The US Department of Agriculture (USDA) released details of the up to $12bn aid package on Monday [August 28]. The three-pronged support program was initially announced July 24 and is expected to start in September.
In response to the actions on trade that the US has taken several countries have retaliated against the US, said Sonny Perdue, US secretary of agriculture, on a conference call. “For months now President [Donald] Trump has been standing up to China and other nations and sending the clear message that the United States will no longer tolerate their unfair trade practices, those practices have included non-trade barriers to American products and the forced transfer or outright theft of our intellectual property,” he added.
“President Trump has said, ‘Enough is enough,’ and he's [been] taking action on trade policy to open markets so that American farmers can compete globally,” Perdue said. “Now the proper response from China and other nations would be to correct their behavior, but instead they chose to retaliate targeting US agricultural products disproportionately – but we always knew US agriculture would be the tip of the spear if other nations decided to retaliate.”
“This package to minimize the trade disruption is a three-prong approach,” he said. “USDA’s farm service agency will administer the market facilitation program to provide payments to cotton, corn, dairy pork, soybeans, sorghum and wheat growers; USDA’s agricultural marketing service will administer a food purchase and distribution program to purchase commodities unfairly targeted by the unjustified retaliation.”
“The foreign agricultural service, foreign trade promotion program’s $200m will be used to develop foreign markets for US agricultural products,” he added. “This program will help our USDA agricultural exporters identify and access new markets and help mitigate the adverse the effects of other countries’ restrictions.”
The loss of trade stemming from tariffs imposed on US products also comes at a challenging time for feed crop and agricultural producers, said Perdue. “Farm incomes have decreased 50% over the last 5 years so the additional problems caused by unjustified tariffs could not have come at a worse time,” he added.
The understanding of that combination sparked interest in developing a support program for agricultural producers involved with several production areas, he said.
“It has been our stated goal to implement these programs right after Labor Day, on September 4, and we will achieve that the timing,” he said. “These programs are tied to the actual harvest time for many crops for farmers and will be based on actual production.”
The program was initially intended to be a one-time support, but any additional information on other ‘further payments’ is slated to be made in later months, he said.
Support systems: determination and highlights
The US farm economy has faced challenges in recent years, said Robert Johannson, chief economist at the USDA. Net farm income in real terms has been dropping since 2012 – it is expected to continue to decline and borrowing has been increasing.
“When we look at these illegal retaliatory tariffs – we know this is coming on top of a very tight farm economy and that’s the reason why these programs are essential to help mitigate the impact of the trade damages imposed by some of these countries that are imposing illegal tariffs,” he said. “USDA estimates that the current impact of tariffs could be up to $12bn, as was said earlier – that’s defined as the value of US exports lost due to these tariffs.”
The damage calculation reflects changes farmers will have from trade disruption, but is not a price effect, he said. It represents trade damages stemming from lower demand for US products and the resulting lower prices.
The market facilitation program is set to provide an income boost to producers of multiple feed and grain crops including corn, soybeans, sorghum and wheat, said Bill Northey, undersecretary for farm production and conservation with USDA. It will be administered through the farm service agency.
Initial payments for producers in the program will be calculated using 50% of production and a payment rate set for each commodity, he said. Producers have to establish their eligibility by not having an income over a set level, being in conservation compliance and will need to know total production.
“Payment rates [include] wheat [at] $0.14 a bushel times 50% of production for 2018, sorghum [is] $0.86 per bushel and soy is $1.65 per bushel,” he said. “For corn, it is $0.01 per bushel times 50% of the 2018 production and for cotton, it is $0.06 per pound times 50% of production for 2018 – we will also make payments to dairy producers and pork producers.”
If another payment period is announced, the remaining half of the production will be used to calculate the payment rate, according to the USDA.
Payment limits for combined feed and other crops will be capped per individual or legal entity at $125,000 and a separate $125,000 cap has been set for producers of dairy and swine, said Northey. In total, payments through the program are expected to be about $4.7bn.
The food purchase and distribution program is set to buy about $1.2bn in specific commodities that have been targeted by the tariffs, said Greg Ibach, undersecretary for marketing and regulatory programs with the USDA.
The third portion of the plan, the trade promotion program, sets aside funds to help develop foreign markets, said Ted McKinney, undersecretary for trade and foreign agricultural affairs. The work is designed to help producers as they interact with export markets including in areas like consumer advertising or market participation.
Industry responses
Members of the feed industry were positive about the support program as details were released.
The National Sorghum Producers thanked the USDA for providing relief for its members, and for sending a message to the international community. The group added that it appreciated the effort to address trade promotion, which could lead to the development of ‘more lasting solutions.’
Members of the American Soybean Association echoed the statement regarding support for trade promotion. “Increasing funding for market development has been a top ASA priority for this year’s farm bill and is even more critical given the need to find new export markets for US soy and livestock products,” added John Heisdorffer, ASA president.
He said that the payment support for producers also is welcome.
“This will provide a real shot in the arm for our growers, who have seen soybean prices fall by about $2 per bushel, or 20%, since events leading to the current tariff war with China began impacting markets in June,” he said. “This assistance will be particularly helpful to farmers who didn’t forward-contract their crop earlier this year and who need to arrange financing for planting next year’s crop.”
