USDA announces $12 billion farmer trade bailout package

In an attempt to rally support among the rural electorate ahead of the midterm elections, the U.S. Department of Agriculture July 24 announced a $12 billion aid package to farmers and ranchers affected by global retaliatory tariffs.

Many of the finer details of the plan have yet to be worked out, Trump administration officials said during a conference call with reporters, but they did say affected producers could expect that information by Labor Day with aid following harvest of their 2018 crops.

“President Trump has promised since day one that he had the back of every American farmer and rancher, and today this is the announcement of the fulfillment of that promise,” Secretary of Agriculture Sonny Perdue said. “We are formally announcing that the Trump administration will be taking several actions to assist farmers in response to the trade damage caused by the illegal and retaliatory tariffs that have been imposed on the United States in the recent months.”

Perdue characterized the plan as a “short-term relief strategy to give President Trump time to work on a long-term trade policy and deal to benefit agriculture as well as all sectors of the American economy.

“Unfortunately, America’s hard-working agricultural producers have been treated unfairly by China’s illegal trading practices and have taken a disproportionate hit when it comes illegal retaliatory tariffs. USDA will not stand by while our hard-working agricultural producers bear the brunt of unfriendly tariffs enacted by foreign nations. The programs we are announcing today help ensure our nation’s agriculture continues to feed the world and innovate to meet the demand.”

The $12 billion in programs announced by USDA are in line with the estimated $11 billion impact of the unjustified retaliatory tariffs on U.S. agricultural goods, officials said. These programs will assist agricultural producers to meet the costs of disrupted markets.

The programs are:

• The Market Facilitation Program, authorized under the Commodity Credit Corporation Charter Act and administered by the Farm Service Agency, will provide payments incrementally to producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs. This support will help farmers manage disrupted markets, deal with surplus commodities, and expand and develop new markets at home and abroad. USDA Assistant Deputy Administrator for Farm Programs Brad Karmen said they had some broad preliminary parameters as to how the funds would be distributed, but it appeared soybean producers will likely be the recipients of the largest amount of MFP funds.

• The Food Purchase and Distribution Program, authorized through the Agricultural Marketing Service would be used. Additionally, USDA will use the CCC Charter Act and other authorities to implement a to purchase unexpected surplus of affected commodities such as fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and other nutrition programs.

• The Trade Promotion Program, authorized through the CCC Charter Act, and administered by the Foreign Agriculture Service in conjunction with the private sector to assist in developing new export markets for U.S. farm products.

Of the total retaliatory tariffs imposed on the U.S., a disproportionate amount was targeted directly at American farmers. Trade damage from such retaliation has impacted a host of U.S. commodities, including field crops like soybeans and sorghum, livestock products like milk and pork, and many fruits, nuts and other specialty crops.

USDA officials on the conference call with Perdue said the department has been analyzing a strategy since April, when Trump ordered the department to put a mitigation plan in place.

This is a short-term bridge and considered a one-time fix. MFP will be able to determine once the farmers have harvested their crops. 

Disrupted marketing

High tariffs disrupt normal marketing patterns, affecting prices and raising costs by forcing commodities to find new markets. Additionally, there is evidence that American goods shipped overseas are being slowed from reaching market by unusually strict or cumbersome entry procedures, which can affect the quality and marketability of perishable crops.  This can boost marketing costs and reduce prices, and adversely affect U.S. producers.

Early Congressional reaction to the plan drew little positive comment, as most members are in a “trade not tariffs” mindset.

Senate Agriculture Committee Chairman Pat Roberts, R-KS, told Politico recently that tariff retaliation could have long-term effects on access to foreign markets.

“I think the question in farm country that is equal to what’s happening now is: What is our future down the road? How do we put these trade agreements back together? Once you lose a market, you lose it,” Roberts said. “We are trying to make the point that we don’t want aid, we want trade.”

Sen. Ben Sasse, R-NE, said, “This trade war is cutting the legs out from under farmers and White House’s ‘plan’ is to spend $12 billion on gold crutches. America’s farmers don’t want to be paid to lose they want to win by feeding the world. This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again.”

