The State of Food Security and Nutrition in the World 2022

As shown in the previous chapter, the world is facing major setbacks, with growing numbers of people facing hunger and food insecurity and increasing challenges to malnutrition in all its forms. Many countries are not on track or are even moving further away from reaching their SDG 2 targets. Governments must take actions to reverse this situation. There are many policy options available to this end, but the current recessionary context makes it even more challenging for many governments to increase their budgets and support to the sector. Even under such a tough economic context, however, much can and needs to be done.

Governments will need to be ingenious and start by looking at the current food and agricultural support they provide to evaluate whether this money can be reallocated more cost-effectively and efficiently to achieve development objectives. For governments all over the world, the starting point is to take stock of their support and then assess its cost-effectiveness. In the specific case of SDG 2, it is important that public support to food and agriculture starts showing increasing marginal returns, including in reducing the cost of nutritious foods and increasing the availability and affordability of healthy diets, sustainably and inclusively.

3.1 Stocktaking: What policy support is currently provided to food and agriculture?

How do governments support food and agriculture?

Governments support food and agriculture in different forms and using different types of instruments that affect agrifood systems, as presented in Figure 1 in Chapter 1. This third chapter takes stock of this support, using indicators available for some of the most common policies, which are summarized in Figure 17. These indicators reflect whether the support provided is influencing domestic prices or actors of agrifood systems are benefiting from a direct public budgetary transfer. Other policies explored further below (Section 4.2), including land regulations, food standards and labelling policies, can be part of a government’s policy toolkit for repurposing food and agricultural support to deliver affordable healthy diets.

FIGURE 17Food and agricultural policy support instruments and indicators

NOTE: “Other support” includes other agrifood systems policies that are discussed more in detail in Section 4.2.
SOURCE: Adapted from FAO, UNDP & UNEP. 2021. A multi-billion-dollar opportunity – Repurposing agricultural support to transform food systems. Rome, FAO.

Trade and market interventions in this chapter include mainly: i) border measures on imports (e.g. tariffs, tariff-rate quotas and non-tariff measures [NTMs]) and exports (e.g. export taxes, bans or licensing, or export subsidies or credits) and ii) market price control measures, such as administered prices (at which governments procure food from farmers) and minimum producer price policies. These interventions increase or depress domestic prices relative to the border price; as such, they can generate price incentives (or disincentives) for farmers. In this report, price incentives are quantified through the nominal rate of protection (NRP) indicator (Box 7).

Fiscal subsidies to producers are budgetary transfers essentially from taxpayers to individual farmers and can be granted depending on i) output (i.e. transfers made according to the level of the production quantity of a specific agricultural commodity), ii) input use (i.e. transfers made to lower the cost of variable inputs, such as seeds and fertilizers), iii) the use of other factors of production (e.g. capital, labour or land), or iv) non-commodity criteria for which production is not required (e.g. subsidies tied to environmental or landscape outcomes or lump-sum payments to all farmers subject to cross-compliance conditions). When tied to the volume or type of production or to the use of certain inputs, these subsidies are defined as coupled subsidies. On the contrary, subsidies are decoupled when farmers are not required to produce a specific commodity (or amount of it) or use certain inputs to become eligible for the subsidy. The nominal rate of assistance (NRA) indicator captures the effects of these producer subsidies by adding them to the price incentives provided by trade and market measures (Box 7).

General services support (GSS) refers to public expenditure (or budget transfers) for the provision of public or collective goods. As such, these expenditures are not directed to individual agents, such as producers, processors, traders or consumers, but they may benefit production, processing, trade and consumption of agricultural commodities in the longer term. This form of fiscal support can target:

