agricultural policy

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Agricultural policyclick for a larger image
Fig. 6 Agricultural policy. (a) The short-term shifts in supply (S) and their effects on price (P) and quantity (Q).

(b) Long-term shifts caused by the influence of productivity improvement on supply.

agricultural policy

a policy concerned both with protecting the economic interests of the agricultural community by subsidizing farm prices and incomes, and with promoting greater efficiency by encouraging farm consolidation and mechanization.

The rationale for supporting agriculture partly reflects the ‘special case’ nature of the industry itself: agriculture, unlike manufacturing industry, is especially vulnerable to events outside its immediate control. Supply tends to fluctuate erratically from year to year, depending upon such vagaries as the weather and the incidence of pestilence and disease, S1, S2 and S3 in Fig. 6 (a), causing wide changes in farm prices and farm incomes. Over the long term, while the demand for many basic foodstuffs and animal produce has grown only slowly, from DD to D1D1 in Fig. 6 (b), significant PRODUCTIVITY improvements associated with farm mechanization, chemical fertilizers and pesticides, etc., have tended to increase supply at a faster rate than demand, from SS to S1 S1 in Fig. 6 (b), causing farm prices and incomes to fall (see MARKET FAILURE).

Farming can thus be very much a hit-and-miss affair, and governments concerned with the impact of changes in food supplies and prices (on, for example, the level of farm incomes, the balance of payments and inflation rates) may well feel some imperative to regulate the situation. But there are also social and political factors at work; for example, the desire to preserve rural communities and the fact that, even in some advanced industrial countries (for example, the European Union), the agricultural sector often commands a political vote out of all proportion to its economic weight. See ENGEL'S LAW, COBWEB THEOREM, PRICE SUPPORT, INCOME SUPPORT, COMMON AGRICULTURAL POLICY, FOOD AND AGRICULTURAL ORGANIZATION.

References in periodicals archive ?
The growers have been registered for agriculture subsidy while they have also been connected with the information technology (IT) facilities through smart phones.
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Launched in late 2001, the Doha Round remains deadlocked over the key issue of agriculture subsidy.
When Malawi's President Bingu wa Mutharika launched an agriculture subsidy programme aimed at relieving one of the worst food security situations to hit Malawi in 2005, he ran into the teeth of opposition from the UK and the US.
Britain will not cut EU rebate payments from the 15 long-standing members without agriculture subsidy reform, Foreign Secretary Jack Straw insisted last night.
The results depict unambiguous gains from the removal of agriculture subsidy when the tax rates are reduced for final consumption only.

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