Monday, October 10, 2011

Agricultural subsidies declining

With higher agricultural prices, there had been a strong decline in subsidies by governments for the farm sector. The only exceptions are Russia and China. It is unlikely that we will see a return of these subsidies when or if prices fall. There is less money available. The reduction in subsidies will mean greater volatility in farm prices as the cushion is reduced. The market will not go back to the old methods, but there is still a mentality of support in some of the command and control economies. 

We do see that export restrictions, export support and intervention in global trade will still occur. This government activity will only make markets more volatile. 

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