Trade

USDA announces $12B package for US farmers impacted by trade war

Grain Central, August 28, 2018

US Secretary of Agriculture Sonny Perdue has overnight released details of a $12 billion aid package the US Department of Agriculture (USDA) will provide to assist farmers in response to what it terms as “trade damage from unjustified retaliation by foreign nations”.

Under the package the USDA will send incremental payments to soybeans, sorghum, wheat, corn, pork, dairy, and cotton producers through the Market Facilitation Program starting on September 4.

Assistance to wheat growers will be 14¢/bushel (about US $5.13/tonne) – which some US farm groups say falls well short of the estimated 75c/bushel price decrease US farmers will experience as a result of the ongoing trade war (more below).

The payments will be based on 2018 actual production and subject to payment limitations.

The agency will also purchase commodities such as fruits, nuts, rice, legumes, beef, pork and milk through a Food Purchase and Distribution Program and authorise a $200 million Trade Promotion Program to develop foreign markets for US agricultural products.

In a statement Mr Perdue said he has been directed by President Donald Trump to craft a short-term relief strategy to protect agricultural producers while the Administration works on “free, fair, and reciprocal trade deals to open more markets in the long run to help American farmers compete globally”.

““Early on, the President instructed me, as Secretary of Agriculture, to make sure our farmers did not bear the brunt of unfair retaliatory tariffs. After careful analysis by our team at USDA, we have formulated our strategy to mitigate the trade damages sustained by our farmers. Our farmers work hard, and are the most productive in the world, and we aim to protect them,” he said.

The USDA will authorize up to $12 billion in programs to assist agricultural producers to meet the costs of disrupted markets. Spending will include:

  • USDA’s Farm Service Agency (FSA) will administer the Market Facilitation Program (MFP) to provide payments to corn, cotton, dairy, hog, sorghum, soybean, and wheat producers starting September 4, 2018. An announcement about further payments will be made in the coming months, if warranted.
  • USDA’s Agricultural Marketing Service (AMS) will administer a Food Purchase and Distribution Program to purchase up to $1.2 billion in commodities unfairly targeted by unjustified retaliation. USDA’s Food and Nutrition Service (FNS) will distribute these commodities through nutrition assistance programs such as The Emergency Food Assistance Program (TEFAP) and child nutrition programs.
  • Through the Foreign Agricultural Service’s (FAS) Agricultural Trade Promotion Program (ATP), $200 million will be made available to develop foreign markets for U.S. agricultural products. The program will help U.S. agricultural exporters identify and access new markets and help mitigate the adverse effects of other countries’ restrictions.

“President Trump has been standing up to China and other nations, sending the clear message that the United States will no longer tolerate their unfair trade practices, which include non-tariff trade barriers and the theft of intellectual property,” Mr Perdue said.

“In short, the President has taken action to benefit all sectors of the American economy – including agriculture – in the long run.

“It’s important to note all of this could go away tomorrow, if China and the other nations simply correct their behavior. But in the meantime, the programs we are announcing today buys time for the President to strike long-lasting trade deals to benefit our entire economy.”

The initial Market Facilitation Program (MFP) payment will be calculated by multiplying 50 percent of the producer’s total 2018 actual production by the applicable MFP rate. If CCC announces a second MFP payment period, the remaining 50 percent of the producer’s total 2018 actual production will be subject to the second MFP payment rate.

MFP payments are also capped per person or legal entity at a combined $125,000 for corn, cotton, sorghum, soybeans and wheat. Interested producers have been told they can apply for the assistance after harvest is 100 percent complete and they can report their total 2018 production. Eligible applicants must have an ownership interest in the commodity, be actively engaged in farming, and have an average adjusted gross income (AGI) for tax years 2014, 2015, and 2016 of less than $900,000.

Market Facilitation Program

Commodity
Initial Payment Rate
Est. Initial Payment**(in $1,000s)
Cotton $0.06 / lb. $276,900
Corn $0.01 / bu. $96,000
Dairy (milk) $0.12 / cwt. $127,400
Pork (hogs) $8.00 / head $290,300
Soybeans $1.65 / bu. $3,629,700
Sorghum $0.86 / bu. $156,800
Wheat $0.14 / bu. $119,200
Total $4,696,300

** Initial payment rate on 50% of production

The initial MFP payment will be calculated by multiplying 50 percent of the producer’s total 2018 actual production by the applicable MFP rate. If CCC announces a second MFP payment period, the remaining 50 percent of the producer’s total 2018 actual production will be subject to the second MFP payment rate.

MFP payments are also capped per person or legal entity at a combined $125,000 for corn, cotton, sorghum, soybeans, and wheat,  and a combined $125,000 for dairy production or hogs.

For more information on the MFP, visit www.farmers.gov/mfp

US farm group response

The National Farmers Union (NFU), an advocacy organisation representing nearly 200,000 farm families, echoed previous requests for the administration to develop a long-term support mechanism to mitigate the significant, long-term damage being inflicted upon US agriculture trade markets and therefore farm prices.

“The USDA aid package is appreciated, and it will begin to help many of those that are suffering the brunt of the retaliation from China and other trading partners,” NFU Senior Vice President of Public Policy and Communications, Rob Larew said.

“But our family farmers and ranchers need strong markets and long-term certainty.

“This trade war has already caused irreparable, long-term harm to what were strong trade relationships for American family farmers and ranchers. As a result, farm prices continue to plummet for US farm goods, and our competitors are putting more land into production to fill the void.

“Farmers Union wants to see the administration pursue fair trade agreements to the benefit of farmers and rural communities. But it must transition away from an ad hoc emergency aid strategy and to work with Congress to develop a legislative solution to low farm prices that keeps family farmers in business. While the current farm economy and outlook are bleak, the administration and Congress have the tools to protect family farmers over the course of this trade war.”

National Association of Wheat Growers President and Sentinel, Oklahoma wheat farmer Jimmie Musick, said the assistance package poorly reflected the reality that all farmers were being harmed by tariffs. The organisation noted that while the package offered wheat growers 14c/bushel, it estimated the ongoing trade war will cause a 75¢/bushel price decrease and a reduction in global wheat production.

“NAWG appreciates the Administration’s steps to hold China accountable for unfair trade practices but tariffs and the subsequent self-inflicted need to provide aid aren’t the answer. Farmers across the country want ‘trade, not aid’, especially wheat growers,” Mr Musick said.

“About half of all US wheat is exported, making new trade deals and establishing new global markets, a priority for all wheat farmers.

“As a result of the tariffs, China hasn’t purchased any wheat from the United States since March. Further, we estimate that the ongoing trade war will cause a 75¢/bushel price decrease and a reduction in global wheat production.

“US Wheat Associates makes a similar note in their statement, which NAWG supports. The federal aid package invests in market development programs which we hope will repair some of the damage resulting from the tariffs. However, this solution is only temporary, and both organizations encourage the Administration to must move forward with new trade deals.

“Farm income is down, and rural America is enduring a prolonged economic downturn. This relief package shows that the Administration isn’t grasping the tough conditions being faced by farmers. The long-term solution is to end the trade war.”

 

 

 

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