• agricultural research and development (R&D) and knowledge transfer services (e.g. training, technical assistance and other extension services);
• inspection and control concerning agricultural product safety, pests and diseases to ensure that food products conform to regulations and product safety norms;
• infrastructure development and maintenance, such as roads, irrigation and storage facilities;
• public stockholding, including the costs of maintaining and managing reserves through market purchase interventions, such as government procurement from farmers, as well as strategic reserves built for food security purposes;ⁱ and
• food and agricultural marketing services and promotion, including collective schemes for post-production facilities and other services designed to improve the marketing environment for agriculture, promote as well as reduce post-harvest losses and to promote market exchange and trade (e.g. promotional campaigns, participation in international fairs). The food and agricultural marketing discussed in this chapter is different from “marketing” that promotes branded products to consumers as defined by the WHA; the latter is part of what is referred to in this chapter as “promotion”.^j

The GSS indicator accounts for all the public expenditures funding public goods in the food and agricultural sector (Box 7).

Fiscal subsidies to consumers are budgetary transfers from the government (and more specifically taxpayers) to intermediary (e.g. processors, traders, etc.) or final consumers of food. These transfers are meant to lower the cost of acquiring food (food subsidies), to increase consumer income (e.g. cash transfers) or to provide direct access to food (e.g. in-kind food transfers and school feeding programmes).

Some of the policy instruments described above, particularly border measures and subsidies on output and inputs, have the potential to distort trade. For this reason, multilateral trade rules play a crucial role in setting the global framework that determines the policy space for national agricultural policies. The World Trade Organization (WTO) Agreement on Agriculture (AoA), which resulted from the Uruguay Round of multilateral trade negotiations, produced a comprehensive set of disciplines on member countries’ trade and agricultural policies, seeking to reduce distortions in agricultural markets. The AoA contains binding commitments that place limits on the use of tariffs and subsidies to agricultural producers (Box 8).

How does support to food and agriculture affect agrifood systems?

Governments may support food and agriculture through the policy instruments introduced above to pursue multifaceted objectives of agrifood systems in the economic, social and health realms. Among these, food and agricultural support has the potential to affect the cost and affordability of healthy diets, by shaping production and consumption choices as well as affecting food supply chain dynamics and food environments, as summarized in Figure 1 in Chapter 1. Both its objectives and the ultimate impact of this policy support will largely depend on the country-specific context, i.e. income and development level, production structure and volume, agricultural sector performance and relevance for the economy, consumption patterns, political economy considerations, impact of climate change on agriculture, and the occurrence of emergencies (e.g. humanitarian crises, conflicts) that can affect safety and livelihood of the population.

Trade and market interventions, for instance, are usually adopted in a bid to support producer prices and thus farm income (e.g. import tariffs), or to keep prices low for consumers (e.g. export bans). LICs and MICs often use some of these measures to protect their farming sector against import competition, or to influence domestic prices for ensuring adequate supplies and access to foods for consumers. However, border measures, beyond affecting trade flows, also influence domestic food production practices and diversity of available foods (or lack thereof) and can therefore imply important trade-offs. By generating a gap between the domestic producer price and the border price of a specific agricultural commodity, these measures can, for example, favour producers of certain crops and potentially discourage production of others. Measures such as tariffs also affect consumption decisions as they raise the price of imported foods, as well as their domestic substitutes to consumers.

Fiscal subsidies to producers are generally provided to boost agricultural production and productivity and support farm income by reducing production costs. In MICs and LICs, these transfers are often used to correct for certain market failures, such as the limited availability of inputs, capital, or credit. However, when these subsidies are coupled to the use of inputs or to the volume of production, like border measures, they can greatly influence which commodities are produced and marketed and/or the type and use of inputs with important implications beyond the farm sector for the climate, food security and nutrition, equity and efficiency.

If provided without any condition, input subsidies may, for example, lead to overuse of agrochemicals and natural resources, and promote monoculture, with negative consequences on the environment and the sustainability of agrifood systems.^58,59 As discussed in more detail in Section 3.2, such subsidies can also hinder positive nutritional outcomes, in some cases by disproportionately fostering the production of cereals in the long term at the expense of other foods that contribute to healthy diets, such as fruits and vegetables.³ Moreover, these subsidies can be regressive if larger farms are more capable than smallholders of meeting requirements necessary to accessing them. These potentially negative implications are aggravated by the fact that, since these policies bring about immediate and often very tangible effects, they are politically difficult to remove, once in place.

