aquatic invertebrates HS-03 n.a. n.a. n.a. n.a. n.a. n.a. 10 15

Animal,vegetable fats and oils, cleavage products HS-15 n.a. n.a. n.a. n.a. n.a. n.a. 2 2

Miscellaneous edible preparations HS-21 n.a. n.a. n.a. n.a. n.a. n.a. 1 3


Sum of above n.a. n.a. n.a. n.a. n.a. n.a. 20 32

Ukraine



Dairy products, eggs, honey, edible animal products HS-04 n.a. n.a. n.a. n.a. n.a. n.a. 6 6


Cocoa and cocoa preparations HS-18 n.a. n.a. n.a. n.a. n.a. n.a. 0 1


n.a.: not available.Commodities grouped by Harmonised System chapters according to WTO agro-food definition.Source: UN, UN Comtrade database, 2006.

1990 1991 1992 1993 1994 1995 1996 1997

http://dx.doi.org/10.1787/666084761804

http://dx.doi.org/10.1787/666084761804

http://dx.doi.org/10.1787/666084761804

http://dx.doi.org/10.1787/666084761804

http://dx.doi.org/10.1787/666084761804

http://dx.doi.org/10.1787/666084761804

AN

NEX

B

AG

RIC

U

Table B.17. Top five agro-food import commodities by countryPercentage share of agro-food imports

1998 1999 2000 2001 2002 2003 2004 2005

27 28 30 32 31 39 31 27

6 6 6 7 6 5 7 8

5 5 5 5 4 3 4 6

5 4 5 6 6 5 7 6

7 5 4 5 4 4 5 6

50 48 50 56 51 56 54 53

16 20 27 28 22 30 26 28

18 18 9 7 13 15 15 12

4 1 1 1 1 6 11 11

8 11 11 11 13 10 8 10

8 6 5 5 4 2 8 5

55 55 53 52 53 64 69 66

53 53 52 42 48 54 48 43

10 10 14 7 10 9 12 15

5 2 4 19 15 11 9 12

0 0 0 0 1 1 3 4

3 3 4 4 4 4 4 4

72 69 74 73 78 80 76 77

n.a. n.a. 19 14 23 18 19 16

n.a. n.a. 11 14 15 15 14 13

n.a. n.a. 7 6 4 6 7 10

n.a. n.a. 7 7 6 8 7 9

n.a. n.a. 8 10 9 7 9 7

n.a. n.a. 52 51 57 54 56 54

LTU

RA

L POLIC

IES IN

NO

N-O

ECD

CO

UN

TR

IES: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OEC

D 2007

181

1990 1991 1992 1993 1994 1995 1996 1997

Brazil

Cereals HS-10 10 26 26 12 11 8 20 20

Fish, crustaceans, molluscs, aquatic invertebrates HS-03 7 6 5 5 5 6 6 6


Milling products, malt, starches, inulin, wheat gluten HS-11 18 13 15 26 20 18 10 5


Sum of above 48 57 55 51 47 43 46 42

China

Oil seed, oleagic fruits, grain, seed, fruit, etc. HS-12 n.a. n.a. 2 3 2 2 4 10

Animal,vegetable fats and oils, cleavage products HS-15 n.a. n.a. 10 13 26 21 16 17

Cotton, not carded or combed HS-5201 n.a. n.a. 8 0 12 11 11 13

Fish, crustaceans, molluscs, aquatic invertebrates HS-03 n.a. n.a. 6 9 8 5 6 5

Cereals HS-10 n.a. n.a. 32 25 18 29 24 9

Sum of above n.a. n.a. 58 51 66 69 60 55

India

Animal,vegetable fats and oils, cleavage products HS-15 19 19 9 11 13 37 43 35



Beverages, spirits and vinegar HS-22 1 0 0 0 0 1 0 1

Wool, not carded or combed HS-5101 10 11 9 11 5 7 7 6

Sum of above 72 67 45 63 41 70 78 69

South Africa

Cereals HS-10 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Animal,vegetable fats and oils, cleavage products HS-15 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Meat and edible meat offal HS-02 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Beverages, spirits and vinegar HS-22 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Residues, wastes of food industry, animal fodder HS-23 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.


AN

NEX

B

182

13 9 7 8 10 9 10 13

14 15 14 13 10 8 7 9

3 6 7 7 6 7 7 8

3 5 5 5 5 6 5 6

6 5 5 6 7 5 5 6

39 39 38 39 39 35 35 41

11 7 8 13 15 10 15 24

9 14 13 11 11 10 12 12

4 7 6 4 6 5 5 7

10 9 11 12 8 7 7 6

7 8 7 6 6 6 6 6

41 46 46 47 47 39 45 55

18 15 14 19 23 19 17 18

7 5 9 7 8 10 12 13

7 4 5 6 6 8 9 9

4 3 3 4 4 5 6 6

2 1 2 2 3 4 5 6

38 29 33 39 44 45 48 51

19 16 15 13 16 11 14 13

4 7 5 7 8 6 10 11

8 7 8 7 8 5 7 8

12 8 7 7 6 4 5 8

9 8 6 7 10 5 8 7

50 47 41 41 48 31 44 47

1 2 http://dx.doi.org/10.1787/516614313683

Table B.17. Top five agro-food import commodities by country (cont.)Percentage share of agro-food imports

1998 1999 2000 2001 2002 2003 2004 2005

AG

RIC

ULT

UR

AL P

OLIC

IES

IN N

ON

-OEC

D C

OU

NT

RIE

S: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OE

CD

2007

Bulgaria


Sugars and sugar confectionery HS-17 n.a. n.a. n.a. n.a. n.a. n.a. 22 22


Edible fruit, nuts, peel of citrus fruit, melons HS-08 n.a. n.a. n.a. n.a. n.a. n.a. 4 2

Residues, wastes of food industry, animal fodder HS-23 n.a. n.a. n.a. n.a. n.a. n.a. 4 5

Sum of above n.a. n.a. n.a. n.a. n.a. n.a. 34 38Romania

Meat and edible meat offal HS-02 15 1 3 3 8 7 2 3

Tobacco and manufactured tobacco substitutes HS-24 2 7 5 7 6 7 11 12


Sugars and sugar confectionery HS-17 8 11 12 7 12 13 18 11

Miscellaneous edible preparations HS-21 2 2 4 5 10 11 12 11

Sum of above 29 25 28 25 40 43 46 42

Russia


Edible fruit, nuts, peel of citrus fruit, melons HS-08 n.a. n.a. n.a. n.a. n.a. n.a. 8 7


Dairy products, eggs, honey, edible animal product HS-04 n.a. n.a. n.a. n.a. n.a. n.a. 5 5



Ukraine



Cocoa and cocoa preparations HS-18 n.a. n.a. n.a. n.a. n.a. n.a. 4 8




n.a.: not available.Commodities grouped by Harmonised System chapters according to WTO agro-food definition.Source: UN, UN Comtrade database, 2006.

