A closer look at the new trade aid payments

Over the last few decades as a reporter, I’ve learned that most farmers love to get a good price from the marketplace, rather than a good check from the federal government. But what’s a person to do when export markets are being shut down as a result of tariffs and an ongoing trade war with China and other trading partners? Hope the government props up your revenues.

President Donald Trump instructed Agriculture Secretary Sonny Perdue to deliver more dollars and help ease the pain out in farm country, and last week, the U.S. Department of Agriculture team did just that. We still don’t have the formula that was used to calculate county-by-county payments, but we know that a lot more producers will be eligible than when USDA rolled out their plan last year—delivering $1.65 a bushel on soybeans and only a penny per bushel on corn, among other crops.

This year, producers can qualify for payments ranging from $15 to $150 an acre under this year’s version of the Market Facilitation Program for row crops, with rates varying widely by county and region. Dairy producers who were in business as of June 1, 2019, will receive a per hundredweight payment on production history, and hog producers will receive a payment based on the number of live hogs owned on a day selected by the producer between April 1 and May 15, 2019.

MFP payments will also be made to producers of almonds, cranberries, cultivated ginseng, fresh grapes, fresh sweet cherries, hazelnuts, macadamia nuts, pecans, pistachios, and walnuts. Each specialty crop will receive a payment based on 2019 acres of fruit or nut bearing plants, or in the case of ginseng, based on harvested acres in 2019.

Agriculture Department officials announced program details this past week, including county-by-county payment rates for the first of three payouts. The rates are based on the mix of crops that each county historically produces as well as USDA’s calculation of the impact on each commodity of unfair trade practices over the past 10 years.

MFP payments will be made in up-to three tranches, with the second and third tranches evaluated as market conditions and trade opportunities dictate. If conditions warrant, the second and third tranches will be made in November and early January, respectively.

“We knew there would be some wide disparities in counties that were close to each other and … (USDA) recognized that. That’s why they put the floor (rate of $15 per acre) in to make sure that it would minimize some of the angst,” House Ag Committee ranking Republican Mike Conaway, R-TX, told Agri-Pulse.

“It’s my guess that each one of (the farm groups) will have folks that are really, really happy and folks who are generally disappointed because they didn’t get higher payments,” Conaway said.

Not all lawmakers were as pleased.

“These short-term, inequitable payouts are not a replacement for markets and a coherent trade strategy,” said Debbie Stabenow of Michigan, the ranking Democrat on the Senate Agriculture Committee. She said the latest version of MFP “only confirms my previous concerns that this aid is not equitable and favors certain farmers over others. Bottom line—it’s not fair.”

Major farm groups were appreciative in general, but offered mixed reviews.

“NAWG appreciates the administration recognizing the impact the current trade war with China is having on farmers,” stated NAWG president and Lavon, Texas, farmer Ben Scholz. “The MFP payments will provide necessary assistance to growers impacted by low prices resulting in part from tariffs. However, this is a Band-Aid when we really need a long-term fix. NAWG understands holding China accountable for its WTO violations and unfair trade practices but a trade war is not the solution especially when farmers are the casualties.”

Midwest producers who were unable to plant their normal crops because of the constant storms this spring also will likely see lower payments since they will only qualify for a minimum $15-an-acre payment on their prevent plant acres, a payment they will only receive if those acres are seeded to cover crops.

National Farmers Union President Roger Johnson, reacting to the new version of MFP, said his group has “some concerns about disparities in payments from county to county, which could put some farmers at a financial disadvantage.”

House Agriculture Chairman Collin Peterson, D-MN, said he expected the disparities in county rates but wasn’t certain how farmers would respond. “At the end of the day farmers need money and I’m not going to complain,” he told Agri-Pulse.

Some of the largest per-acre payments will go to counties, including some in Conaway’s district, that are dominated by cotton production. No counties in Ohio, Indiana, Illinois, Iowa, Nebraska, Minnesota, and the Dakotas have payment rates above $100 an acre, but Texas and Georgia have $35 and $51, respectively.

Rates also vary significantly by county. On the southern Plains in Texas, where cotton is the dominant crop, the MFP rate is $145 in Lubbock County but $114 in neighboring Hale County to its north and $124 in Lynn County to its south.

Perdue, speaking about the major differences between the minimum payment rate of $15 per acre and the maximum of $150 for farmers in different counties, said USDA did the best it could with its resources and time.

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“The minimum and the maximum payments were an attempt to equitably distribute the funds,” Perdue said, but also acknowledged that “there are going to be some misalignments probably in this program somewhere …”

For example, he said, a farmer of a commodity that was not affected sharply by Chinese tariffs in a county where the predominant crop was significantly affected, could benefit from the MFP disproportionately. And the opposite could happen.

Soybean farmers, who have borne the brunt of China’s retaliatory tariffs, are expected to still do relatively well under the new MFP. American Soybean Association President Davie Stephens said that’s how it should be, even though some may be in counties with lower payment rates.

“The county rate for farmers in areas with a higher percentage of crops suffering from negative trade impacts will receive a higher offset for the damages we have seen because of the tariffs,” he said. “We appreciate the administration’s effort to determine how the payments will work and hope our soybean growers—no matter where their farms are and what is planted there—feel some relief from this assistance.”

Corn farmers, who were generally disappointed in the penny per acre they got in the last MFP, did better this time around after USDA looked back at Chinese corn imports over the past decade to calculate damages.

National Corn Growers Association President Lynn Chrisp said in a statement, “While NCGA’s focus remains on markets, we welcome USDA’s quick rollout of MFP 2.0 and the department’s creative efforts to reorient MFP to better reflect market impacts and support American farmers. We look forward to learning more about how MFP will work for corn farmers.”

The chairman of the National Cotton Council, Alabama farmer Mike Tate, welcomed the payments his growers will get, noting that cotton futures prices have fallen by 30 cents per pound since the trade war with China began a year ago, costing producers about $250 an acre in revenue.

The drop is “due in large part to cotton sales to China being substantially below the level that was expected in absence of tariffs,” Tate said.

Although there have been press reports of recent possible cotton purchases by China, they won’t be enough given the rising stocks and U.S. production, he said.

U.S. farm groups are united in their desire to see the U.S-China trade war come to an end and the withdrawal of Chinese tariffs.

“While we are grateful for the continuing support for American agriculture from President Trump and Secretary Perdue, America’s farmers ultimately want trade more than aid,” said Zippy Duvall, president of the American Farm Bureau Federation. “It is critically important to restore agricultural markets and mutually beneficial relationships with our trading partners around the world.”

Editor’s note: Agri-Pulse Editor Sara Wyant can be reached at www.agri-pulse.com. Agri-Pulse reporters Spencer Chase, Philip Brasher and Bill Tomson contributed to this report.