Contrary to most types of border measures, fiscal subsidies can also drain public resources that could instead be invested in areas where returns may be higher and benefits are longer lasting, for example, in general services such as R&D, infrastructure, or marketing facilities – thus hindering efficient and more sustainable use of often-limited public funds.^60,61 However, it should be recognized that if designed with sustainability objectives in mind, fiscal subsidies may contribute to better production and livelihoods.⁶²

Subsidies decoupled from production and public expenditure on general services, especially in countries where they are low and significant productivity gaps persist, are less likely to hinder sustainability and can even promote it. These forms of support can promote production and productivity enhancements, food safety, connectivity between farmers, markets and consumers and can contribute to food security and improved nutrition in the longer term. They may also affect farm revenues or consumption expenditure indirectly. Though the positive impacts of many general services take longer to materialize compared to, for example, border measures, price control policies or input subsidies, returns of general services investments on agricultural growth and poverty reduction are recognized to be higher.^63,64,65 Properly designed, inclusive and sustainable investments in R&D, marketing services and infrastructure can also be effective in lowering the cost of nutritious foods and improving access to healthy diets, as discussed in detail in Section 3.2.⁶⁶

Subsidies to consumers, including food subsidies to processors or traders, and those provided through social protection programmes that include cash transfers, food vouchers and in-kind food transfers including school feeding programmes, can have positive effects on different outcomes.^k These subsidies, if carefully designed, can increase total household food consumption, improve dietary diversity and nutritional outcomes, as well as decrease poverty rates (see Section 3.2 for more analysis).⁶⁷ They can also affect agricultural performance, since they have the potential to alleviate liquidity and credit constraints affecting investment and production decisions.^67,68

Policy support to food and agriculture is significant but differs by policy instrument

Worldwide support for the food and agricultural sector accounted for almost USD 630 billion a year on average over 2013–2018.^l Support targeting agricultural producers individually averaged almost USD 446 billion a year in net terms (i.e. accounting for both price incentives and disincentives for farmers), which corresponds to about 70 percent of the total sector support and about 13 percent of the global value of production, on average.^m About USD 111 billion were spent yearly by governments for the provision of general services to the sector, while food consumers received USD 72 billion on average every year (Figure 18).

FIGURE 18Level and composition of global support to food and agriculture (USD billion, average 2013–2018)

SOURCE: Ag-Incentives. (forthcoming). Ag-Incentives. Washington, DC. Cited 4 May 2022. http://ag-incentives.org with data from OECD, FAO, IDB and World Bank compiled by the International Food Policy Research Institute (IFPRI).

Half of the support provided to farmers individually were price incentives (USD 202 billion net), while the rest (USD 245 billion) was in the form of fiscal subsidies, the majority (USD 175 billion) being linked to production or unconstrained use of variable inputs. Less than one-third of fiscal subsidies to producers (USD 69 billion) were decoupled from production (Figure 18).

Policy support to food and agriculture differs across country income groups and across time

The analysis of support by policy instrument indicates that, overall, price incentive measures and fiscal subsidies have been most widely used in HICs and are becoming increasingly popular across some MICs, in particular those at the upper level of income. LICs have historically implemented policies that generate price disincentives for farmers to facilitate consumers’ access to food at a lower price. These countries have limited resources to provide fiscal subsidies to producers and consumers as well as to fund general services that benefit the whole of the food and agricultural sector.

Producer support

Despite wide variations within this group, HICs have always accounted for the bulk of support to agricultural producers around the world. Seen through the NRA, in 2005 this support accounted for about 40 percent of these countries’ total production value, but the rate has significantly decreased since then, to 24 percent in 2018 (Figure 19). The level of producer support in HICs has mainly been driven by decreasing price incentives (i.e. as captured through the NRP) as part of a long-term trend that started in the 1990s and in particular, since the conclusion of the Uruguay Round of multilateral trade negotiations that led to a reduction in tariffs applied by WTO members. Moreover, from a political economy perspective, technology improvements with reduction in production and labour costs in agriculture may have also contributed to making public support less necessary in these countries. Despite the declining rate of assistance and despite providing a not negligible share (6 percent) of subsidies decoupled from production, most support to farmers in HICs still consists of trade measures that distort prices and subsidies coupled to production.

