Producer Support Estimate Effects in Terms of Commodity Production – An Empirical Investigation

Abstract

The agriculture sector has steadily enjoyed government support for a relatively long period, especially in developed economies. Considerations relate to strategic behavior of countries’ leadership, in that ensuring food security is essential to avoid dependence on other countries for food supply. However, recent decades’ objectives have been focused on farmers’ income stability as well as on the environmental impacts of agriculture. While there is a consensus on the depressing effects on consumers’ and taxpayers’ welfare, the discussions on the public policy impacts on the agricultural outcome are of a wider range. Empirical studies at the farm level doubt the positive effect of farm support on their technical efficiency. This paper provides an analysis of the role of Producer Support Estimate (PSE) as a source of assistance on a commodity basis in a group of OECD and other big agricultural traders. With a special focus on the Producer Single Commodity Transfer (PSCT) effect on the countries’ commodity production levels, the general finding is that the government intervention in specific commodities investigated here may not be efficient.