Trump's $16 Billion Farmer Trade Aid Package Leaves Few Happy

(Bloomberg) -- President Donald Trump’s new $16 billion aid package for farmers raises the federal government’s bill for the trade-war but isn’t easing anyone’s concerns about damage to the U.S. economy.

Farmers would prefer a resumption of normal trade over government handouts. Several farm-state lawmakers say the payments are too meager. And the money risks distorting agriculture markets.

“What do farmers want? They want trade,” said Beth Ford, chief executive officer of Minnesota-based agriculture cooperative Land O’Lakes Inc., before the White House released details of the plan. “Nobody wants a payment.”

Democratic Senator Tina Smith of Minnesota derided the administration’s trade assistance in a Bloomberg TV interview as “a little Band-Aid” that “won’t take care of the problem.”

The Trump administration unveiled its latest package Thursday to help farmers hurt by the trade war with China, including $14.5 billion in market facilitation payments directly to producers and $1.4 billion in government purchases to be distributed through school lunch programs and local food banks. That brings to $28 billion the total trade assistance the U.S. has announced for agriculture.

“We will ensure our farmers get the relief they need, and very, very, quickly,” Trump said at the White House on Thursday in announcing the aid. “Good time to be a farmer,” he added.

Farmers can expect to receive their first aid payments by July or August, Agriculture Department officials said in a conference call with reporters on Thursday. The final payment is scheduled for the beginning of the 2020 election year.

American farmers are struggling to remain afloat as the tit-for-tat tariffs spat with China leaves soybeans from last year’s harvest piling up. American farm income dropped 16% last year to $63 billion, about half the level it was as recently as 2013. For Trump, appeasing his rural-voter base has become crucial ahead of 2020 elections.

Trump referenced the key role farmers and ranchers played in his 2016 election as he announced the aid package, saying they were “people that have been with me from the beginning.”

“The farmers have been attacked by China” in retaliatory tariffs Beijing has imposed on U.S. agricultural exports, he added.

John C. Baize, an independent consultant who advises the U.S. Soybean Export Council, said the payments will “underwrite the farm economy.”

“That will help the president in rural America with respect to the 2020 election,” Baize said. “Clearly producers of some commodities that are doing fine will get the payments while others that are hurting because of the trade war will get less."

Futures for corn, soy and wheat each dropped from earlier gains after the conference call, with Chicago corn declining by as much as 1.9% to $3.87 a bushel. Analysts cited concerns the plan could prompt farmers to plant more even as stockpiles of crops remain huge in part because of the trade war.

Roger Johnson, president of the National Farmers Union, called the latest aid package “a short-term fix for a very long-term problem.”

“Farmers rely on markets to make a living,” Johnson added. “Our ongoing trade wars have destroyed our reputation as a reliable supplier and have left family farmers with swelling grain stores and empty pockets.”

In the run-up to the program, farmers squabbled over how an aid package should be divided. The National Corn Growers Association, complaining its members were short-changed in last year’s $12 billion aid program, waged a public campaign for better treatment of their crop in aid levels. Corn growers in 2018 received 1-cent-per-bushel payment while soybean producers received $1.65 per bushel.

GOP Senator Joni Ernst of Iowa took up the cause of corn farmers earlier in the week, pressing for higher payments.

Agriculture Secretary Sonny Perdue said on the conference call that the administration had designed this year’s aid program to avoid distorting farmers’ production decisions. Under the new program, aid for most crops will be calculated based on what is grown in their county rather than just individual farmers’ plantings.

But Lindsay Greiner, president of the Iowa Soybean Association, cast doubt on the assurance, saying the announcement “could very well bump planted soybean acres and thus production, almost assuring that the pile of soybeans will not be reduced.”

“Short-term, stair-stepped subsidies are a poor remedy for trade,” Greiner said. “They stimulate production but not sales and therefore do little to undo the long-term log jam caused by not selling soybeans to destinations like China, the world’s No. 1 customer.”

Agriculture officials on the call declined to describe how they would compute trade losses but said they would be based on direct and indirect effects of tariffs imposed by China, the European Union and Turkey, though wouldn’t consider tariffs Mexico and Canada imposed on agricultural goods.

Producers of crops including corn, soybeans and wheat will receive a payment based on a single county rate multiplied by a farm’s total plantings to those crops in aggregate in 2019, according to the Agriculture Department.

Those per-acre payments aren’t dependent on which of those crops are planted in 2019, and therefore will not distort planting decisions, the agency said. Moreover, total payment-eligible plantings can’t exceed total 2018 plantings, it said.

Dairy and hog producers also will receive payments.

The National Pork Producers Council welcomed the package, but urged Congress to quickly ratify the USMCA trade accord with Mexico and Canada, and continue working on a resolution of the dispute in China, where the spread of African swine fever is set to boost imports of proteins including pork, beef and chicken.

“The current situation in China represents a historic sales opportunity for U.S. pork,” David Herring, president of the NPPC, said in a statement. “We look forward to continued work with the administration to restore favorable access to China, allowing U.S. pork producers to capitalize on this opportunity.”

Senator Debbie Stabenow, the top-ranking Democrat on the Agriculture Committee, said “farmers are struggling as this administration continues to pursue a chaotic trade agenda.”

“This complex scheme leaves them with more questions than answers,” the Michigan senator added.

Trump said he would provide $15 billion more in aid to farmers earlier this month when he announced additional tariffs on Chinese goods. While the president said that would come in purchases of U.S. food for overseas aid to poor countries, the Agriculture Department statement didn’t announce any funding for that purpose.

To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net;Isis Almeida in Chicago at ialmeida3@bloomberg.net;Michael Hirtzer in Chicago at mhirtzer@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Joshua Gallu, Justin Blum

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