FIGURE 19Nominal rate of assistance as a share of production value, by instrument and income group

SOURCE: Ag-Incentives. (forthcoming). Ag-Incentives. Washington, DC. Cited 4 May 2022. http://ag-incentives.org with data from OECD, FAO, IDB and World Bank compiled by IFPRI.

In MICs, the profile of producer support is quite different between the UMICs and LMICs subgroups. In the former group, especially since the late 1990s, agricultural support has increased significantly, particularly in the form of price incentives generated mainly by import tariffs or other trade restrictions. In the most recent years, this support, measured by the NRA, accounted for about 16 percent of agricultural production value (Figure 19). Out of this, fiscal subsidies to agricultural producers accounted for just 5 percent of total value of production – versus almost 13 percent in high-income countries (Table 6).

TABLE 6Support to the food and agricultural sector as a share of value of production, by country income group, average 2013–2018

SOURCE: FAO based on data from OECD, FAO, IDB and World Bank compiled by IFPRI.

China largely influences the aggregate support estimates in this subgroup, given that seen as a share of value of production, the country’s support is not only rather high in its own right but also relative to the other countries. China’s rate of assistance turned positive in the early 1990s and has followed an upward trend since then, driven by increasing price incentives, especially for cereals, to attain the country’s self-sufficiency and food security goals.¹ Historically, fiscal subsidies to farmers have been small relative to price incentives, but these have expanded since 2005 and now account for about 5 percent of the country’s total value of production.

LMICs and LICs have historically protected poor consumers using trade and market policies that keep domestic prices low, implicitly penalizing the farming sector. Farmers in LMICs have consistently faced price disincentives (as reflected in a negative NRP) but have been in some cases supported through input subsidies. Other fiscal subsidies are barely used in these countries (Figure 19). The magnitude of the negative rate of assistance in LMICs has diminished recently, averaging -4 percent in the latest 2013–2018 period, up from the -10 percent in 2005–2012.

The most prominent example of a LMIC is India, where the food and agricultural policy has historically focused on protecting consumers by ensuring affordable food prices, through export restrictions (on wheat, non-basmati rice, and milk, among others) and through marketing regulations around pricing and public procurement, public food stockholding and distribution of a vast range of agricultural commodities.⁶⁹ As such, farmers have constantly faced price disincentives in aggregate terms (i.e. negative NRPs). Input subsidies and expenditure on general services such as in R&D and infrastructure have been widely used as a means of compensating them for the price disincentives generated by trade and market measures, and for boosting production and self-sufficiency in the country.

A similar policy support pattern is seen in most LICs. Price disincentives have been narrowing also in these countries, from -17 percent on average in 2005–2012 to -9 percent in 2013–2018 (Figure 19). Policies supporting prices and production of cereals, as a staple food, largely drove this trend, in a bid to ensure food security in the framework of self-sufficiency strategies launched in the aftermath of the 2007/08 food price crisis. Staple food production is also the target of the few fiscal subsidies, usually on inputs, provided to farmers in these countries.

