U.S. Department of Agriculture Secretary Sonny Perdue said farmers and ranchers are taking the brunt of the trade war between the U.S. and China. He hopes a new aid package will help soften the blow of the lack of a trade deal.
“We’ve been working very hard to assess those trade damages again, the same by farmers over a period of time,” Perdue said. “The package we’re announcing today ensures that farmers will not bear the brunt of those trade practices by China or any other nation.”
Perdue said, “Farmers themselves will tell you they’d rather have trade than aid. Without that trade, those producers are going to need some support from a profitability standpoint.
“We honestly and sincerely know and believe that it is a food security issue, which leads to a national security issue,” he said.
$16 billion package
Perdue announced May 23 actions to assist famers because of trade damage from unjustified retaliation and trade disruption to China. President Donald Trump has authorized USDA to provide up to $16 billion in programs to address long-standing market access barriers.
The team at USDA reflected on what worked with the previous aid package and how they can effectively redesign it to help support farmers over the longer term. Perdue said this could have been a moot point if China had simply “acted appropriately and fairly in many of the areas regarding intellectual property theft and non-tariff barriers.
“The U.S./China economic relationship is very important and the Trump administration is still committed to reaching a good deal for agriculture and other American industries whenever China wants to play by the rules of the WTO and the world economy,” Perdue said.
USDA Chief Economist Rob Johannson said the program is “slightly different from last year, but the main brushstrokes are roughly the same as they were last year.”
The department is looking at trade damages, not just from last year’s tariffs, but going back to previous actions by China and some other trading partners that are levying “these unjustified tariffs on our producers and on our ag trade,” Johannson said.
The same model from last year to develop the trade damages will remain the same.
“Again, we’re comparing to the difference in trade with the tariffs on our exports, is what to trade without those tariffs,” Johannson said. “But we are looking back a number of years to look at what China has purchased from us in the past.”
Similarities to 2018 program
They’re bringing those back numbers into the baseline for applying those tariffs, garnering a slightly larger number than in 2018. It’s $16 billion for 2019, compared to $12 billion last year.
“As I mentioned, the current damage estimate is based on this longer term analysis of our commodity exports,” Johannson said. “The affected markets in it better reflect the increased scope of and level of tariff retaliation that is continued after our last estimates were developed.”
Estimates do account for some other variables that have “repeated distortionary trade policies by China and other countries that have contributed to the slow pace of market adjustment and trade that we’ve seen for agricultural production,” Johannson said.
The estimated $16 billion in aid will be put into three different programs—Market Facilitation Program; Food Purchase and Distribution Program; and Agricultural Trade Promotion Program. Details on the programs are as follows:
• MFP for 2019, authorized under the Commodity Credit Corporation Charter Act and administered by the Farm Service Agency, will provide $14.5 billion in direct payments to producers.
• The CCC Charter Act authority will be used to implement a $1.4 billion FPDP through the Agricultural Marketing Service to purchase surplus commodities affected by trade retaliation such as fruits, vegetables, some processed foods, beef, pork, lamb, poultry and milk for distribution by the Food and Nutrition Service to food banks, schools and other outlets serving low-income individuals.
• Finally, the CCC will use its Charter Act authority for $100 million to be issued through the Agricultural Trade Promotion Program administered by the Foreign Agriculture Service to assist in developing new export markets on behalf of producers.
Undersecretary for Farm Production and Conservation Bill Northey said there are three pieces to the MFP, which will provide producers payments via the FSA county offices.
“We divide this pool of funds into three different buckets,” Northey said.
Northey noted the following specifics about the MFP programs.
• Producers of alfalfa hay, barley, canola, corn, crambe, dry peas, extra-long staple cotton, flaxseed, lentils, long grain and medium grain rice, mustard seed, dried beans, oats, peanuts, rapeseed, safflower, sesame seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, upland cotton, and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019. Those per acre payments are not dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions. Moreover, total payment-eligible plantings cannot exceed total 2018 plantings.
• Dairy producers will receive a per-hundredweight payment on production history, and hog producers will receive a payment based on hog and pig inventory for a later-specified time frame.
