Comparative Analysis of Food Price Policies in the Developed Countries

Linrong LI

Sichuan Vocational College of Cultural Industries，Chengdu 610213，China

1 Overview of food producers'price policy evolution in typical developed countries

1.1 The United States of AmericaDuring World War I（1914-1918），the United States benefited from the prosperity of food exports brought by the war and the accelerated urbanization caused a growing demand for food，so the price of food continued to increase.Therefore，before the 1920s，the US government adopted a laissez-faire grain market policy.However，the end of World War Idirectly led to a sharp decline in grain prices for a period of10 years，and eventually led to the bankruptcy of American farms and agricultural economic crisis［2］.In the 1930s，the United States began to conduct direct intervention in the grain market by means of food purchase price support policy，in order to avoid low grain prices for farmers.These food price support policies ensured the grain producers'minimum income，and the most immediate aftermath was the conflict between national financial pressure and food surplus.Since the 1970s，the US government began to promote the food producers'price support policy to shift to income support policy，in order to ease the financial pressure caused by food subsidies and improve the efficiency of food policy.Farm and Consumer Protection Actin 1973 proposed determining the target price in accordance with the cost of major agricultural products，and when the food producers'price was lower than the target price，the government paid the cash subsidies to farmers to ensure that the farmers could obtain stable profit margins.However，under the dual pressures of deficit and GATT Uruguay Round Agreement on Agriculture，the US government enactedFarm Billin 1985 and 1996 to promote the disconnection between agricultural support policies and agricultural market prices in the year，and initiated the market-oriented agricultural policy reforms.But it was opposed by the domestic interest groups of farmers，and the effectiveness of market-oriented reforms of food producers'price policy was not significant.The core ofFarm Security and Rural Investment Actintroduced in 2002 was to increase investment in agriculture and subsidies for farmers to build＂a reliable income safety net＂［3］.Farm Security and Rural Investment Actin 2008 still continued to maintain all food producers'price policy measures and levels proposed by Farm Bill in 2002.In February 2014，the delayedFood，Farm and Job Billfor two years was formally introduced.It cancelled the direct income subsidies，counter-cyclical payments and other inappropriate food support policies，and established some food producers'subsidy policy tools having no connection with prices and production such as price loss security and agricultural risk security.But it still retained the marketing assistance loan policy as a direct producers'price support policy.

1.2 EUIn the 1960s，due to the trauma suffered in World War II，food production was low and the trade deficit continued in the member states of EC.6 EC member states signed the original framework agreementCompromise Agreement on Establishing AUnified Market of Agricultural Productsof CAP in January 1962.The specific policy tools are used for the annual re-determination of the intervention price，target price and threshold price of agricultural products.Under the influence of the CAP，the EC's food supply ability was quickly restored，but there were also some problems such as food overproduction and increasing financial burden.In response to policy shortcomings，European Communities Commission conducted a number of adjustments and reforms on the food producers'price support policies.In February 1988，the budget stabilization mechanism was started to intervene in the link between price and MGQs in order to limitexcessive growth of food production and agricultural budget.In June 1992，the EC carried out the first systematic reform on CAP，and the focus of the reform is to use the direct income subsidies to replace the food producers'price support.In March 1999，the EC promulgatedAgenda2000：Prospects and Policy Priorities of the21st Century Common Budget，to further reduce the price support for food producers.After 2003，in line with the Doha Round negotiationson agriculture，the EU's CAP gradually advanced in moremarket-oriented direction.The specific reform measure is to cut price support for food producers.On October 23，2013，the European Parliament and the European Commission reached a political agreement on the transitional measures of CAP in 2014 and determined the direction of next reform of the EU's CAP，namely cutting restrictions on the scale，growth and transfer of agricultural payment.

1.3 JapanThe food policy of Japan was originally designed to ensure the effective food supply during the war.In 1942，Food Management Lawstipulated the food management system of major food products characterized by unified acquisition，wholesale，pricing and rationed retail.After World War II，with the easing of food shortages，the government gradually liberalized the directly regulated grain varieties（excluding rice）.After the 1960s，the food producers'price policy goal was gradually changed to increase farmers'income and promote food production by the price protection of agricultural products.In the 1970s，to ease the rice excess，the Ministry of Agriculture，Forestry and Fisheries of Japan began to impose restrictions on the purchasing amount of rice.In 1972，it abolished the restrictions on consumer price of rice，and changed the protection measures for food consumers to the protection measures for food producers.In 1990，it began to use open bidding to determine the independently circulated rice prices.To meet the requirements ofAgreement on Agricultureof the WTO on grain policy market reform，the Diet of Japan enactedLawson the Supply and Demand and Price Stability of Foodand repealedFood Management Lawin 1994，marking the beginning of the implementation of the largest food policy reform since World War II.The reform in relation to food producers'price policy included the annual decrease in price support to grain and other agricultural products，and change in the support to grain producers from price subsidies to director indirect income subsidies.In 2012，the compensation policy for changes in the price of rice was developed，with the previous year's average price of rice as the benchmark price，and the government subsidized the difference between current year's price of rice and benchmark price.This policy plays a role in promoting the change of food support policy from price subsidies to income subsidies.