1990 1991 1992 1993 1994 1995 1996 1997

http://dx.doi.org/10.1787/516614313683

http://dx.doi.org/10.1787/516614313683

http://dx.doi.org/10.1787/516614313683

http://dx.doi.org/10.1787/516614313683

http://dx.doi.org/10.1787/516614313683

http://dx.doi.org/10.1787/516614313683

AN

NEX

B

AG

RIC

U

Table B.18. Top five export destinationsPercentage share of agro-food exports

1998 1999 2000 2001 2002 2003 2004 2005

12 13 14 12 12 13 12 11

4 5 3 7 7 7 5 8

4 2 3 4 6 8 8 7

9 10 10 7 8 8 7 7

7 7 7 7 6 7 6 5

35 38 37 36 39 42 38 38

43 44 45 42 40 40 37 35

32 35 35 36 32 28 32 29

6 7 7 8 9 10 10 11

6 8 11 10 11 12 9 10

17 14 12 12 11 10 11 10

4 3 3 3 3 3 3 3

64 67 68 69 66 64 66 63

12 11 11 11 9 9 11 13

12 16 14 14 15 13 12 12

2 3 3 2 2 3 3 8

7 6 6 5 4 5 7 6

11 12 11 8 7 5 6 5

9 3 4 5 6 9 8 5

41 39 37 34 34 35 35 36

19 22 20 17 17 17 19 18

n.a. n.a. 11 10 11 12 14 12

n.a. n.a. 9 9 8 9 11 10

n.a. n.a. 2 2 5 4 3 7

n.a. n.a. 6 8 5 4 4 6

n.a. n.a. 6 6 6 5 5 5

n.a. n.a. 33 34 34 35 37 39

n.a. n.a. 41 39 41 45 49 44

LTU

RA

L POLIC

IES IN

NO

N-O

ECD

CO

UN

TR

IES: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OEC

D 2007

183

1990 1991 1992 1993 1994 1995 1996 1997

Brazil

Netherlands 17 15 17 18 19 16 18 18

Russia n.a. n.a. 1 2 1 4 3 4

China 2 1 1 0 3 5 5 4

USA 20 16 15 14 11 9 11 9

Germany n.a. 7 6 5 5 4 5 7

Sum of above n.a. 39 40 38 40 38 41 42

Memorandum item: EU1 46 48 49 46 47 43 44 46

China

Japan n.a. n.a. 25 26 31 32 35 31

USA n.a. n.a. 5 5 4 5 5 6

Korea n.a. n.a. 7 7 7 5 7 9

China, Hong Kong SAR n.a. n.a. 21 18 22 22 17 19

Germany n.a. n.a. 4 4 3 3 3 3

Sum of above n.a. n.a. 62 59 67 67 67 67

Memorandum item: EU1 n.a. n.a. 11 11 9 10 11 10

India

USA 7 9 11 11 12 9 10 10

China 0 0 0 0 1 1 4 5

Saudi Arabia 4 6 8 8 6 4 5 6

Japan 12 11 11 12 14 9 10 11

Bangladesh 1 2 1 1 1 6 2 2

Sum of above 23 28 31 32 35 28 31 35


South Africa

United Kingdom n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Netherlands n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Zimbabwe n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Japan n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

USA n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.


Memorandum item: EU1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

AN

NEX

B

184

8 7 5 6 11 11 12

5 6 7 6 8 9 8

3 1 2 9 2 4 6

9 9 9 7 10 8 6

5 3 6 8 7 6 6

30 26 28 36 37 37 39

39 33 38 44 41 46 46

14 18 24 17 19 21 18

13 9 4 6 7 7 9

3 1 1 3 1 4 9

6 7 9 10 11 10 8

7 10 8 8 10 8 7

43 45 47 46 48 50 52

44 49 55 52 57 66 65

14 15 13 8 10 14 13

4 6 9 8 14 11 11

0 1 1 5 3 5 9

5 3 2 2 2 6 5

0 0 1 2 3 5 4

23 26 26 24 32 40 43

26 25 21 24 15 21 16

36 41 35 26 34 31 31

1 1 4 4 5 3 6

1 2 6 11 2 2 6

8 5 3 3 2 3 3

1 2 2 2 4 4 3

47 51 50 45 47 44 49

13 19 20 24 15 22 22

1 2 http://dx.doi.org/10.1787/563788810527

Table B.18. Top five export destinations (cont.)Percentage share of agro-food exports

1999 2000 2001 2002 2003 2004 2005

AG

RIC

ULT

UR

AL P

OLIC

IES

IN N

ON

-OEC

D C

OU

NT

RIE

S: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OE

CD

2007

Bulgaria

Turkey n.a. n.a. n.a. n.a. n.a. n.a. 4 5 7

Greece n.a. n.a. n.a. n.a. n.a. n.a. 5 4 4

Spain n.a. n.a. n.a. n.a. n.a. n.a. 0 0 1

Germany n.a. n.a. n.a. n.a. n.a. n.a. 6 6 9

Italy n.a. n.a. n.a. n.a. n.a. n.a. 2 3 4

Sum of above n.a. n.a. n.a. n.a. n.a. n.a. 18 18 25

Memorandum item: EU1 n.a. n.a. n.a. n.a. n.a. n.a. 26 28 34

Romania

Italy 9 6 7 7 9 10 8 9 12

Turkey 1 8 7 14 10 14 12 13 11

Spain n.a. 0 0 0 0 1 0 0 1

Greece 0 1 1 2 3 2 1 3 4

Germany n.a. 21 17 12 10 10 6 7 8

Sum of above n.a. 36 32 34 32 37 27 31 36

Memorandum item: EU1 42 39 36 30 29 31 23 27 35

Russia

Kazakhstan n.a. n.a. n.a. n.a. n.a. n.a. 12 9 10

Ukraine n.a. n.a. n.a. n.a. n.a. n.a. 3 3 3

Egypt n.a. n.a. n.a. n.a. n.a. n.a. 0 0 0

Azerbaijan n.a. n.a. n.a. n.a. n.a. n.a. 2 1 1

Georgia n.a. n.a. n.a. n.a. n.a. n.a. 1 1 1



Ukraine

Russia n.a. n.a. n.a. n.a. n.a. n.a. 49 41 33

Saudi Arabia n.a. n.a. n.a. n.a. n.a. n.a. 1 1 0

Spain n.a. n.a. n.a. n.a. n.a. n.a. 2 4 4

Belarus n.a. n.a. n.a. n.a. n.a. n.a. 7 8 5

Moldova n.a. n.a. n.a. n.a. n.a. n.a. 1 2 1



n.a.: not available.1. EU12 for 1990-94 including ex-GDR; EU15 for 1995-2003; EU25 from 2004.Source: UN, UN Comtrade database, 2006.

