Ride high food prices to cut subsidies, boost production: OECD

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PARIS, June 29, 2008 (AFP) – Industrialised countries should seize the opportunity of high world food prices to cut subsidies for farm production, the OECD advises in a review of agriculture policies. Published as the World Trade Organization gears up for an attempt to break through agriculture, subsidies and other issues blocking a world trade deal, the review says that OECD state subsidies to producers totalled 258 billion dollars or 187 billion euros last year.

State aid was running at a record low level but still accounts for nearly a quarter of all payments received by farmers in the OECD area.

Prices for many agricultural commodities reached “historically high levels in nominal terms (in 2007), although in real terms prices were considerably lower than in the 1970s,” the review notes.

Nominal prices are current headline prices, whereas “real” prices remove the effect of inflation over a period.

The OECD argues that food prices have shot up in response to a coincidence of factors.

These were a rise in demand from emerging economies, increased energy prices, drought in key markets, speculative activity and the use of crops for the production of biofuels.

Subsidies to