OECD says farm support rises as distortive measures retain large share

Highlights

OECD reports total agricultural support reached a record USD 885 billion per year in 2023-2025, rising USD 121 billion from the prior period and reversing a long-term decline.
Distortive measures constitute nearly half of all support, with emerging economies favoring price supports and OECD countries prioritizing direct government spending such as emergency disaster assistance.
Consumers face an annual net cost of USD 204 billion due to elevated food prices, while agricultural productivity growth slowed to 0.8% in 2014-2023 and public investment in innovation systems dropped to 0.5% of production value.

Record support levels and policy mix

As reported by the OECD, its Agricultural Policy Monitoring and Evaluation 2026 finds total support to the sector averages USD 885 billion per year in 2023-2025, up USD 121 billion from the previous two-year period. The increase reverses a decades-long decline in support relative to production, with support rising from 17.6% to 19.1% of the value of agricultural production across the 56 countries covered.

Nearly half of the support still takes forms most likely to distort production and trade, including measures that alter market prices, subsidise inputs or tie payments to output quantities. The OECD says emerging economies rely more heavily on policies that keep domestic agricultural prices above world prices, while OECD countries depend more on direct government spending such as emergency disaster assistance.

OECD Secretary-General Mathias Cormann says higher support does not automatically deliver better outcomes, warning that distortive measures raise costs for families and reduce efficiency. He calls for more investment in innovation and infrastructure so farmers can produce more with fewer resources and prepare better for future shocks.

Consumer costs and long-term resilience gap

Consumers bear a significant part of the burden through higher food prices, the report says. Policies that kept domestic food prices above international levels create an estimated net annual cost to consumers of USD 204 billion in 2023-2025, as extra spending on food outweighs budgetary assistance provided to households.

The OECD also says investment in research, innovation and infrastructure fails to keep pace with the sector's needs as agricultural productivity growth slows. Annual productivity growth declines from 1.8% in 1991-2000 to 0.8% in 2014-2023, while public investment in agricultural knowledge and innovation systems falls to 0.5% of production value in 2023-2025 from 0.9% in 2000-2002.

The report sets out more than 150 country-specific recommendations and identifies four priorities for reform. These include cutting reliance on support that distorts prices and trade, strengthening systemic risk management, increasing investment in research and other public goods, and aligning agricultural policy more closely with sustainability goals.

In our earlier article on Mario Draghi’s policy warning, we examined how tight monetary policy and fiscal restraint can end up undermining the investment needed for long-term growth and resilience to supply shocks. We noted his argument that central banks should keep inflation under control while avoiding interest-rate paths that unnecessarily raise the cost of capital and slow innovation and productivity.

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