Market Effects of Crop Support Measures

Governments in many OECD countries intervene in agricultural markets to boost crop producer returns by applying tariffs to the prices of imported cereals and oilseeds and/or subsidising prices paid by foreign buyers. Historically, market price support attributable to such interventions comprised the lion’s share of total financial support afforded crop producers in OECD countries. In recent years, however, the share of crop producer support due to trade policy measures has declined, while that due to payments made directly from government budgets has increased. This publication compares the market impacts of market price support and several kinds of budgetary direct payments using indicators of economic efficiency and trade distortion. The main finding is a numerical ranking of the support measures studied showing a close inverse relationship between trade distortion and transfer efficiency. That is to say, those support measures found to be most efficient in transferring income to farmers are least distorting to trade.