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The USDA spends about $3 billion a year on
agriculture and food research at more than
100 locations.
The variety of subsidies in the USA just
shows how much support their produc-
ers have and the advantage it gives them
against other producers in the world who
do not receive any support. Subsidies have
their advantages and disadvantages and
some of the underlying effects of farm sub-
sidies have an impact on the local economy
of the country of note and eventually have
an impact on trade partners, especially de-
veloping ones.
Subsidies undermine trade relations. When
a country subsidises farm production and
the result thereof is a boost in commodity
exports, this undermines foreign producers
and distorts global trade patterns. In addi-
tion to subsidies, recent USA income tax
data over the last years shows that in gen-
eral farming businesses are lightly taxed.
Conclusion
Although there are inefficiencies caused
by subsidies, it is highly unlikely that the
USA and other major South African trade
partners are willing to remove subsidies in
totality considering the benefits for their
producers. This means that the South Afri-
can government needs to use opportunities
that are unutilised from the domestic sup-
port pillar of the WTO; R2 billion, under the
amber box and unlimited support under the
blue, green and brown boxes.
These unutilised subsidy options are within
the WTO agreement and would afford South
African producers a better chance at com-
peting on the international market. What we
can learn from the USA is that they prioritise
their producers, therefore allowing them to
survive within the local economy and to be
competitive on the international front.
Budget is always an obstacle for South
Africa, but this can always be executed if
government commits towards this, and real-
locates funds, as they have been promising
for years.
Considering the unpredictable weather pat-
terns and production costs in South Africa it
would be beneficial for producers to be sub-
sidised on crop insurance and input costs.
To avoid inefficiencies, insurance money
does not have to be in the form of direct
payments; nonetheless, producers will still
get the reassurance needed should tragedy
strike.
With input costs becoming ridiculously
high annually, government can subsidise
fertiliser and chemical companies for pric-
es to decrease for the producer. Subsidis-
ing producers on crop insurance and input
costs would assist South Africa in terms of
achieving food security and competing on
the world market.
This could also create an opportunity for
small scale producers to borrow money
from banks against their insurance policy,
therefore allowing them to expand their
businesses and to create jobs. This might
be a process that could happen over time;
however, it is high time we start taking les-
sons from other major producing countries
on how to make the agricultural environ-
ment better for all producers.
Subsidies have their
advantages and disadvantages
and some of the underlying
effects of farm subsidies
have an impact on the local
economy of the country
and eventually have an impact
on trade partners, especially
developing ones.
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Grain SA/Sasol photo competition