LICs overall devote small shares of their total public budgets to food and agriculture, compared with the other country income groups, even though agriculture remains an essential sector for economic growth and job creation. Fiscal support accounts for a small share of total support to the sector: on average, subsidies to agricultural producers accounted for just 0.6 percent of the total value of production against 4 to 5 percent in MICs and 12.6 percent in HICs (Table 6). A similar trend is also evident in the expenditure for general services, as analysed below, despite commitments by African countries, for example, to allocate at least 10 percent of their total public expenditure to agriculture under the Comprehensive Africa Agriculture Development Programme.⁷⁰ Reasons for the limited fiscal support to farmers in LICs are: i) their very narrow fiscal space – which is largely determined by limited revenue growth, substantial debt burden and multiple sectors competing for scarce resources, but also ii) the low budget execution rates (one fifth of budgets on food and agriculture are left unspent), especially for donor-funded expenditures, where the share of unspent funds is substantially high (around 40 percent).^{n 70} As such, policy repurposing might not be a viable or effective solution in LICs. However, future research could identify additional measures (e.g. international transfers financed by fiscal measures in high-income countries) to support LICs in addressing challenges related to public investments in food and agriculture.

General services support

Aligned with the trend described so far, also GSS support, expressed as a share of value of production, is lower in LICs (2 percent) compared to HICs (4 percent) (Table 6). The composition of expenditure on general services is also quite diversified across income groups (Figure 20). Services mostly funded by governments in HICs are infrastructure, R&D and knowledge transfer services; yet, inspection and marketing promotion activities are also important areas targeted by public investments. In MICs, a sizeable amount of public spending covers costs of public stockholding programmes. These are very common in Asia and the Pacific (e.g. China, India, Indonesia, Pakistan and the Philippines) and, though their implementation mechanisms may differ, they are overall aimed at providing remunerative prices to farmers, stabilizing markets, and ensuring food security for consumers.⁷¹ Amounts spent in GSS are relatively lower in LICs; support is concentrated on funding agricultural infrastructure construction and maintenance (with a special focus on irrigation), on R&D services, as well as on expenditures earmarked for forestry, land management and environmental protection (mapped in the miscellaneous category) (Figure 20).⁷⁰

FIGURE 20Composition of general services support as a share of value of production, by income group and type of service, average 2015–2018

SOURCE: FAO based on data from OECD, FAO, IDB and World Bank compiled by IFPRI.

Consumer support

In line with the fiscal support described above, two-thirds of the world’s fiscal subsidies to consumers (either final or intermediary, such as that of processors) were disbursed in HICs. On average in 2013–2018, these accounted for 4.6 percent of the value of production in HICs, while in LICs they were less than 1 percent of the total value of production (Table 6). Again, this is an indication that HICs have more means and resources to financially support agrifood systems actors than LICs do. On the contrary, LICs tend to opt more for trade and market interventions to keep domestic prices low in favour of consumers, as discussed above. Subsidies to intermediary consumers are usually provided only in HICs and UMICs, notably in Norway, Iceland, the United States of America and Kazakhstan.

Subsidies to consumers provided in LICs and MICs most often take the form of in-kind or cash transfers under social protection programmes. India and Indonesia, for example, provide substantial subsidies to final consumers under the Targeted Public Distribution System for grains in India, and the food assistance programme (BPNT) based on electronic vouchers for rice, in Indonesia. In some sub-Saharan Africa countries, subsidies to consumers have recently increased, in some cases to the detriment of producers, who have received less financial support under existing budget constraints; cash transfers, in-kind transfers and school meal programmes have instead been expanded.⁷⁰

Policy support differs across food groups and commodities

In line with the discussion above, countries with higher levels of income provide support to all food groups, and particularly to staple foods, including cereals, roots and tubers, followed by dairy and other protein-rich foods.^o In HICs, support within these three food groups is equally provided in the form of price incentives and fiscal subsidies to producers. On the contrary, for fruits and vegetables and fats and oils, fiscal subsidies (accounting for about 11 percent of the value of production) were substantially larger than price incentives, on average, during 2013–2018 (Figure 21).^p

FIGURE 21Nominal rate of assistance as a share of the value of production by income and food group, average 2013–2018

NOTES: “Others” include various food crops, such as sugar, coffee, cocoa, tea and chilies among the main ones, but also some non-food crops (e.g. cotton, wool and tobacco). Non-product-specific subsidies are those that do not target a specific commodity or food group but a broader food group, such as all crops or livestock products; these were apportioned to the various food groups based on the product’s share in the value of production in the relevant aggregate.
SOURCE: FAO based on data from OECD, FAO, IDB and World Bank compiled by IFPRI.

