Missing the Mark

In some areas decoupled subsidies are being discarded in favour of programs that respond better to State set objectives. In the eyes of many, these subsidies did not meet expectations. Will decoupling lead farm policies' long evolutionary road to a dead end?
Decoupling is essentially support provided regardless of the type of production or the price of agricultural products. The level of support is often determined on the basis of past history. In the 1980s and 1990s, farm subsidies were viewed as one of the causes of farm surpluses. They were then often coupled; directly related to the area under crops, the type of breeding and market conditions – ASRA is one example. These coupled subsidies were believed to prevent farmers from making market-based business decisions (note that there is some shred of truth to this). It is essentially in a perspective of limiting the influence of subsidies on crop choices that the notion of decoupling was born. The WTO gave its blessing to decoupled subsidies. So filed in the green box, they can be used without limit.

"Decoupled payments provide too much support to farmers enjoying prosperous times, while not providing adequate support to those whose cost-effectiveness is threatened."

In spite of good intentions, how does decoupled support truly influence the choice of crops or breeds based on market conditions? As professor Gouin diligently admonished in his University Laval classrooms, the complexity and the costs related to a change of agricultural production often pushed farmers to persevere in their choice despite market conditions. This is even truer for animal farms, where farming equipment and necessary expertise are highly specialized. The architects of certain decoupled programs, who believed in "farming versatility" beyond measure, were indulging in some magical thinking.

Furthermore, decoupled payments have some perverse effects. First, they provide too much support to farmers enjoying prosperous times. Just think of the direct payments regularly received by large scale farmers in Europe and North America even if grain prices are very high. However, these payments don't provide adequate support to those whose cost-effectiveness is threatened. Talk to European dairy producers, the support they receive from the State has not evolved with production costs. In short, decoupling often misses the mark.

Overall, by allocating resources more efficiently, did decoupling really have an impact on reducing surpluses? Not so sure. There are reasons to believe that the demand for grain to use as bio-fuels (oilseed crops in Europe and corn in the United States) as well as demand from China have done much more to reduce grain surpluses.

What is the future of decoupling? Beyond the budget cuts announced in Europe and the Equilibrium State Aid, it seems that the principle of decoupling will be maintained. But we shouldn't be surprised to see cynical farmers take to the streets to express their displeasure. However, in the United States, it seems to be taken for granted that direct decoupled payments, which cost the US Treasury department $4.9 billion per year, won't survive the current Farm Bill. Politically, it is difficult to financially support farmers enjoying some of the best years of their lives while the Treasury department is searching for loose change in the couch.

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