KEY MESSAGES

Agricultural support is not providing desirable results for sustainability and human health, but repurposing it can be a game changer. It offers governments an opportunity to optimize the use of scarce public resources to transform food systems in ways that make them not only more efficient, but also more supportive of the SDGs.

Globally, support to agricultural producers currently accounts for almost USD 540 billion a year, or 15 percent of total agricultural production value. This support is heavily biased towards measures that are distorting (thus leading to inefficiency), unequally distributed, and harmful for the environment and human health.

Phasing out the most distorting and environmentally and socially harmful producer support (i.e. price incentives and fiscal subsidies tied to the production of a specific commodity) is essential. But this will not bear fruit if resources are not redirected towards investments for the provision of public goods and services for agriculture (i.e. research and development and infrastructure) and to decoupled fiscal subsidies.

Any repurposing strategy is dependent on a range of factors and country-specific circumstances, involving policymakers and all relevant stakeholders through public outreach and communication strategies to ensure buy-in and policy coherence across all food systems components. This includes measures to mitigate negative short-term impacts especially for the most vulnerable groups, including smallholder farmers, many of whom are women.

Six steps governments may follow to develop and implement a repurposing strategy include: estimating the support already provided; identifying and estimating the impact of the support provided; designing the approach for repurposing agricultural producer support, including identifying needed reforms; estimating the future impact of the repurposing strategy; reviewing and refining the repurposing strategy, prior to implementation; and monitoring the outcomes of the new agricultural producer support.

A few countries have begun repurposing and reforming agricultural support, but action needs to be broader, bolder and faster worldwide. The time has come for greater collaboration and cooperation across government, research institutions, non-governmental organizations and the private sector to develop the evidence on which successful repurposing strategies can be built. The United Nations Food Systems Summit 2021 and other subsequent forums present a momentous opportunity to spearhead action in this direction.

The case of Low-income countries

In low-income countries, almost all of which are found in sub-Saharan Africa, the aggregate NRA (Nominal rate of assistance) is negative, meaning that producer prices are well below the international reference price. These countries have pursued policies to lower the cost of food for consumers but also to generate revenues for the government.

The average rate of assistance are very different for the agricultural export and import subsectors. Import-competing commodities (such as staple foods like maize and rice) are often incentivized through protectionary trade measures such as import tariffs and quotas, together with some large input subsidy programmes (mainly on seeds and fertilizers). This may in turn penalize the production and affordability of more nutritious foods, such as fruits and vegetables, which form part of a healthy diet. On the contrary, export products are largely penalized (e.g. export taxes on cash crops).

Input subsidies represent on average the largest share of public budgets allocated to agriculture in sub-Saharan Africa. There are growing concerns on the effectiveness of extensive input subsidy programmes. In many cases, input subsidies do not promote climate-smart goals and are provided without any conditions or constraints to protect against the over-application of the subsidized inputs and reduce their negative externalities concerning the environment.

In low-income countries, governments continue to allocate limited expenditure and investments to general sector services, although some encouraging signs are seen in the composition of such expenditures in recent years. In some countries, infrastructural investments has been on the rise, especially for irrigation, while funding to land management and environment preservation has also increased.

Maintaining a policy mix that is disadvantageous for farmers – either through market-distorting policies or/and poor investments in public goods and general services – perpetuates subsistence farming practices, hinders growth in the sector and may discourage private investment in agriculture. All of these factors can hinder innovation, commercialization, profitability and the agricultural transformation process which is, in turn, central to creating healthier, more sustainable, equitable and efficient food systems

However, a trend towards a more neutral stance (i.e. NRP close to zero) is emerging in these countries.

It is critical for low-income countries to repurpose fiscal support to protect consumers and ensure food security and nutrition, especially for the poorest. This can be done through:

• reducing distorting support, especially on food security crops;
• Repurpose support to sustainable agriculture and farming practices (e.g. climate-resilient seeds, the use of organic fertilizers and biological pest control;
• Design well-targeted subsidies and social protection mechanisms that ensure access to affordable nutritious foods that make up healthy diets;
• Investments in general sector services, such as roads or other post-production infrastructure
• Investments in agricultural R&D;
• Investment in traditional and indigenous crops.