• Tree nut producers, fresh sweet cherry producers, cranberry producers and fresh grape producers will receive a payment based on 2019 acres of production.
• These payments will help farmers to absorb some of the additional costs of managing disrupted markets, to deal with surplus commodities, and to expand and develop new markets at home and abroad.
• Payments will be made in up to three tranches, with the second and third tranches evaluated as market conditions and trade opportunities dictate. The first tranche will begin in late July/early August as soon as practical after Farm Service Agency crop reporting is completed by July 15. If conditions warrant, the second and third tranches will be made in November and early January.
“This year, we’re still in a place where some producers are making planting decisions and we need to make sure that folks have the complete flexibility in this challenging planting season to plant what works for them they need to make the best economic decision,” Northey said. “And that economic decision will not be impacted by the payment that they receive, depending on which production they choose.”
Producers can decide
Northey said USDA wants to make sure producers are planting for the market and their own agronomic situation.
“And encourage folks certainly in this challenging time to not have to worry about what differential payments may be between crops,” he said.
The piece for dairy and pork producers will be very similar to last year and processed similarly. The third piece will have added specialty crops in the payment mechanism.
“They will not have a blended rate, like we talked about in the first non-specialty crops, it will be based on each of their impact to that commodity times the acres of production,” Northey said.
As mentioned in the payment details earlier in the story, Perdue is hoping the second and third payments won’t have to be made because there’s been a trade deal with China. Northey agrees.
“Of course as the secretary said we plan and hope to be able to have a trade agreement well before those second and third payments are made,” Northey said. “We’ll make the first payment, and the second and third payment will depend on whether we still have damage to our producers or are able to celebrate any trade agreements.”
The payments are not only those commodities that are negatively impacted, but those commodities that have some opportunity with a new trade deal.
“These payments are not designed to be a market loss payment,” Northey said. “They are a market facilitation payment. It’s not going to perfectly reflect what some producers feel the loss of these markets have been.”
But it will vary for the payments, as they are designed to accomplish things like marketing, paying for storage or looking at other flexibilities to get producers to a time when there is a trade agreement, Northey said.
Undersecretary for Marketing and Regulatory Programs Greg Ibach detailed the FPDP.
“Of course, one of the main purposes of this program is to clear inventories of products that have been impacted by the tariffs,” Ibach said. “We’ve worked closely through the last program with industry groups to design the purchase specification to target those segments within each commodity that are most directly impacted by the tariff.”
Purchases are going to be made in phases like happened previously.
“This not only helps match up the purchases with the capacity of the food bank, but it allows us to have a variety of products available to hungry citizens for an extended period of time,” Ibach said.
Feeding the hungry
The second big benefit helps feed hungry people and consequently introduces them to a wider variety of commodities they’ve maybe not experienced.
Brandon Lipps, acting deputy undersecretary for food nutrition and consumer services, reiterated what Northey had to say about the FPDP and how it delivered top quality domestically grown food to millions of Americans that need them through the FNS.
“These products have been used extensively in the local food banks and pantries throughout this country that participate and the USDA emergency food assistance program and will also benefit others to the National School Lunch Program and the through Food Distribution Program on Indian reservations,” Lipps said.
In many cases, USDA has been able to offer products through this program in normal channels.
“This ongoing program will continue to support both American producers and the millions of Americans who rely on nutrition assistance with facing difficult circumstances,” Lipps said. “The Food and Nutrition Service, the USDA is excited to continue working with AMS. We support farmers through this process to feed Americans and need through partnerships.”
The Ag Trade Promotion Program is getting an additional $100 million for the express purpose of developing, enhancing and growing new markets, Ted McKinney, undersecretary for trade and foreign agricultural affairs, said. Last year there was $600 million in requests from cooperators.
“These cooperators transcend every crop commodity, livestock, poultry, all of it,” McKinney said. “And the desire was to make sure that they targeted those monies to either reestablish markets that might have been in trouble, but also to develop new markets, and they were outstanding in their quality.”
Further details regarding eligibility and payment rates for the programs will be released at a later date.
Kylene Scott can be reached at 620-227-1804 or [email protected].