1.4 South KoreaIn response to food shortages at the beginning of the founding of country in 1950，South Korea issued Food Management Act to form the basic framework of the Korean food policy.At the early stage of policy implementation，in order to keep sufficient food reserves，the South Korean government made the purchasing price of rice less than the cost of grain cultivation for a time，which to some extent dampened the enthusiasm for growing grain.So in early 1960，the South Korean government raised the purchasing price of rice above the cost of grain cultivation.From 1968，South Korea began implementing the price support policy（purchasing at high prices，selling at low prices，price difference subsidized by the government）for food producers，and continued to cover many products such as wheat，soybeans and corn.Under the huge financial pressures brought about by this policy，the Korean government reformed the double-track system of food prices in 1993.It changed the government pricing mechanism，and used the competitive bidding mechanism of NACF（National Agricultural Co-operatives Federation）to determine the price of food product sold in the market.After 2004，South Korea abolished such price subsidy，and it began to officially use the direct income subsidies to replace food price support from 2005.The direct rice income subsidy program uses three different policy support tools to ensure the domestic rice supply.The total size of subsidy changed from 470.835 billion won in 2006 to 315.3 billion won in 2014.The changeable subsidy in 2014 was also the compensation policy initially started after 2010.The government purchased a certain amount of new rice according to the actual market conditions at harvesting time through PSSE，and sold the rice during the non-harvest period，to ensure the domestic rice price stability.

2 A comparative analysis of food producers'price policy in typical developed countries

2.1 Policy objectivesThe evolution of food producers'price support policies in the United States of America，EU，Japan and South Korea indicates that the food producers'price policy objectives and policy tools in these economies have been continuously adjusted with the changes in domestic food development tasks and international environment（Table 1），gradually forming the food producers'price support policy system with non-direct market intervention as the main body.The changes in the food producers'price policy objectives in these economies are all closely related to the governments'attitude toward food security and stage characteristics of national food development.Narrowing the gap between agriculture and industry to achieve balanced development of the national economy is one of the core objectives of agricultural policy of various economies at the middle stage of industrialization.Accordingly，protecting the grain producers'relative benefits and steady income also becomes the main objective of food producers'price support policy at this stage.Maintaining the basic balance of food supply has become another core objective of food policy.Therefore，from the perspective of food producers，the food price support policies help to absorb excess food on the market in the case of oversupply，increase food production under shortage conditions，and guarantee food production potential under the supply and demand balance.Therefore，the food producers'price policies in these economies are developed based on the objectives of ensuring the food producers'interests and national food security.The time when the food price policy focus is shifted between the two objectives is determined by the national food production and supply and demand conditions.

2.2 Policy toolsThe food producers'price policies in the above typical developed countries are related to the food produc-tion，sales，reserves and income and other links.Through the WTO agricultural product negotiations，the price support of various economies for food producers becomes more and more market oriented，and the direct market price intervention gradually fades away.The transitional food producers'price policy tools，as well as the income subsidies and risk subsidies that are disconnected with yield and price in the year，are used to reach the stage goals of food development（Fig.1，2）.Table 2 lists the main food producers'price policy tools adopted by the typical developed countries in each period.It can be found that the food producers'price support policies in developed countries aim to reduce the intervention in food producers'market price，and stipulate a variety of market responsibilities such as environmental protection and food production potential protection，in order to improve the efficiency of policies.

Table 1 Comparison of food producers'price policy objectives in typical developed countries

2.3 Policy effectsIn face of a series of price policy tools for achieving specific food development goals，selecting a combination of policy tools will have different effects on the food development goals.In this regard，the design of food producers'price policy in the typical developed countries can provide a good reference.The lowest acquisition policy of the US，the EU and other countries is often bundled with restrictive yield policies，which can reduce the pressure on government's food purchasing and storage.At the same time，the performing cost of different policy tools will also affect the efficiency of the policy.If the policy is mainly for the food producers engaged in small-scale operation，the government will give priority to the programs of low cost and high benefits when selecting the price policy tools，in order to improve the performing efficiency of food producers'price policy.

3 Conclusions

This paper per forms a comparative analysis of food producers'price policies in the US，EU，Japan and South Korea.The results show that after reaching a certain stage of industrialization，most developed countries will take the food support and protection measures，and the policy objectives and policy tools have evolved into a set of policy systems through continuous adjustment，but the intervention in food price has always been present.At different stages of food development and under different environments at home and abroad，various countries will choose different food producers'price policy objectives and policy tools.On the one hand，the food producers'price policy objectives are a diversified target system；on the other hand，various price policy tools have different impact on the objectives.Now the food producers'price intervention has two forms.One is the support price，also known as the minimum guaranteed price，such as non-recourse loan in the United States and the intervention price in the EU.The other is the target price，also known as the benchmark price，which is used in the food producers'price policies of the United States，EU，Japan and South Korea.In general，the minimum guaranteed price can regulate market supply and demand and guarantee the farmers'minimum income，but it can not reflect the cost of food production and continue to increase farmers'income.It is likely to interfere with the normal role of grain market price signal，but it is simple，cheap and effective，so it is suitable for the countries with a lot of small-scale farmers in the short term.

Table 2 Comparison of food producers'price policy tools in the United States，EU，Japan and South Korea

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