Farm Aid Will Be Temporary Even in Extended Trade War, Ag Secretary Says

(Bloomberg) -- A $12 billion assistance plan for farmers hit by a growing trade war is unlikely to be extended in future years even if tariff battles continue, Agriculture Secretary Sonny Perdue said Wednesday.

The mix of direct payments to farmers, commodity purchases for food-aid programs, and stepped-up promotion of new export markets announced by the Trump administration Tuesday is based on losses related to 2018 crops that were planted well before retaliatory tariffs from China, Canada and other nations began, Perdue said after speaking at an agriculture conference in Arlington, Virginia.

In 2019, farmers will know the trade environment heading into planting, allowing them to make decisions that will lessen tariff-related losses.

Farmers who planted this year "had no idea what was coming about" on trade, Perdue said. Once a new market equilibrium is established, there would be much less, if any, need for additional assistance, he said. "We don’t expect trade disruption as much in future crops."

The U.S. Department of Agriculture’s plan Tuesday buoyed markets looking for new sources of demand for U.S. products. The announcement raised futures of soybeans, a crop heavily dependent on trade with China, to their highest price in two weeks, but it didn’t win over skeptics on Capitol Hill, including Republicans from politically important agricultural states.

‘Trade, Not Aid’

"My thoughts are the thoughts of farmers. They want trade, not aid. It’s really just that simple," said Senator Ron Johnson, a Republican from Wisconsin.

Perdue’s remarks echoed those of White House economic adviser Larry Kudlow, who said on CBS Wednesday that the aid package is only temporary and that the entire $12 billion in assistance that was announced might not be needed.

“Nobody’s really thrilled about this,” Kudlow said. “We’re just trying to protect American agriculture from some of the unfair trading practices.”

Extra farm aid would be a balm to producers who are seeing prices drop and inventories rise because of disputes with China, Canada and other trade partners who are significant purchasers of U.S. pork, soybeans and other crops.

Trump Support

Farmers are a key part of the rural political base that elected President Donald Trump, who has promised they will emerge from a trade war better off. Many farmers are accepting that message. Still, an extended trade dispute that lingers into the fall harvest -- and midterm elections -- holds the potential to shake that support. Trump also has been under pressure from lawmakers representing rural parts of the country to back away from imposing tariffs.

That pressure won’t work, Trump said on Twitter Wednesday. "China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S.," Trump tweeted. "They are being vicious in what will be their failed attempt."

He also said “weak” politicians who criticize tariffs will only extend a trade war by making negotiations harder for the U.S.

The plan will cover agricultural commodities like soybeans, wheat and milk as well as crops including legumes and nuts, depending on the program. Farmer signups will begin later this year after the fall harvest, according to the USDA, with more details on administration due by the Labor Day holiday in September.

Soybeans, which surpassed corn to become the most-planted U.S. crop for the first time since 1983 this year, have been especially hard hit -- exports to China accounted for about one-third of the oilseed’s revenue last year. The USDA projected earlier this month that average soybean prices paid to farmers would fall 75 cents to $9.25 a bushel next year, a potential loss of more than $3.2 billion based on expected use of the crop.

The plan for providing price supports, which doesn’t need congressional approval, was rolled out just two days before Trump is set to travel to Iowa, the top U.S. soybean-producing state.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo

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