Trump’s Farmer Bailout: Half Now, the Rest Later – Maybe
President Trump’s promise to protect U.S. agriculture from retaliatory tariffs by China and other countries will be paid on the installment plan — half this fall and the rest in December, or early 2019 if assistance is still needed, said Agriculture Secretary Sonny Perdue on Monday. The USDA announced $6.2 billion in outlays that will begin in September, with soybean growers in line for $3.6 billion of it.
The payments are equal to half of USDA’s estimate of trade impacts, such as lost export sales and adjustment in markets, from the tariffs. Perdue said the tentative U.S.-Mexico trade agreement, announced earlier in the day, showed how the dour trade outlook could brighten seemingly overnight for U.S. farmers. Mexico, one of the countries with tariffs on U.S. farm goods, is the No. 3 customer for U.S. farm exports.
“Payments will be bifurcated,” Perdue said after applauding President Trump’s policy of trade confrontation and calling on China to change its practices. “Announcement about further payments will be made in coming months, if warranted.” USDA Chief Economist Rob Johansson rejected the idea that a second round of payments is certain. “We will continue to evaluate markets … and the secretary will decide in consultation with the White House on the second round of payments,” he said.
Of the $6.2 billion announced by USDA, $4.7 billion will be paid in cash to crop and livestock producers, $1.2 billion will be spent to buy excess food and donate it to public-nutrition programs, and $200 million will go for overseas market development. The cash payments, based on this year’s production, would be half of what is indicated by payment rates that range from 1¢ a bushel for corn to $1.65 a bushel for soybeans and $8 per hog. There will be separate $125,000 payment limits for crops and for livestock aid.
Farm groups welcomed the aid while renewing calls for restoration of trade, the source of 20¢ of each $1 in farm income. “Our family farmers and ranchers need strong markets and long-term certainty,” said the National Farmers Union. Tariffs on exports to China, Canada, Mexico, and the European Union are “more than many farmers can bear,” said the American Farm Bureau Federation. “The real solution to this trade war is to take a tough stance at the negotiating table and quickly find a resolution with our trading partners.”
U.S. farm income soared to a record high in 2013 as the seven-year commodity boom crested and then collapsed. With commodity prices in a trough, farm income this year is half of its record level. The trade war has added to financial stress in the farm sector. In Sino-U.S. trade, soybeans are the most vulnerable commodity since one third of the U.S. crop ordinarily is shipped China. The American Soybean Association said USDA aid will be “a real shot in the arm” considering the steep decline in prices since late May.
“Under today’s proposal, thousands of city slickers will receive payments,” said the Environmental Working Group. It said USDA needed tighter rules to prevent big farmers, absentee landlords, and investors living in town from collecting payments.
Producers are eligible for payments on this year’s production of seven commodities. Undersecretary Bill Northey said the payments this fall would be $3.6 billion for soybeans, $277 million for cotton, $290 million for pork, $127 million for dairy, $156 million for sorghum, $119 million for wheat and $96 million for corn. The food-purchase program would include $559 million of pork, $93 million of apples, and $85 million of dairy.
Because payments will be based on production this year, there will be no allowance for the effect of drought or floods, said Northey. “It will certainly be representative of the impact on producers from these tariffs,” he said, acknowledging that some growers will do better and some worse than usual at harvesttime. The National Cotton Council said the payments “will help address a portion of the losses cotton producers are facing in the marketplace.” Some growers have lost production due to severe drought, it said.
Sign-up for producers begins September 4 and runs through mid-January. Wheat, dairy and pork producers would have enough production data on hand to apply immediately, said Northey, who said it would take a few days for USDA to process the material. “In less than a week, we should get some of these payments out the door.”
To read USDA’s description of the aid package and payments, click here.