1990 1991 1992 1993 1994 1995 1996 1997 1998

http://dx.doi.org/10.1787/563788810527

http://dx.doi.org/10.1787/563788810527

http://dx.doi.org/10.1787/563788810527

http://dx.doi.org/10.1787/563788810527

http://dx.doi.org/10.1787/563788810527

http://dx.doi.org/10.1787/563788810527

AN

NEX

B

AG

RIC

U

Table B.19. Top five import origin countriesPercentage share of agro-food imports

1998 1999 2000 2001 2002 2003 2004 2005

44 47 47 47 41 40 43 43

5 5 7 7 10 11 7 7

10 8 7 7 7 8 7 7

8 6 6 6 9 10 9 6

3 3 3 3 3 3 4 4

70 69 70 70 70 72 69 67

12 13 13 15 14 13 16 17

22 21 23 24 22 27 27 23

8 4 5 7 9 11 10 11

6 6 7 9 7 12 10 10

8 11 12 11 12 6 9 8

6 6 4 3 6 6 5 5

50 47 51 54 56 62 61 57

9 12 10 8 7 6 5 7

11 10 16 13 20 28 28 20

8 8 12 11 9 9 9 12

3 6 1 4 4 3 10 8

6 6 8 8 6 5 5 5

2 5 5 5 5 4 4 5

29 34 42 41 44 50 55 51

7 7 4 5 5 4 4 4

n.a. n.a. 2 5 7 7 10 12

n.a. n.a. 11 14 12 11 17 12

n.a. n.a. 11 7 9 8 8 8

n.a. n.a. 4 6 5 6 8 7

n.a. n.a. 10 7 6 6 6 6

n.a. n.a. 39 40 39 37 48 45

n.a. n.a. 26 23 20 22 20 23

LTU

RA

L POLIC

IES IN

NO

N-O

ECD

CO

UN

TR

IES: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OEC

D 2007

185

1990 1991 1992 1993 1994 1995 1996 1997

Brazil

Argentina 35 31 37 31 33 33 35 38

Paraguay 11 6 6 6 6 6 7 7

Uruguay 11 8 7 7 8 8 8 8

USA 11 13 7 7 13 13 10 10

Chile 4 3 4 3 3 4 3 3

Sum of above 72 62 61 54 63 63 64 67


China

USA n.a. n.a. 19 16 18 29 22 24

Brazil n.a. n.a. 1 1 7 5 8 10

Argentina n.a. n.a. 2 2 2 2 4 5

Australia n.a. n.a. 10 16 14 6 13 11

Malaysia n.a. n.a. 4 8 9 6 5 5

Sum of above n.a. n.a. 36 42 49 49 52 54

Memorandum item: EU1 n.a. n.a. 8 8 7 11 6 7

India

Indonesia 5 3 2 4 5 6 9 9

Argentina 0 0 1 1 2 5 7 4

Brazil 1 1 1 1 15 5 1 3

USA 15 22 19 17 9 11 8 8

China 1 0 3 7 13 4 3 3

Sum of above 22 26 25 31 43 31 27 26


South Africa

Brazil n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Argentina n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

USA n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Thailand n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

United Kingdom n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.


Memorandum item: EU1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

AN

NEX

B

186

11 11 14 10 10 16 18

11 11 11 9 10 10 10

6 7 6 7 6 5 6

6 5 5 6 5 4 5

5 4 4 5 5 6 5

39 38 40 38 37 41 44

39 43 43 42 40 47 49

8 6 8 9 6 8 9

8 11 14 8 8 11 9

4 4 5 9 5 9 9

13 15 15 10 13 8 7

4 3 4 5 4 5 5

36 39 45 42 37 41 40

36 32 33 38 34 51 53

8 5 10 12 12 9 13

7 8 7 6 8 9 8

7 6 8 7 6 6 6

10 10 11 7 6 6 5

4 5 4 5 4 4 4

36 35 40 38 36 34 36

28 26 27 30 28 34 32

7 11 12 12 16 15 16

8 7 6 8 5 7 7

7 7 9 9 13 9 7

3 2 3 4 3 4 6

5 5 5 5 3 4 4

29 32 35 39 41 39 41

24 25 23 26 20 35 36

1 2 http://dx.doi.org/10.1787/605200148304

Table B.19. Top five import origin countries (cont.)Percentage share of agro-food imports

1999 2000 2001 2002 2003 2004 2005

AG

RIC

ULT

UR

AL P

OLIC

IES

IN N

ON

-OEC

D C

OU

NT

RIE

S: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

2007 – ISB

N 978-92-64-03121-0 – ©

OE

CD

2007

Bulgaria

Brazil n.a. n.a. n.a. n.a. n.a. n.a. 6 12 9

Greece n.a. n.a. n.a. n.a. n.a. n.a. 11 11 12


Netherlands n.a. n.a. n.a. n.a. n.a. n.a. 5 4 7

Turkey n.a. n.a. n.a. n.a. n.a. n.a. 3 3 4



Romania

Germany n.a. 6 6 4 6 7 7 6 7

Brazil 1 1 2 3 5 5 6 4 5

USA 18 4 7 13 13 9 9 6 6

Hungary 7 4 7 5 6 8 4 9 15

Austria 2 4 3 2 3 4 3 3 4

Sum of above n.a. 20 26 27 34 33 30 28 37

Memorandum item: EU1 32 38 39 43 31 36 38 37 35

Russia


Ukraine n.a. n.a. n.a. n.a. n.a. n.a. 16 6 5


USA n.a. n.a. n.a. n.a. n.a. n.a. 10 11 12




Ukraine

Russia n.a. n.a. n.a. n.a. n.a. n.a. 3 6 10



Poland n.a. n.a. n.a. n.a. n.a. n.a. 2 3 3




n.a.: not available.1. EU12 for 1990-94 including ex-GDR; EU15 for 1995-2003; EU25 from 2004.Source: UN, UN Comtrade database, 2006.

1990 1991 1992 1993 1994 1995 1996 1997 1998

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ANNEX B

Table B.20. Gross Agricultural Output, totalPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil –4.5 6.1 6.0 0.5 6.9 5.5 –1.4 3.7 1.2 7.7 3.1 5.6 6.2 7.5 5.0 –0.3

China 7.7 3.8 4.8 8.1 4.7 7.9 6.6 4.8 3.9 3.2 4.3 3.0 4.9 2.4 6.4 2.9

India 0.5 0.8 4.7 2.6 3.6 2.8 4.3 1.5 3.1 4.8 0.0 3.1 –5.5 9.5 0.6 0.1

South Africa –1.0 1.5 –15.5 14.3 6.2 –14.7 19.4 1.2 –6.5 6.4 10.0 –4.6 5.7 –0.4 1.8 3.6

Bulgaria –7.8 –7.5 –9.0 –18.1 –2.8 8.2 –15.3 5.3 3.0 1.9 –11.5 0.3 5.5 –1.0 2.2 –8.6

Romania –2.9 0.8 –13.3 10.2 0.2 4.5 1.3 3.4 –7.5 4.0 –14.8 22.7 –3.5 7.5 18.1 –12.9