The persistence of the staple cereals focus in the food and agricultural policy in most countries around the world is not a new trend. Policies that promoted staple crop productivity, including price incentives, crop specific input subsidies, and grain procurement for food security stocks, have been common since the Green Revolution period.⁷² Historically, these measures have contributed to hampering farmer incentives for the diversification of their production systems, as analysed more in detail in Section 3.2.^73,74

LMICs consistently penalize production of most products through policies that depress farm gate prices, but these countries provide fiscal subsidies to farmers, especially for staple foods, fruits and vegetables as well as fats and oils. Price incentives are negative for most food groups in LICs, ranging from minus 7 percent on staple foods (mainly cereals) to 1 percent for other crops (e.g. sugar, tea, coffee) (Figure 21). These countries have little space to support farmers through fiscal subsidies, as discussed above.

A deeper scrutiny can be done by looking at support that targets single food products.^q

Rice, sugar and meats of different types are among the most supported commodities worldwide (Figure 22). The main measures used to support these products are trade and market policies that alter prices and generate price incentives for farmers. As already anticipated, these measures are not always aligned with healthy diets and can potentially generate (relative) disincentives towards producing more fruits and vegetables, for example, as farmers are prompted to produce crops that face lower competition and fetch higher prices. Moreover, in LICs and LMICs, some fruits and vegetables, such as bananas, mango and onions fetched price disincentives on average over the 2013–2018 period (Figure 22). While this may raise a concern on the supply side, it should be recognized that in a scenario of relatively low domestic prices (i.e. lower than the international reference, as defined by the NRP), these products may result more affordable for consumers.

FIGURE 22Nominal rate of assistance as a share of THE value of production for selected most targeted food products by income group, average 2013–2018

SOURCE: FAO based on data from OECD, FAO, IDB and World Bank compiled by IFPRI.

Rice production receives significant support worldwide: farmers enjoy relatively high price incentives across all the income groups (Figure 22). These incentives represent over 70 percent of value of production in HICs, mainly driven by some Asian countries (e.g. Japan and South Korea) that largely support production of this key commodity through border and domestic price control measures. Rice tends to be a high emission-intensive commodity, which provides calories but few micronutrients. However, being a staple food for more than 3 billion people in the world, it requires careful and special consideration when policymakers assess the most appropriate policy reform and repurposing options, in order to avert trade-offs with food security. The same consideration applies to animal source foods products like milk and beef, which can contribute to improving the diet quality and nutrition in some LICs and LMICs contexts but are often overconsumed in HICs with negative health implications. It is precisely in HICs and UMICs that production of these livestock-derived products is relatively more supported, as indicated by an average NRA of about 11 percent across these two income groups during 2013–2018.

Some LICs have provided price incentives to selected staple foods, i.e. wheat and rice but disincentives for others, like maize (Figure 22). In some cases, input subsidies schemes were also implemented, notably for maize (mostly in Malawi) and wheat (in Rwanda) production. Price incentives for rice were particularly high in Eastern African countries (e.g. Burundi, Rwanda and Uganda) in the 2013–2018 period. Milk, cashew nut and bananas were instead among the most penalized products (Figure 22).

Other commodities of critical importance for the livelihoods, food security and nutrition of billions of people around the world are fishery and aquaculture products, for which, unfortunately, there are no consistent policy support indicators. Fish and other aquatic foods play a pivotal role in healthy diets; in many countries, indeed, they provide the animal protein required to consume the least costly healthy diet. Small-scale artisanal fishers and fish workers produce a large portion of these foods and represent a large proportion of the workforce in many countries (Box 9). Overfishing is a pressing challenge for agrifood systems and the environment. Fishery subsidies could exacerbate overfishing as well as illegal and unequal practices. There is an urgent need for gathering and developing data to understand the level and type of public support directed to these products important for healthy diets, as repurposing strategies in many countries must account for these considerations (Box 9).