Trump’s Farmer Base Will Make More Money Thanks to Trade Deal

(Bloomberg) --

American farmers are set see higher incomes again this year as the trade truce helps markets recover and improve exports at a time when China needs more meat, likely shoring up economic confidence for a key Trump constituency going into the November election.

Profits will climb 3.3% from 2019 and depend less on government aid following President Donald Trump’s initial trade deal with China, the U.S. Department of Agriculture projected on Wednesday. Income from livestock production is forecast to jump 4.6%, the biggest gain for cash receipts.

Trump has boasted that his trade agreement with China would make farmers very happy with the Asian country agreeing to boost purchases of American farm goods $32 billion above pre-trade war levels over two years. Some of the biggest gains for shipments could come to meat producers as China struggles to fill a protein gap left by the African swine fever epidemic, which is killing off tens of millions of hogs.

With exports set to rise, U.S. Agriculture Secretary Sonny Perdue has warned farmers not to expect another federal bailout in 2020. The government authorized $28 billion in trade assistance over the past two years, helping incomes to rise in 2019 despite the trade-war fallout.

Still, a last taste of aid is creating a temporary buffer. Payments of the final tranche started in January, contributing to the gains for this year’s profit projection. The USDA forecasts farmers will receive $15 billion in direct government payments in 2020, down from $23.7 billion in 2019 but still above the $11.5 billion received in 2017, before the trade war started.

While the USDA’s estimates take into account the trade pact, they may not reflect the true scope of the impact, according to Carrie Litkowski, a senior economist with the USDA’s Economic Research Service.

The projected gain for income also doesn’t reflect any potential blow-back from the outbreak of the deadly coronavrius in China, the world’s biggest food importer. The health crisis has in recent days called into question whether the Asian nation will meet the purchase targets established in the trade deal.

Following is a table detailing the USDA’s projections. Figures are in billions of dollars.

--With assistance from Dominic Carey.

To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Millie Munshi, Patrick McKiernan

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