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The impacts of reforming agricultural policy support on cereal prices: A CGE modeling approach

Author

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  • Balie, Jean
  • Valera, Harold Glenn A.
  • Narayanan Gopalakrishnan, Badri
  • Pede, Valerien O.

Abstract

Purpose - This paper investigates the effects of the total abolition of all forms of agricultural subsidies to producers and border tariffs on the prices of staple cereals. Design/methodology/approach - The authors use the GTAP global economy-wide model and focus on 27 countries and 8 regions. The GTAP database that is used contains information on budgetary transfers to producers and market price support such as domestic price support, tariffs, export subsidies, quotas on exports or imports and other border measures. Findings - The removal of subsidies is estimated to significantly increase the prices of wheat and other cereal grains in Japan, paddy rice in Malaysia and Indonesia, processed rice in Malaysia and Indonesia and wheat in Brazil and India. When border tariffs are removed, cereal prices are projected to fall in several countries, but the decline is more pronounced for wheat in Kenya and Japan, other cereal grains in South Korea and all staples in Nepal. Research limitations/implications - The alternative scenarios on the removal of agricultural subsidies in all agricultural sectors and the elimination of border tariffs are purely speculative as the analysis ignores important political economy considerations of agricultural and food policy reforms. Practical implications - The findings from this study point to the importance of implementing additional policy measures to mitigate the possible negative effect of repurposing the support to agriculture and ensure the food security and welfare of those categories of buyers who heavily depend on the price of staple food for their livelihoods. Social implications - This study’s findings confirm that the elimination of agricultural subsidies would impact global food security directly by making staple food less affordable to the poorest and indirectly by decreasing the available household budget for other presumably more nutritious food groups. Consequently, it is expected that these price increases could make segm
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Suggested Citation

  • Balie, Jean & Valera, Harold Glenn A. & Narayanan Gopalakrishnan, Badri & Pede, Valerien O., 2021. "The impacts of reforming agricultural policy support on cereal prices: A CGE modeling approach," 2021 Annual Meeting, August 1-3, Austin, Texas 313939, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea21:313939
    DOI: 10.22004/ag.econ.313939
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    References listed on IDEAS

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    1. Hans van Meijl & Petr Havlik & Hermann Lotze-Campen & Elke Stehfest & Peter Witzke & Ignacio Perez Dominguez & Benjamin Bodirsky & Michiel van Dijk & Jonathan Doelman & Thomas Fellmann & Florian Humpe, 2017. "Challenges of Global Agriculture in a Climate Change Context by 2050 (AgCLIM50)," JRC Research Reports JRC106835, Joint Research Centre.
    2. Laborde Debucquet, David & Mamun, Abdullah & Martin, Will & Piñeiro, Valeria & Vos, Rob, 2020. "Modeling the impacts of agricultural support policies on emissions from agriculture," IFPRI discussion papers 1954, International Food Policy Research Institute (IFPRI).
    3. Abdullah Mamun & Will Martin & Simla Tokgoz, 2021. "Reforming Agricultural Support for Improved Environmental Outcomes," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1520-1549, December.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    5. Marco Springmann & Daniel Mason-D’Croz & Sherman Robinson & Keith Wiebe & H. Charles J. Godfray & Mike Rayner & Peter Scarborough, 2017. "Mitigation potential and global health impacts from emissions pricing of food commodities," Nature Climate Change, Nature, vol. 7(1), pages 69-74, January.
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    Cited by:

    1. Valera, Harold Glenn & Balie, Jean & Pede, Valerien, 2021. "The Future of Cereal Prices," SocArXiv mrfu6, Center for Open Science.

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    Keywords

    Agricultural and Food Policy; International Development; Research Methods/Statistical Methods;
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