Trump Aid Payments to Boost Farm Profits This Year, USDA Says
The Trump administration said farmers are doing better than previously thought, forecasting profits will rise 5% in 2019 to the best in five years because of the president’s trade aid program.
The more favorable portrait of agricultural finances comes as the administration has faced increasing criticism from farmers over losses from the president’s intensifying tariff war with China. Farmers openly challenged Agriculture Secretary Sonny Perdue earlier this month at an event in Minnesota.
The U.S. Department of Agriculture on Friday projected net farm income this year will reach $88 billion, up from $84 billion last year. That’s a rosier financial picture for farmers than prior estimates, which didn’t anticipate the level of aid Trump would provide to compensate for lost sales to China, said Jeffrey Hopkins, the economist who supervised the forecast.
The last forecast, made in March, also didn’t include the level of aid payments farmers received for being unable to plant because of floods, Hopkins said.
Rob Larew, vice president of public policy for the National Farmers Union, the second-largest general farm organization, said the boost in profits “belies the economic difficulties that most farmers are still facing” and relies entirely on aid from taxpayers.
“Though those payments are helpful in the short term, they ultimately are not a sustainable solution to the ongoing farm crisis,” Larew said. “Unless the government plans to either keep throwing money at these problems or implement real solutions, farm income will likely fall again next year.”
John Newton, chief economist for the American Farm Bureau Federation, the largest general farm group, said a 13% increase in farm bankruptcies in the 12 months through June and an uptick in delinquent farm loans suggest a tightening financial squeeze.
“A lot of real-time indicators don’t show signs of a stronger farm economy, but you can’t deny the impact of the trade aid,” Newton said, adding that most farmers haven’t yet received payments from this year’s trade assistance package.
The revised forecast suggests farmers will have their most profitable year since 2014. But the projection is still 2.3% below average farm profits since 2000 and 36% below their net income in 2013 when adjusted for inflation.
Farmers will receive $19.5 billion in direct government aid by year-end, the most since 2005, according to the projections. That doesn’t include an additional $10.5 billion in federally subsidized crop insurance payments forecast for the year.
Rural voters are a key constituency for President Donald Trump as he heads into the 2020 election, and the farm economy had been under stress even before the trade war with China. The administration announced $16 billion in trade aid for farmers this year after providing $12 billion last year. Congress also appropriated $3 billion in disaster assistance for farmers on top of payments they receive from existing farm subsidy programs for those who were unable to plant.
The data also include big upward revisions for net farm income for last year and this year based on a 2018 survey on farm production practices and finances. The survey showed farmers’ expenses were considerably lower than previously estimated, Hopkins said.
The USDA had previously estimated last year’s farm profits at $63.1 billion. The 2019 projection of $88 billion is up from a $69.4 billion forecast released in March.
©2019 Bloomberg L.P.