Beneficial effects of agricultural subsidies on farming income

Kovács, Gábor

Keywords: agricultural subsidies, subsidy effectiveness, growth in income, tax-payer and consumer expenses

Increasing the beneficial effects of agricultural subsidies is one of the main aims of agricultural policy, in the sense of direct subsidies improving the income situation of the original beneficiaries – agricultural producers – rather than going to other actors in the product path. The most beneficial effect on producers’ income is achieved by those forms of subsidy that exert the least influence on the market’s supply and demand relationship. Knowing this, it can be seen that the proportion of subsidy types which most distort the market (subsidies based on product output and variable inputs), has decreased recently throughout the European Union. In contrast, the share of subsidies divorced from production, which influence the market to a lesser degree, has grown. This tendency can also be observed in Hungary, although this does not give a complete picture of the situation. According to our calculations only 52% of direct agricultural subsidies in 2006 actually increased the income of agricultural enterprises. SAPS subsidies, which are divorced from production and include no production obligation, proved to be the most beneficial (62%).

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