Europe's agriculture subsidies fell by more than $8bn last year, bucking an international trend of rising support, and continuing a trend which has removed almost entirely farmers' cushion from market prices.

Agricultural support in the major industrialised nations rose last year, as a percentage of farm receipts, for the first time since 2004, led by the US, where the fall in global world prices triggered a "sharp increase" in dairy subsidies, the OECD said.

US subsidies rose by 13.1%, or more than $3.5bn.

However, farm support in the European Union fell by 6.3%, a drop which reflected the end of the region's repurchase of sugar quotas amid the opening up of the market to foreign suppliers, but also continued a longstanding decline in subsidies.

Different direction

Much of the revamp has centred around the switch in payments from being based in production to supporting environmental criteria, such as uncultivated breaks around fields which provide cover for ground-nesting birds.

The prices that farmers received for produce were only 9% higher last year than market levels, compared with 71% two decades ago, the intergovernmental group said.

However, the bill for farm support has fallen on overall measures too, comprising 0.86% of the region's economic output last year, compared with 2.6% in the late 1980s.

'Higher price variability'

Nonetheless, the EU remains the world's biggest payer of farm subsidies, at $120.8bn last year, compared with $46.5bn in second-ranked Japan.

"In the context of the financial crisis and the fiscal belt-tightening currently underway, the cost of agricultural policies to consumers and taxpayers calls for a fresh look," said the organisation, which has more than 30 member countries, including Australia, the UK and the US. 

The OECD singled out US dairy supports for criticism, saying that the "sharp rise in the market price support for dairy, including use of export subsidies, exacerbates market distortion in the sector".

The US Farm Act passed two years ago "shows little progress towards market orientation", the organisation added.