Excessive Foreign Farm Support Disrupts Trade, Hurts Farmers

U.S. Wheat Associates and the National Association of Wheat Growers released study findings last week that suggest excessive farm support in advanced developing countries could cost U.S. wheat farmers nearly $1 billion in revenue every year.

USW recently showed that the governments of China, India, Turkey and Brazil have dramatically increased subsidies for domestic wheat production over the past 10 years to levels that far exceed their World Trade Organization agreements. The study confirms that these policies have a detrimental effect on U.S. and world wheat farmers and global wheat trade.

“I believe we have shown through these studies that the old perceptions about farm support and trade are clearly wrong,” said USW President Alan Tracy. “Today, it is the farm subsidies in a few advanced developing countries, not developed country policies, which disrupt normal trade flows and distort world wheat prices. These rapidly growing subsidies cause direct, serious and now measurable impacts on the prices that U.S. farmers receive for their grain.”

Agricultural economist Dr. Dermot Hayes and two of his colleagues at Iowa State University conducted the study to determine what would happen to U.S. and global wheat production, trade and prices if China, India, Turkey and Brazil did not receive domestic support.

Using subsidy data from November 2014 and an econometric model, researchers found that without subsidies in those countries, annual U.S. wheat production would increase 53 million bushels, farm gate prices would increase by $0.30 per bushel, and U.S. wheat farmers would receive $947 million more a year in revenue.

“The results confirm that if domestic support were removed, wheat prices in the countries modeled would go down and farmers would plant less wheat, but domestic consumption would go up,” Hayes said. “The lower supply would lead to higher global wheat prices, which tend to benefit wheat exporting countries, including the United States.” S