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Farmers Expect More Trump Tariff Payments in 2020
Although farmers and ranchers overwhelmingly believe they will emerge as winners from the Sino-U.S. trade war, they also expect the Trump administration will send them billions of dollars in trade-war payments on 2020 crops yet to be planted, according to a Purdue University poll released Tuesday.
A monthly Purdue poll did not ask producers why they expect the Trump tariff payments to continue but some analysts say it would be difficult to shut off aid during a presidential election year.
Chinese and U.S. negotiators are working on a “phase one” agreement that President Trump says would include purchases by China of $40 to $50 billion of U.S. farm exports over two years. Iowa Sen. Chuck Grassley told reporters that the agreement would not automatically preclude additional trade-war payments. “It kind of depends on how much confidence we have that China is going to buy” the goods, he said.
As of Monday, the USDA had sent $6.7 billion to producers to offset trade-war losses on crops and livestock this year. The USDA did not respond to questions if a second tranche of $3.6 billion would be released this month. The administration has offered up to $14.5 billion through the stopgap Market Facilitation Program for this year’s farm production. Some $7.25 billion was available in the first round in August, with additional tranches of $3.6 billion each possible in November and January “if conditions warrant.”
“No one can figure out what the hell is going on,” said House Agriculture chairman Collin Peterson when asked by a Minnesota farmer for an update on the second tranche, according to the Crookston Times. Peterson was in Crookston, 25 miles southeast of Grand Forks, North Dakota, to hear from potato and sugar beet growers about crop damage caused by heavy rains and freezing temperatures at harvesttime. Some growers said they will need disaster assistance.
The administration sent $8.6 billion to producers in 2018 to mitigate the impact of the trade war on the agriculture sector.
If all goes well, Trump and President Xi Jinping of China will sign the phase-one package in another week or two, probably in the United States. Before the trade war, China was the top customer for U.S. farm exports with annual purchases of $21 billion. The USDA forecasts sales of $7.5 billion this year, putting China fifth on the list of top markets.
By a 2-to-1 margin, producers surveyed for Purdue’s Ag Economy Barometer during October said they anticipated that USDA would make Trump tariff payments on 2020 crops. The totals were 62% “yes,” 27% “no,” and 12% “uncertain.” The trade war payments have bolstered farm income, in a rut since the collapse of the commodity boom early this decade. Direct farm program payments are forecast to equal 22% of net farm income this year, the largest share since 2006.
Three-fourths of respondents to the Purdue survey said they believed the trade war “will ultimately be resolved in a way that benefits U.S. agriculture.” Producers have been highly confident of success for months, with sentiment dipping below 70% only twice since March. A growing portion of farmers say the dispute will be settled soon. In the latest poll, 42% said a resolution was likely soon, compared with 22% in July. But 51% said a settlement was not at hand.
By and large, farmers said they would plant the same amount of corn and soybeans in 2020 as they did this year; 14% of corn growers said they would expand corn acreage, and 12% of soybean growers said they would plant more beans. A small portion of them plan large increases: 5% of corn farmers said they would expand plantings by more than 20%, and 5% of soybean growers plan a similar expansion.
On the other hand, 10% of corn and 14% of soybean farmers said they would curtail plantings in 2020.
The USDA projects a 5% increase in corn plantings, to 94.5 million acres, and a nearly 10% increase in soybean plantings, to 84 million acres, in 2020. Corn and soybeans are the two most widely grown crops in the country.