Russia –3.6 –5.0 –9.0 –4.0 –12.0 –8.0 –5.0 2.0 –13.2 4.1 7.7 7.5 1.5 1.4 3.1 2.0

Ukraine –3.7 –13.2 –8.3 1.5 –16.5 –3.6 –9.5 –1.8 –9.6 –6.9 9.8 10.2 1.2 –11.0 19.7 –0.1


Table B.21. Gross Agricultural Output, cropsPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil –8.2 1.1 6.4 –1.3 7.9 2.6 –5.7 6.4 1.5 7.2 1.9 7.3 5.8 9.7 3.8 –0.6

China 7.4 1.6 3.2 6.6 1.7 6.8 8.0 2.7 2.1 3.2 3.7 2.6 4.9 0.5 6.7 2.1

India –0.9 1.0 4.8 2.1 3.5 1.7 4.8 0.7 2.4 4.9 –1.7 2.4 –9.1 12.5 0.1 –0.4

South Africa –11.1 1.5 –27.1 31.4 12.2 –20.0 31.4 –1.2 –7.8 8.6 7.2 –8.2 8.5 –4.0 2.7 7.2

Bulgaria –13.1 3.6 –13.5 –24.7 14.3 10.6 –30.5 20.4 –0.1 –1.4 –17.3 15.0 8.0 –1.0 9.0 –10.4

Romania - 7.2 4.3 - 14.8 14.6 0.3 5.4 1.7 9.9 - 11.1 11.7 –20.8 35.3 –11.3 10.0 26.8 –18.0

Russia –7.5 0.4 –5.0 –3.0 –10.0 –5.0 0.3 7.3 –23.5 9.1 13.6 10.8 0.0 2.9 4.2 7.0

Ukraine –6.6 –16.8 0.3 10.8 –22.8 2.7 –8.9 6.1 –17.2 –10.3 21.9 12.4 –1.6 –14.2 33.6 –2.7


Table B.22. Gross Agricultural Output, livestockPer cent change from previous year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 1.8 14.1 5.5 3.1 5.4 9.5 4.3 0.4 0.8 8.4 4.5 3.6 6.7 4.8 6.5 0.0

China 8.8 11.3 9.6 12.6 13.2 10.5 3.3 10.1 8.1 3.1 5.7 3.9 4.9 6.6 5.7 4.6

India 4.5 0.5 4.3 4.3 3.9 6.0 2.7 3.6 4.8 4.6 4.2 4.6 2.6 3.5 1.7 1.2

South Africa 14.1 0.9 1.2 –1.6 –2.5 –5.0 0.1 5.2 –1.3 2.6 11.6 –0.1 2.5 4.5 0.6 –0.1

Bulgaria –3.4 –15.7 –4.8 –12.7 –15.0 5.9 –0.1 –5.2 5.6 4.8 –4.8 6.0 –21.0 –13.0 7.0 4.0

Romania 2.2 –3.8 –10.5 4.2 –0.1 2.9 0.5 –6.3 –1.2 –4.6 –3.3 2.1 10.2 4.6 2.9 –1.4

Russia –0.9 –7.0 –12.0 –5.0 –13.0 –10.0 –11.0 –5.3 –1.8 –0.7 0.8 3.5 3.2 6.6 –2.4 0.1

Ukraine –1.2 –9.6 –16.3 –8.9 –8.0 –10.9 –10.4 –12.2 2.5 –2.4 –4.7 7.0 5.6 –6.2 0.9 4.5



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ANNEX B

2005

55 724

427 613

235 913

14 707

5 879

19 309

78 000

38 016

286057

2005

4 773

97 450

72 000

1 804

3 478

7 480

47 698

18 699

237606

2005

37 383

149 720

33 400

12 670

2 332

11 884

28 240

18 466

665373

Table B.23. Total cereal productionThousand tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 32 490 36 682 44 058 43 073 45 849 49 642 44 962 44 876 40 743 47 431 45 897 57 117 50 879 67 328 63 812

China 404 413 398 464 404 275 407 930 396 460 418 664 453 665 445 931 458 396 455 193 407 336 398 395 399 998 376 123 413 166

India 193 919 193 101 201 468 208 627 211 941 210 013 218 750 223 232 226 877 236 206 234 866 242 964 206 570 235 856 232 630

South Africa 11 565 11 299 5 054 12 802 15 987 7 511 13 667 13 250 10 221 10 065 14 528 10 732 13 053 11 825 12 352

Bulgaria 8 216 9 072 6 644 5 717 6 462 6 572 3 581 6 218 5 387 5 207 4 259 4 893 6 773 3 828 7 508

Romania 17 174 19 307 12 289 15 493 18 184 19 883 14 200 22 100 15 453 17 037 10 478 18 871 14 357 12 964 24 403

Russia 116 676 89 094 106 855 99 094 81 297 63 406 69 341 88 553 47 858 54 706 65 506 85 000 86 600 67 200 78 100

Ukraine 51 009 38 674 38 537 45 623 35 497 33 930 24 536 35 472 26 471 24 369 24 459 39 671 38 804 20 234 41 809


Table B.24. Wheat productionThousand tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 3 094 2 917 2 796 2 197 2 096 1 534 3 293 2 489 2 270 2 462 1 726 3 367 3 106 6 154 5 819

China 98 230 95 950 101 590 106 390 99 300 102 210 110 570 123 290 109 730 113 880 99 640 93 870 90 290 86 490 91 950

India 49 850 55 134 55 690 57 210 59 840 65 767 62 097 69 350 66 345 71 288 76 369 69 681 72 766 65 800 72 060

South Africa 1 709 2 142 1 324 1 984 1 840 1 977 2 712 2 429 1 892 1 733 2 428 2 504 2 438 1 547 1 687

Bulgaria 5 292 4 497 3 443 3 618 3 754 3 435 1 802 3 575 3 800 3 155 3 406 4 077 4 123 2 004 3 961

Romania 7 289 5 473 3 206 5 314 6 135 7 667 3 144 7 157 5 182 4 661 4 434 7 735 4 421 2 479 7 812

Russia 49 596 38 899 46 167 43 547 32 129 30 119 34 917 44 258 27 012 30 995 34 455 46 982 50 609 34 104 45 413

Ukraine 30 374 21 155 19 507 21 831 13 857 16 273 13 547 18 404 14 937 13 585 10 160 21 333 20 556 3 599 17 520


Table B.25. Coarse grain productionThousand tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 21 976 24 277 31 256 30 769 33 212 36 882 33 025 34 035 30 757 33 260 33 146 43 568 37 316 50 964 44 809

China 114 567 115 900 113 890 121 270 118 660 128 680 145 600 119 470 147 810 140 670 117 670 125 030 133 160 127 140 140 530

India 32 552 25 925 36 778 31 017 29 461 28 805 34 153 30 182 31 477 30 422 31 097 33 383 26 203 37 856 32 570

