A Deere & Co. John Deere 9560 combine harvester is used to harvest soft red winter (SRW) wheat in this aerial photograph taken above the village of Kirkland in Dekalb, Illinois, U.S. (Photographer: Daniel Acker/Bloomberg)

Republicans Pan Trump’s $12 Billion Farm Aid Plan

(Bloomberg) -- The Trump administration’s decision to deliver $12 billion in aid to farmers hit by a burgeoning trade war was panned Tuesday by Republicans in Congress as not fixing the underlying problem -- the White House’s own trade policies.

The planned mix of direct payments to farmers, commodity purchases for food-aid programs, and stepped up promotion of new export markets 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.

"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.

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.

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.

‘Be a Little Patient’

“The farmers will be the biggest beneficiary; watch, we are opening up markets, you watch what is going to happen, just be a little patient," Trump said during a speech Tuesday in Kansas City, Missouri.

Agricultural goods covered would include major 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 U.S. Department of Agriculture, with more details on administration due by the Labor Day holiday in September.

Farmer groups welcomed the assistance, but with a catch: They’d like a resolution of trade disputes.

The aid "will provide a welcome measure of temporary relief to our farmers and ranchers," said Zippy Duvall, president of the American Farm Bureau Federation, the largest American farmer group. "But we cannot overstate the dire consequences that farmers and ranchers are facing in relation to lost export markets," he added, "and we will continue to push for a swift and sure end to the trade war."

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.

No Long-Term Solution

Republican Senator Chuck Grassley of Iowa, who’s been critical of Trump’s moves on trade, said before the announcement that commodity supports aren’t a long-term solution and will be costly to taxpayers.

“The president’s going to have to say more than ‘I like the farmers and I support the farmers,”’ he said during a conference call with reporters.

Senators who are frequent critics of the president were more scathing in their remarks.

Senator Ben Sasse, a Nebraska Republican, said in a statement, "This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again."

"You have a terrible policy that sends farmers to the poorhouse, and then you put them on welfare, and we borrow the money from other countries," said GOP Senator Bob Corker of Tennessee. "It’s hard to believe there isn’t an outright revolt right now in Congress over what is happening."

Other rank-and-file members also expressed concern. Senator James Lankford, an Oklahoma Republican, called the plan "the wrong direction to go. "

Farmers already have "quite a few" assistance programs, he said. "I don’t want us to have yet another one."

$21 Billion Surplus

Agriculture is the rare American industry that runs a trade surplus, with a projected $21 billion this year. Canada, China and Mexico are the three biggest buyers of U.S. farm goods, accounting for 43 percent of purchases in 2017. All three are embroiled in conflicts with the U.S.

Soybeans, the second-most valuable U.S. crop after corn, 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.

Government payments to farmers in 2018 -- not including crop insurance subsidies or the aid announced Tuesday -- are forecast to be $9.2 billion, the lowest since 1997, according to USDA estimates. That puts farmer assistance below the amounts that would trigger complaints before the World Trade Organization, the USDA said.

And while emergency government commodity purchases are rare, they’re not unheard of. President Barack Obama allocated $170 million to help farmers struck by drought in 2012.

Agriculture Secretary Sonny Perdue said the government’s measures were temporary, and necessary to send "a firm statement that other nations cannot bully our agriculture producers to force the United States to cave in," he said in announcing the aid.

Still, farmers dealing with trade turmoil are looking for more permanent solutions, said Senator Jerry Moran of Kansas, a Republican.

"There will never be enough money to solve the problem" created by duties on American farm goods, Moran said. "Farmers and ranchers recognize that the Trump administration cares about them. They are worried about tariffs."

©2018 Bloomberg L.P.