Rep. Roger Marshall, R-KS, said, “This is a start, but it’s more or less putting a band-aid on a deep wound. I applaud the USDA for acknowledging the impact these tariffs have had on American producers, but this is only short-term relief, the main focus should still be on getting our trade agreements wrapped up.

“The next step would be to couple this effort with opening new markets and finishing NAFTA, that’s what I hope to see. No one wants to see government payments instead of markets, but we need to take care of producers as this administration works to end unfair trading practices and find a more permanent solutions.

“I think the message sent today by the USDA is for our farmers to hang on and believe in this administration, that our farmers are not being forgotten about,” Rep. Marshall said. 

Farm groups react

Producer group reaction also was oriented toward long-term trade strategies to alleviate mounting surplus stocks and continued low prices. They renewed their support for the North America Free Trade Agreement and other trade pacts.

John Heisdorffer, ASA president and soybean grower from Keota, Iowa, said in a statement, “The American Soybean Association has consistently advised the administration that the best way to reduce our nation’s trade deficit is by increasing exports, including of agricultural products. Since the administration has decided to use tariffs to address trade concerns with China, and China has retaliated, farmers don’t have time to wait to see how this trade war turns out.

“Our best course of action is to expand other markets and develop new ones to buy the soybeans we’re not selling to China. This means finishing the NAFTA negotiations as soon as possible so we can begin talks on new bilateral agreements with other key soybean markets including Japan, Vietnam, Indonesia and the Philippines.”

“U.S. soybean producers want to see President Trump succeed in meeting his trade campaign goals of achieving better trade deals and greater market access. And, we appreciate that he has recognized our loss in exports and lower prices and provided some immediate relief. However, producers cannot weather sustained trade disruptions.”

National Pork Producers Council President Jim Heimerl, a pork producer from Johnstown, Ohio, said in a statement, “President Trump has said he has the back of U.S. farmers and today demonstrated this commitment with an aid package to sustain American agriculture cutoff from critical export markets as his administration works to realign U.S. global trade policy.

“U.S. pork, which began the year in expansion mode to capitalize on unprecedented global demand, now faces punitive tariffs on 40 percent of its exports. The restrictions we face in critical markets such as Mexico and China—our top two export markets by volume last year—have placed American pig farmers and their families in dire financial straits. We thank the president for taking immediate action.

“While we recognize the complexities of resetting U.S. trade policy, we hope that U.S. pork will soon regain the chance to compete on a level playing field in markets around the globe. We have established valuable international trading relationships that have helped offset the U.S. trade deficit and fueled America’s rural economy.”

National Corn Growers Association President Kevin Skunes, a North Dakota farmer, said, “NCGA appreciates the administration’s recognition of the harm to producers caused by tariffs and trade uncertainty. The fine print will be important. We know the package won’t make farmers whole but look forward to working with USDA on the details and implementation of this plan.

“NCGA’s grower members are confronting their fifth consecutive year of declining farm incomes while facing high levels of uncertainty due to ongoing trade disputes and disruptions in the ethanol markets. Corn farmers prefer to rely on markets, not an aid package, for their livelihoods.

“NCGA will continue to advocate for administrative actions including: rescinding the section 232 and 301 tariffs; securing NAFTA’s future; entering new trade agreements; allowing for year-round sales of higher ethanol blends such as E15; and implementing the Renewable Fuel Standard as intended. We believe these additional actions, which would come with no cost, would result in stronger market demand for farmers.”

U.S. Wheat Associates and the National Association of Wheat Growers said in a joint statement they were glad that the administration recognizes farming as a risky business and acknowledges that farmers need help to manage the additional risk from its trade policies.

“However, our concerns still lie in a lengthy trade war that will cause long-term, irreparable harm to U.S. agriculture. We urge the administration to recognize this self-inflicted damage and to end the trade war immediately as well as to work within the rules-based trading system in partnership with like-minded countries to address serious problems in the global economy,” the statement said.

“While tariffs aren’t the answer, the wheat industry greatly appreciates the administration’s efforts to push back on China’s unfair trade practices through dispute settlement cases at the World Trade Organization. The policies being challenged hurt U.S. farmers and have undermined trust in the rules-based trading system. President Trump understands that the farm economy is struggling and is working to improve the livelihoods of growers across the country through these efforts.”

Larry Dreiling can be reached at 785-628-1117 or [email protected].