South Africa 9 853 9 154 3 727 10 816 14 143 5 531 10 953 10 818 8 326 8 329 12 097 8 224 10 612 10 275 10 669

Bulgaria 2 817 4 464 3 114 2 160 3 018 3 200 1 746 2 592 2 118 2 499 1 515 1 912 2 537 1 724 3 443

Romania 9 818 13 802 9 043 10 143 12 033 12 192 11 033 14 933 10 266 12 372 6 040 11 134 9 935 10 485 16 586

Russia 58 443 45 154 56 873 51 991 45 998 31 321 32 284 42 215 19 512 22 406 29 285 35 919 33 760 31 007 30 348

Ukraine 16 469 14 721 15 951 20 826 19 024 16 007 9 820 15 926 10 691 10 304 13 520 17 461 17 364 15 979 23 396



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ANNEX B

Table B.26. Total meat productionThousand tonnes, carcass weight

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 7 709 9 465 10 112 10 685 11 489 12 808 12 752 12 960 13 283 14 588 15 434 15 974 17 308 18 388 19 919 19 919

China1 30 410 33 362 36 398 40 543 44 720 48 244 45 840 52 688 57 238 59 490 61 254 63 339 65 865 69 329 72 448 77 431

India 3 929 4 023 4 285 4 467 4 494 4 631 4 785 4 669 4 835 4 998 5 304 5 515 5 701 5 941 6 032 6 297

South Africa 1 679 1 587 1 578 1 512 1 453 1 558 1 626 1 639 1 662 1 840 1 711 1 777 1 891 1 991 2 083 2 118

Bulgaria 791 659 650 565 447 481 505 450 411 502 479 199 156 166 188 199

Romania 1 694 1 544 1 402 1 333 1 297 1 188 1 211 1 167 1 170 1 103 990 973 1 056 1 163 1 080 1 105

Russia 10 112 9 375 8 260 7 513 6 803 5 796 5 336 4 854 4 703 4 313 4 431 4 394 4 694 4 936 4 994 4 914

Ukraine 4 358 4 029 3 401 2 815 2 677 2 294 2 113 1 875 1 706 1 695 1 663 1 517 1 648 1 725 1 600 1 597

1. Figures for 1996-2005 take into account results of the First Agricultural Census of 1997. Figures for 1990-95 were not revisedand are likely overestimated.


Table B.27. Beef and veal productionThousand tonnes, carcass weight

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 4 132 4 357 4 563 4 654 4 970 5 529 6 045 4 973 5 066 6 413 6 579 6 824 7 139 7 569 8 674 9 167

China1 1 144 1 397 1 654 2 139 2 535 3 296 3 557 4 409 4 799 5 054 5 328 5 488 5 846 6 304 6 759 7 115

India 1 325 1 228 1 279 1 356 1 361 1 365 1 370 1 378 1 401 1 421 1 442 1 452 1 463 1 473 1 483 1 494

South Africa 665 704 694 611 508 507 502 496 512 625 525 574 610 632 672 699

Bulgaria 126 115 154 122 99 71 80 67 45 65 73 22 24 29 30 25

Romania 317 317 250 252 258 202 177 185 186 182 181 177 191 227 235 248

Russia 4 329 3 989 3 632 3 359 3 240 2 733 2 630 2 366 2 246 1 868 1 897 1 837 1 957 1 990 1 951 1 793

Ukraine 1 543 1 457 1 284 1 072 1 108 939 850 758 645 645 615 527 569 591 505 459



Table B.28. Pigmeat productionThousand tonnes, carcass weight

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 1 040 1 110 1 200 1 230 1 330 1 430 1 600 1 520 1 650 1 684 2 556 2 730 2 872 2 698 2 679 2 940

China1 24 016 25 824 27 647 29 836 32 613 33 401 31 580 35 963 38 837 40 056 40 314 41 845 43 266 45 186 47 016 50 106

India 417 434 445 469 477 495 514 462 466 473 476 483 487 490 497 497

South Africa 131 113 130 120 119 127 128 125 119 123 104 111 125 143 146 125

Bulgaria 408 362 319 277 210 256 252 225 247 258 239 51 62 71 78 74

Romania 788 834 789 761 775 673 631 667 620 550 480 490 508 568 502 530

Russia 3 480 3 190 2 784 2 432 2 103 1 865 1 705 1 545 1 505 1 485 1 568 1 547 1 583 1 706 1 644 1 520

Ukraine 1 253 1 129 940 807 729 654 652 586 552 546 563 498 507 527 467 413




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ANNEX B

Table B.29. Milk productionMillion tonnes

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 15.08 15.55 16.27 16.07 16.27 16.99 19.09 19.24 19.27 19.66 20.38 21.15 22.31 23.32 23.32 23.32

China1 7.04 7.60 8.07 8.15 8.68 9.46 7.36 6.81 7.45 8.07 9.19 11.23 14.00 18.49 23.68 28.65

India 53.68 54.06 56.41 58.86 61.40 65.25 66.84 70.65 74.05 78.10 80.83 84.80 86.80 89.30 91.00 91.94

South Africa n.a. n.a. n.a. 1.88 1.89 2.01 2.15 1.97 2.11 2.20 1.96 1.93 2.00 1.93 2.04 2.16

Bulgaria 2.46 2.07 1.86 1.58 1.46 1.45 1.45 1.48 1.64 1.71 1.71 1.78 1.51 1.50 1.60 1.64

Romania 3.81 4.06 3.86 4.07 4.68 5.04 5.06 5.01 5.25 5.20 5.01 5.16 5.35 5.59 5.72 5.84

Russia 55.72 51.89 47.24 46.52 42.18 39.24 35.82 34.14 33.26 32.27 32.28 32.91 33.51 33.37 32.17 31.15

Ukraine 24.51 22.41 19.11 18.38 18.14 17.27 15.82 13.77 13.75 13.36 12.66 13.44 14.14 13.66 13.71 13.71

n.a.: not available.1. Figures for 1996-2005 take into account results of the First Agricultural Census of 1997. Figures for 1990-95 were not revised

and are likely overestimated.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

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AN

NEX

B

AG

RIC

U

Table B.30. Production of selected commoditiesThousand tonnes

2000 2001 2002 2003 2004 2005

31 879 41 955 35 933 47 988 41 806 34 860

106 000 114 090 121 310 115 830 130 290 139 370

12 043 13 160 11 200 14 900 14 100 14 500

7 772 10 077 9 705 9 737 11 749 n.a.

