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Can USDA Stretch Corn, Soybean Farmers’ Safety Net With Tariff Relief?

Rumors of USDA’s tariff easing strategy not confirmed.

WASHINGTON - Agriculture Secretary Sonny Perdue is giving himself a couple of months – until around Labor Day – before deciding whether to proceed with President Trump’s promise of shielding farmers from “China’s unfair retaliation.” For tactical reasons, Perdue has declined to say how USDA would aid producers or how much it might spend.

China imposed tariffs on U.S. pork, ethanol, apples, and almonds this spring in response to U.S. tariffs on imported steel and aluminum. U.S. tariffs on $50 billion of Chinese high-tech products are scheduled to take effect on July 6. China says it is ready with duties on U.S. soybeans, beef, cotton, corn, ethanol, dried distillers’ grains, grain sorghum, wheat, cranberries, orange juice, tobacco, and whiskey.

“If China does not soon mend its ways, we will quickly begin fulfilling our promise to support producers who have become casualties of these disputes,” said Perdue in an essay in USA Today this week. During a trip to Chicago, Perdue said he would wait until Labor Day to judge the damage to U.S. agriculture. “There are mitigation strategies that have to do with actual remuneration of damages done there. It’s not baked-in yet exactly what measures we would take,” Perdue told the Chicago Tribune.

The administration has provided little detail to its often-repeated promise to protect farmers. In April, there were rumors that $15 billion would be available and chatter about using USDA’s share of customs duties (so-called Section 32 funds) to purchase food in order to bolster prices or using the broad powers of its Commodity Credit Corp, created during the Depression to support farm income and prices, to indemnify producers. USDA used the CCC in 1985 to create the Export Enhancement Program of export subsidies.

“It would not be prudent to unveil the playbook while the opposing team is watching,” said a USDA spokesperson when asked about plans to help farmers.

“There are many more questions than answers,” said a farm lobbyist. “How do you determine what the payments are?"

Many of the commodities targeted by China are not monitored in as great detail by USDA as are the major field crops, so there would be challenges in gauging the impact of trade disruptions. Grains, cotton, and soybeans already have safety net programs as well as crop insurance. USDA would have to decide if the safety net programs are enough for those crops. Complaints of inequitable treatment seem inevitable.

The typical Midwestern corn and soybean grower lost tens of thousands of dollars in potential revenue due to steep declines in commodity prices since the last week of May, said Purdue economist Brent Gloy, listing global trade uncertainty as an obvious factor along with changing expectations for this year’s crops. “The changes have taken expected farm profitability from near break-even to a rather substantial loss,” said Gloy.

China imposed tariffs on U.S. pork, ethanol, apples, and almonds this spring in response to U.S. tariffs on imported steel and aluminum. U.S. tariffs on $50 billion of Chinese high-tech products are scheduled to take effect on July 6. China says it is ready with duties on U.S. soybeans, beef, cotton, corn, ethanol, dried distillers’ grains, grain sorghum, wheat, cranberries, orange juice, tobacco, and whiskey.

Farmers and rural voters, who were key to Trump’s election, have benefited from regulatory relief and tax cuts, wrote Perdue in USA Today. “Farmers should know this: They have stood with President Trump and his policies, and we will make good on our promise to stand with them as well.”

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