Production effects of agricultural support policies implemented in Turkey

The agricultural sector is crucial in many aspects. The first of these is the desire to guarantee security of food supply, the second is economic policy. Price, foreign trade, budget and employment policies are not independent from agriculture. The social side of the issue is another factor that increases the significance of agriculture, because the agricultural sector constitutes the source of income of considerable part of the population. Such causes, which increase the importance of agriculture, constitute an important reason for the sector to be protected and taken care of. Agricultural supports are one of the most used tools to protect and canalize the producers and production. Agricultural supports are also used to protect the sector from foreign competition. However, the negative reflections of the support policies in foreign trade paved the way for questioning the supports. The surplus production created by agricultural supports has caused devastating effects specifically in countries whose economy is based on agriculture. Countries that want to avoid this condition have implemented protective measures such as high tariffs and quotas. This situation, which means less trade and greater welfare loss locally and universally, was negotiated comprehensively for the first time in the Uruguay Round organized within the GATT (WTO). With the Agreement on Agriculture signed at the end of the tour, while some commitments were made to reduce the supports affecting the production, and no restrictions were made on decoupled payments. As a matter of fact, in the next period, agricultural supports have evolved into decoupled payments. Turkey has re-designed the agricultural support policies with the effect of the economic crisis of the early 2000s. As a matter of fact, within this scope, there has been a transition from supports that directly affect production such as market price supports to direct payments per hectare and deficiency payments. The purpose of decoupled payments is to encourage market signals to be taken into account by the producer rather than agricultural supports at the production decision stage. However, although the independence of agricultural supports from production is stated in theory, the independence of agricultural supports from production in practice is a topic of discussion. Indeed, the subject of this study is the effect of the direct payment supports per hectare and deficiency payment supports used commonly as a support policy tool in Turkey on production. For this, the production effect of the supports given between 2002-2018 on wheat, corn, sunflower, cotton wool, paddy, soybean, canola, safflower, tea, haricot beans and olives was studied. Two models were created for the study in which the dependent variable was determined as the production quantity. The independent variables of the first model were determined as deficiency payment supports and direct payment supports per hectare, product price, fuel price and fertilizer price. Taking into consideration of the Turkey's unique situation, the variables of the minimum wage and agricultural mechanization were added to the second model in addition to the arguments of the first models. As a result of the Panel ARDL analysis used as an econometric method, it was concluded that both supports affect production but deficiency payment supports affects production more than direct payment supports per hectare. In other words, direct payment supports per hectare are more decoupled from deficiency payment supports. Moreover, it has been understood that the product price is not a good indicator for the producers. It has been evaluated that the producers choosing to compensate for their income losses arising from the price decrease by producing more may be effective in this. It has been observed that the increase in input prices has a negative impact on producers, especially in the long run. At the same time, as a result of the migration phenomenon, it is concluded that the increases in the minimum wage affect negatively agricultural production. Another result of the study is that there is no meaningful relationship between agricultural mechanization and agricultural production. The findings are considered to be important in terms of presenting how agricultural supports should be used for production and guiding the producer. In addition to this, it has been evaluated that in advanced agriculture negotiations in WTO, taking into consideration the possibility of Turkey's disadvantaged on this issue would be useful to take the essential policy measures are being considered.