11 090 10 184 10 457 10 320 13 277 13 141

187 910 177 580 174 540 160 660 179 090 180 590

127 400 139 900 107 600 132 200 128 000 130 513

2 010 2 646 2 170 2 202 3 798 3 727

13 251 15 971 14 748 14 579 18 960 17 100

4 923 5 104 4 450 7 040 7 700 7 500

76 104 47 41 72 52

2 561 2 849 3 126 3 047 2 931 2 951

66 318 64 596 70 223 68 139 70 036 73 037

24 713 22 488 24 450 25 000 25 000 25 000

1 594 1 662 1 556 1 620 1 819 1 909

327 705 345 942 363 721 389 849 416 256 420 121

69 299 77 966 92 203 91 930 90 979 88 730

299 230 295 956 301 000 281 600 236 180 232 320

23 876 21 157 23 013 20 419 19 095 21 265

LTU

RA

L POLIC

IES IN

NO

N-O

ECD

CO

UN

TR

IES: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

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N 978-92-64-03121-0 – ©

OEC

D 2007

191

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Maize

Brazil 21 348 23 624 30 506 30 056 32 488 36 267 32 185 32 948 29 602 32 038

China 96 820 98 770 95 380 102 700 99 280 111 990 127 470 104 310 132 950 128 090

India 8 962 8 064 9 992 9 601 8 884 9 534 10 769 10 816 11 148 11 510

South Africa 8 614 3 277 9 997 13 275 4 866 10 171 10 136 7 693 7 946 11 455

Rice, paddy

Brazil 7 421 9 488 10 006 10 107 10 541 11 226 8 644 8 352 7 716 11 710

China 189 330 183 810 186 220 177 510 175 930 185 230 195 100 200 730 198 710 198 490

India 111 517 112 042 109 001 120 400 122 640 115 440 122 500 123 700 129 055 134 496

Seed cotton

Brazil 1 921 2 080 1 885 1 135 1 368 1 451 954 822 1 173 1 414

China 13 523 17 025 13 524 11 217 13 023 14 304 12 609 13 809 13 503 11 487

India 5 020 4 955 5 816 5 480 6 064 6 560 7 260 5 535 6 281 5 880

South Africa 149 116 53 32 68 64 113 72 104 136

Potatoes

Brazil 2 234 2 267 2 432 2 368 2 488 2 692 2 406 2 670 2 784 2 905

China 32 031 30 441 37 826 45 942 43 836 45 984 53 079 57 260 64 618 56 141

India 14 771 15 206 16 388 15 230 17 392 17 401 18 843 24 216 17 648 23 611

South Africa 1 261 1 323 1 068 1 279 1 284 1 426 1 592 1 579 1 555 1 674

Sugar Cane

Brazil 262 674 260 888 271 475 244 531 292 102 303 699 317 106 331 613 345 255 333 848

China 63 451 72 695 78 869 68 997 66 430 70 279 71 260 83 012 87 204 78 108

India 225 569 241 046 254 000 228 030 229 670 275 540 281 100 277 560 262 090 295 730

South Africa 18 083 20 078 12 955 11 244 15 683 16 714 20 951 22 155 22 930 21 223

AN

NEX

B

192

32 735 39 058 42 769 52 018 49 793 52 700

15 410 15 410 16 510 15 390 17 400 16 350

5 276 5 963 4 558 7 900 7 500 6 600

226 223 137 220 273 n.a.

36 300 33 306 35 765 34 695 36 095 35 788

64 491 68 941 72 003 78 135 83 238 82 456

42 137 42 691 46 231 46 961 47 031 47 031

4 925 4 873 5 276 5 618 5 463 5 447

21 330 16 983 18 531 16 918 18 271 17 805

1 181 1 488 1 643 2 013 2 311 2 412

3 000 2 860 3 120 3 070 3 100 3 100

1 156 1 118 1 263 1 267 1 330 1 140

1 904 1 820 2 650 1 997 2 466 2 179

11.6 17.2 19.5 23.1 25.0 27.0

292 301 301 275 270 275

578 565 670 656 921 879

2 564 2 359 2 454 2 263 2 410 2 686

520 340 550 490 598 598

704 722 766 789 855 941

837 848 847 846 851 831

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Table B.30. Production of selected commodities (cont.)Thousand tonnes

2000 2001 2002 2003 2004 2005

AG

RIC

ULT

UR

AL P

OLIC

IES

IN N

ON

-OEC

D C

OU

NT

RIE

S: MO

NIT

OR

ING

AN

D EV

ALU

AT

ION

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OE

CD

2007

Soybeans

Brazil 19 898 14 938 19 215 22 591 24 932 25 683 23 155 26 391 31 307 30 987

China 11 000 9 710 10 300 15 300 15 600 13 500 13 220 14 730 15 150 14 250

India 2 602 2 492 3 390 4 745 3 932 5 096 5 400 6 463 7 143 7 081

South Africa 135 63 69 68 59 80 120 201 188 154

Fruits

Brazil 29 824 31 592 33 065 32 531 31 582 33 884 33 852 36 779 34 190 37 199

China 20 952 24 088 26 543 32 502 37 270 44 423 48 778 53 326 56 687 64 826

India 27 359 28 040 30 458 33 885 36 298 36 045 38 186 40 681 44 342 45 284

South Africa 3 740 3 797 3 889 3 756 3 801 3 837 4 215 4 442 4 430 4 938Oranges

Brazil 17 521 18 936 19 682 18 797 17 446 19 837 21 079 23 047 20 851 22 893

China 1 374 1 711 1 405 1 750 1 790 2 123 2 182 2 110 1 185 1 435

India 2 010 1 890 1 330 1 895 2 005 2 300 2 500 2 550 2 800 3 000

South Africa 712 776 712 756 782 876 745 919 978 964

Coffee

Brazil 1 465 1 520 1 294 1 279 1 307 930 1 369 1 229 1 689 1 632

China 6.3 3.5 3.8 4.0 3.3 3.2 3.0 3.6 6.2 8.7

India 118 170 180 162 208 180 223 205 228 265

Tobacco leaves

Brazil 445 414 576 656 520 456 473 597 505 630

China 2 646 3 052 3 515 3 468 2 257 2 327 3 245 4 261 2 374 2 478

India 552 556 584 597 563 567 535 618 646 736

Tea

China 562 563 580 621 613 609 617 637 688 697

India 688 720 754 704 753 754 761 787 836 855

n.a.: not available.Source: OECD Secretariat, 2006; FAO, FOASTAT database, 2006.

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

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ANNEX B

Table B.31. Average share of household income spent on foodPer cent

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 17 n.a. n.a.

China1 59 58 58 58 59 59 56 55 53 53 49 48 46 46 47 46

China2 54 54 53 50 50 50 49 47 45 42 39 38 38 37 38 37

India 48 49 48 53 52 51 51 46 46 n.a. n.a. n.a. n.a. n.a. n.a. n.a.

South Africa n.a. n.a. n.a. n.a. n.a. 16 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Bulgaria 36 47 43 43 45 46 48 54 48 44 44 45 43 40 39 n.a.

Romania 53 55 60 62 64 57 58 59 57 60 59 56 56 55 52 50

Russia3 36 38 47 46 47 52 50 46 53 54 49 48 44 41 38 36

Ukraine n.a. 42 n.a. n.a. 52 50 48 46 48 65 65 63 61 58 58 58

n.a.: not available.1. Rural households.2. Urban households.3. Includes expenditures on food at home and in the catering system.Source: OECD Secretariat, 2006.

