Brazil Questions US Corn, Soya Subsidy

The Brazilian government is reportedly considering whether to formally question – or even challenge – the level of US farm subsidies for corn and soya, Brasilia is collecting evidence on whether such support has increased since the enactment of Washington’s 2014 Farm Bill.

Last year, Brazil posted its first trade deficit in over a decade, which has been attributed partly to falling soy prices. Domestic producers and government officials have reportedly expressed concern in recent months that increasing US subsidy levels in response to lower prices have negatively affected the soy sector, according to Brazilian newspaper O Estado de S. Paulo.

Brazil is the largest global exporter of soybeans, with sales at US$31 billion in 2014, or 10 percent of its total exports. The US, meanwhile, is the largest producer of soybeans, with Brazil a close second.

US farm subsidies

Compared with the previous legislation, the 2014 Farm Bill has eliminated or phased out direct payments to farmers, replacing them with new subsidy schemes that tie payments to market prices and yields, while expanding crop and revenue insurance subsidy programmes.

With the new legislation, US farmers are now allowed to choose from a suite of subsidised farm support programmes that help protect them from market volatility, which reduces some of the financial risk related to farming.

Farm support is now tied to recent and current production and market conditions. Some critics say that most of these new policy instruments are heavily-trade distorting and should be classified in the WTO’s “amber box” of farm subsidies..

In the coming months, US farmers will need to choose between revenue or price-based coverage, which could give a clearer indication on the current and future subsidy levels and their effects on global markets.