1 2 http://dx.doi.org/10.1787/071264572111

Table B.32. Daily food consumption Calories per capita per day (number)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil 2 736 2 846 2 844 2 845 2 896 2 887 2 935 2 961 2 952 2 988 2 985 2 996 3 034 3 146 3 157 n.a.

China 2 709 2 691 2 720 2 779 2 809 2 856 2 908 2 960 2 977 2 961 2 969 2 953 2 951 2 940 n.a. n.a.

India 2 318 2 364 2 416 2 261 2 344 2 433 2 420 2 453 2 326 2 436 2 412 2 398 2 461 2 473 n.a. n.a.

South Africa 2 869 2 862 2 752 2 814 2 806 2 802 2 790 2 814 2 837 2 834 2 892 2 912 2 954 2 962 n.a. n.a.

Bulgaria 3 538 3 187 3 140 2 967 2 855 2 870 2 706 2 640 2 795 2 765 2 827 2 796 2 872 2 885 n.a. n.a.

Romania 3 043 3 062 2 964 3 227 3 153 3 258 3 299 3 268 3 281 3 295 3 360 3 452 3 538 3 582 n.a. n.a.

Russia n.a. n.a. 2 924 2 968 2 909 2 900 2 833 2 866 2 870 2 898 2 916 3 012 3 072 3 118 n.a. n.a.

Ukraine n.a. n.a. 3 367 3 242 2 977 2 696 2 646 2 617 2 592 2 565 2 661 2 758 2 800 2 798 2 910 2 916

n.a.: not available.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

1 2 http://dx.doi.org/10.1787/466513536006

Table B.33. Annual consumption of grain and grain productsKg per capita per year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil1 110.0 109.1 109.3 110.7 109.9 105.2 105.8 105.9 106.2 107.5 100.6 107.9 107.1 118.5 n.a. n.a.

China1 211.0 207.1 207.7 205.6 199.1 196.6 200.0 197.6 194.0 190.5 183.6 177.2 167.6 160.4 n.a. n.a.

India1 159.3 163.0 169.5 150.1 156.6 164.4 164.2 160.6 150.6 154.1 152.5 152.2 156.6 158.2 n.a. n.a.

South Africa 216.5 187.2 177.4 189.5 184.5 182.4 180.5 178.2 183.0 180.9 186.7 185.6 187.6 177.2 n.a. n.a.

Bulgaria 184.2 179.3 160.4 157.2 156.1 155.5 145.8 141.7 143.4 140.6 134.8 133.1 130.2 124.2 132.2 127.0

Romania 213.6 192.6 194.1 211.5 210.5 215.8 213.1 225.0 221.1 220.1 215.3 221.2 225.0 215.0 219.8 n.a.

Russia 119.0 120.0 125.0 124.0 124.0 121.0 117.0 118.0 118.0 119.0 118.0 120.0 121.0 120.0 119.0 n.a.

Ukraine 141.0 142.5 142.5 144.5 134.8 128.4 123.5 127.0 126.4 122.4 124.9 129.6 131.2 124.5 125.6 131.3

n.a.: not available.1. The figures are derived from the FAO commodity balances and reflect the gross availability of food products per capita and

do not necessarily indicate the actual amount of food consumed by individuals.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

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ANNEX B

Table B.34. Annual consumption of meat and meat productsKg per capita per year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil1 49.7 59.0 60.8 62.1 67.4 75.8 73.5 74.6 73.2 77.6 80.3 77.7 80.1 81.2 74.0 n.a.

China1 26.3 28.4 31.0 34.0 37.2 39.6 39.1 44.3 47.5 48.5 50.7 51.6 53.2 55.6 n.a. n.a.

India1 4.5 4.5 4.7 4.8 4.8 4.8 4.8 4.6 4.7 4.8 4.9 5.1 5.1 5.2 n.a. n.a.

South Africa 55.0 43.8 42.7 40.0 37.6 39.5 40.1 39.8 39.4 42.7 39.2 63.4 41.6 42.9 44.7 45.2

Bulgaria 36.5 26.2 31.4 30.2 25.8 25.3 24.9 17.3 22.6 23.2 22.1 20.9 22.7 24.8 24.2 24.2

Romania 61.0 54.4 49.6 51.6 49.6 51.2 50.2 48.5 51.2 48.3 60.3 49.0 50.7 60.3 65.5 n.a.

Russia 75.0 69.0 60.0 53.0 45.5 55.0 51.0 50.0 48.0 45.0 41.0 47.0 50.0 52.0 53.0 n.a.

Ukraine 68.2 65.5 53.4 46.4 43.5 38.9 37.1 34.7 33.4 33.1 32.8 31.1 32.6 34.5 38.5 39.3

n.a.: not available.1. The figures are derived from the FAO commodity balances and reflect the gross availability of food products per capita and

do not necessarily indicate the actual amount of food consumed by individuals.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

1 2 http://dx.doi.org/10.1787/217123288776

Table B.35. Annual consumption of milk and dairy productsKg per capita per year

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil1 95.1 99.0 97.8 96.4 100.0 115.9 118.5 115.4 115.9 117.2 116.6 113.5 121.0 120.4 119.4 n.a.

China1 6.1 6.6 6.8 6.8 7.4 7.8 8.2 8.1 8.4 9.0 9.8 11.2 13.5 16.8 15.4 n.a.

India1 58.0 57.2 58.7 60.0 61.3 63.8 63.8 66.4 68.2 70.5 71.0 72.7 73.4 75.7 68.3 n.a.

South Africa 52.1 46.4 38.5 40.4 48.8 46.9 47.3 48.2 47.6 42.3 45.1 45.5 45.8 45.1 46.4 n.a.

Bulgaria 134.2 117.8 94.2 84.9 83.9 74.8 73.2 40.8 43.1 44.8 41.3 40.3 40.5 39.9 37.7 36.0

Romania2 144.3 168.2 168.6 182.2 184.9 194.3 198.5 198.2 200.2 199.8 200.4 203.3 215.0 225.0 238.9 n.a.

Russia 386.0 347.0 281.0 294.0 278.0 253.0 232.0 229.0 221.0 215.0 216.0 219.0 227.0 231.0 233.0 n.a.

Ukraine 373.2 345.5 284.5 264.2 256.2 243.5 230.2 210.4 213.6 210.9 199.1 205.2 225.3 226.4 226.0 227.7

n.a.: not available.1. Whole fresh milk.2. Excluding butter.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

1 2 http://dx.doi.org/10.1787/308808300417

Table B.36. Total area sown, cropsMillion hectares

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Brazil1 50.5 50.7 50.8 46.8 51.6 51.1 45.9 47.8 47.0 49.2 50.0 50.4 53.3 57.7 62.0 n.a.

China1 148.4 149.6 149.0 147.7 148.2 149.9 152.4 154.0 155.7 156.4 156.3 155.7 154.6 152.4 153.6 155.5

India n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 200.9 192.6 187.3 190.4 176.0 192.2 193.6

South Africa 7.6 7.2 6.8 7.2 7.4 6.6 7.0 7.1 6.0 6.4 6.2 6.0 6.2 6.0 5.7 5.7

Bulgaria n.a. 3.8 3.9 3.6 3.4 3.4 2.9 3.1 3.2 3.0 3.0 2.9 3.0 2.6 2.8 2.7

Romania 9.4 9.2 8.9 9.2 9.2 9.2 8.9 9.1 9.0 8.5 8.5 8.9 9.0 8.9 8.5 n.a.

Russia 117.7 115.5 114.6 111.8 105.3 102.5 99.6 96.6 91.7 88.3 85.4 84.8 84.6 79.6 78.8 77.2

Ukraine 32.4 32.0 31.5 31.3 31.0 31.0 30.1 30.3 28.8 28.3 27.2 27.9 27.5 25.1 26.8 26.0

n.a.: not available.1. Harvested area.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

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ANNEX B

2005

19.1

82.9

99.5

4.4

1.7

5.8

44.4

15.0

125128

2005

207 000

141 575

185 000

13 800

672

2 808

23 000

6 514

nd are

370560

2005

33 200

503 348

14 300

1 656

935

6 495

13 413

7 053

nd are

571061

Table B.37. Grain sown areasMillion hectares

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 18.5 19.8 20.6 18.3 20.1 19.8 17.5 17.8 15.8 17.4 17.3 18.1 17.9 19.9 20.4

China 93.6 94.1 92.6 89.3 87.9 89.8 92.6 92.4 92.5 92.0 85.6 83.0 81.8 77.1 79.8

India 102.5 100.2 99.5 100.1 100.2 99.5 100.3 100.2 100.9 102.1 102.4 100.3 93.9 98.3 95.9

South Africa 6.2 5.7 5.4 5.9 6.2 5.3 5.5 5.8 4.7 4.6 5.0 4.5 4.7 4.7 4.3

Bulgaria 2.2 2.3 2.3 2.3 2.3 2.2 1.8 2.1 2.1 1.8 1.8 2.1 2.1 1.7 1.9

Romania 5.7 6.0 5.8 6.4 6.6 6.4 5.8 6.3 5.9 5.4 5.7 6.3 6.0 5.5 6.3

Russia 63.1 61.8 61.9 60.9 56.3 54.7 53.4 53.6 50.7 46.6 45.6 47.6 47.5 42.2 43.7

Ukraine1 14.6 14.7 13.9 14.3 13.5 14.2 13.2 15.1 13.7 13.2 13.6 15.6 15.4 12.5 15.4

1. Grain and pulses for 1990 and 1991.Source: OECD Secretariat, 2006; FAO, FAOSTAT database, 2006.

1 2 http://dx.doi.org/10.1787/586484

Table B.38. All cattle inventoriesThousand heads, 1 January

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 147 102 152 136 154 229 155 134 158 243 161 228 158 289 161 416 163 154 164 621 169 876 176 389 185 347 195 552 204 513

China1 79 497 81 328 82 723 85 783 90 908 100 556 110 318 121 822 124 419 126 983 128 663 128 242 130 848 134 672 137 818

India 202 500 203 500 204 584 203 634 202 684 201 734 200 784 198 882 196 966 195 050 193 134 191 218 189 302 187 382 185 500

South Africa 13 500 13 500 13 100 12 500 12 600 13 000 13 400 13 700 13 800 13 600 13 500 13 500 13 600 13 500 13 500

Bulgaria 1 575 1 457 1 311 974 750 638 632 582 612 671 682 634 691 728 671

Romania 6 291 5 381 4 355 3 683 3 597 3 481 3 496 3 435 3 235 3 143 3 051 2 870 2 800 2 878 2 897

Russia 58 841 57 043 54 677 52 226 48 914 43 297 39 696 35 103 31 520 28 481 28 032 28 000 27 800 26 500 24 900

Ukraine 24 623 23 728 22 457 21 607 19 624 17 557 15 313 12 759 11 722 10 627 9 424 9 421 9 108 7 712 6 953

1. Figures for 1996-2005 take into account results of the First Agricultural Census of 1997. Figures for 1990-95 were not revised alikely overestimated.


Table B.39. Pig inventoriesThousand heads, 1 January

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Brazil 33 623 34 290 34 532 34 184 35 142 36 062 29 202 29 637 30 007 30 839 31 562 32 605 32 013 32 305 33 085

China1 360 898 371 210 379 911 394 070 402 943 424 787 362 836 400 348 422 563 431 442 446 815 457 430 462 915 466 017 481 891

India 12 000 12 500 12 788 13 500 13 783 14 306 14 848 13 291 13 400 13 600 13 700 13 900 14 000 14 142 14 300

South Africa 1 665 1 654 1 653 1 570 1 585 1 707 1 699 1 736 1 780 1 647 1 678 1 710 1 663 1 663 1 651

Bulgaria 4 332 4 187 3 141 2 680 2 071 1 986 2 141 1 500 1 480 1 721 1 512 788 996 1 032 931

Romania 11 671 12 003 10 954 9 852 9 262 7 758 7 960 8 235 7 097 7 194 5 848 4 797 4 447 5 058 5 145

Russia 39 982 38 314 35 384 31 520 28 557 24 859 22 631 19 115 17 348 17 248 18 271 15 708 16 047 17 337 15 980

Ukraine 19 427 17 839 16 175 15 298 13 946 13 144 11 236 9 479 10 083 10 073 7 652 8 370 9 204 7 322 6 466

1. Figures for 1996-2005 take into account results of the First Agricultural Census of 1997. Figures for 1990-95 were not revised alikely overestimated.



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(51 2007 03 1 P) ISBN 978-92-64-03121-0 – No. 55487 2007

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Agricultural Policies in Non-OECD CountriesMONITORING AND EVALUATION

Agricultural Policies in Non-OECD Countries MONITORING AND EVALUATION The agricultural sector and related support policies of many OECD trading partners are changing rapidly. This report monitors agricultural policy developments in Brazil, Bulgaria, China, India, Romania, Russia, South Africa and Ukraine following the same approach applied to OECD countries, providing a common benchmark for evaluating reforms and for facilitating international dialogue. A comprehensive statistical annex containing a wide range of contextual information for these countries is also included.

FURTHER READING

OECD Review of Agricultural Policies: BrazilOECD Review of Agricultural Policies: ChinaOECD Review of Agricultural Policies: South AfricaEnvironment, Water Resources and Agricultural Policies: Lessons from China and OECD Countries

2007 A

gricultural P

olicies in N

on-O

EC

D C

ountries M

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ITO

RIN

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ISBN 978-92-64-03121-051 2007 03 1 P -:HSTCQE=UXVWVU: 2007

2007

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