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Market mitigation plan gets mixed reviews 0Market mitigation plan gets mixed reviews

Trade mitigation programs draws praise and criticism.

Ron Smith

August 28, 2018

6 Min Read
Farmers look to market mitigation plan to ease tariff hits.

The plan unveiled today by the U.S. Department of Agriculture (USDA) to provide short-term relief to protect farmers negatively affected by trade tariffs and ongoing trade uncertainty was met with mixed reviews from farm organizations.
The National Cotton Council (NCC) and the American Farm Bureau (AFB) praised the plan, which was panned by both the National Corn Growers Association (NCGA) and the National Milk Producers Federation (NMPF).
USDA announced last month that it will organize up to $12 billion in programs that will align with World Trade Organization obligations. Details of the plan were announced earlier today by Secretary of Agriculture Sonny Perdue.

“Early on, the president instructed me, as secretary of agriculture, to make sure our farmers did not bear the brunt of unfair retaliatory tariffs,” Perdue said. “After careful analysis by our team at USDA, we have formulated our strategy to mitigate the trade damages sustained by our farmers. Our farmers work hard, and are the most productive in the world, and we aim to protect them.”

The program includes tools that provide direct payment to farmers, a food purchase and distribution plan to buy up to $1.2 billion in targeted commodities (commodities will be distributed through nutrition assistance programs), and foreign market development.

“This support comes at a crucial time for the U.S. cotton industry,” NCC said in a press release this afternoon.

Benefits for Cotton

Cotton farmers may see benefits from The Market Facilitation Program, which will “provide $0.06 per pound on at least half of a producer’s 2018 cotton production (upland and ELS). The payment rate on the second half of 2018 production will be determined later and may remain at the same payment level. Once harvest is complete, production evidence must be provided to the local USDA Farm Service Agency,” the NCC statement noted.

“The National Cotton Council strongly commends Secretary Perdue and his team at USDA for their ongoing efforts to help U.S. agriculture manage through the current trade disruptions as the administration seeks to address unfair trade practices and barriers,” said NCC Chairman Ron Craft, a Plains, Texas, ginner. “The tariff mitigation program will help address a portion of the losses cotton producers are facing in the marketplace.”

Craft noted, however, that farmers face “continued economic stress in areas of the Cotton Belt that have lost production this year due to severe drought. In addition, cotton and cottonseed industry participants throughout the marketing channels are feeling the impacts of the retaliatory tariffs.”

The NCC statement reiterated the importance of producer support to help partially mitigate the impacts tariffs have on U.S. cotton. The statement also acknowledged the importance of “additional funds for export promotion as the industry looks to expand markets for U.S. cotton.”

Corn Growers Not Pleased

Corn growers say the USDA program will not make up for lost markets. In a statement released earlier today, NCGA said the plan is “insufficient to even begin to address the serious damage done to the corn market because of the administration’s actions.”

“NCGA members had a spirited debate on the prospect of trade aid during last month’s Corn Congress meeting,” said NCGA President and North Dakota farmer Kevin Skunes. “While most members prefer trade over aid, they support relief if it helps some farmers provide assurances to their local bankers and get through another planting season. Unfortunately, this plan provides virtually no relief to corn farmers.”

Today’s statement also referenced an NCGA-commissioned analysis, which was provided to USDA and the Office of Management and Budget (OMB). That analysis estimates that trade disputes have lowered corn prices by 44 cents per bushel for the crop produced in 2018— $6.3 billion in lost value on the 81.8 million acres projected to be harvested in 2018. USDA’s plan sets the payment rate for corn at just one cent per bushel.

“NCGA has understood from the beginning that this aid package would neither make farmers whole nor offset long-term erosion of export markets,” Skunes said. “… it is disappointing that this plan does not consider the extent of the damage done to corn farmers. Once again, we are calling on the administration to settle trade disputes and support a strong Renewable Fuel Standard. These no-cost, immediate actions would deliver a real win for rural America.”

Little help for Dairies

NMPF President and CEO Jim Mulhern responded to USDA’s plan.

“The dairy-specific financial assistance package provided by USDA — centered on an estimated $127 million in direct payments — represents less than 10 percent of American dairy farmers’ losses caused by the retaliatory tariffs imposed by both Mexico and China,” Mulhern said.

“The price drop resulting from these tariffs has not been gradual — it’s hurting U.S. dairy producers right now and will continue to do so.”

He says since retaliatory tariffs were announced in late May, milk futures prices lost more than $1.2 billion through December 2018.

“Milk prices for the balance of the year are now expected to be $1.10 per hundredweight lower than estimated just prior to the imposition of the tariffs on U.S. dairy exports.”

An Informa Economics study projects dairy farmer income will take a $1.5 billion hit this year if the tariffs remain in place through the end of 2018. It gets worse. Up to $16.6 billion in losses accrue if the tariffs persist over the next five years, through 2023. Mulhern says lost sales to China account for most of that harm, 73 percent of the total. That’s a hard hit in conjunction with low prices and financial losses dairies are already facing.

Mulhern says the dairy industry’s daily production, compared to row crop farmers’ one harvest a year, increases the market loss burden. “If farmer incomes continue to suffer as projected, we will lose more farms.”

Mulhern says the product purchase program and the Trade Promotion Program are important for dairy producers and says the industry will “continue working with [USDA] to best accomplish our shared goals of supporting dairy farmers’ prices in light of the harm caused by retaliatory tariffs.”

Welcome Relief

American Farm Bureau Federation President Zippy Duvall tagged the USDA program as a “welcome relief from the battering our farmers and ranchers are taking in the ongoing trade war.”

He says tariffs have led to lower crop and livestock prices. “This comes on top of nearly five years of falling commodity prices that have led to lower revenues and higher debt levels for farmers and ranchers. Nationwide, income is at a 12-year low, so any assistance that may help farmers is greatly appreciated: We lost more than 150,000 farms to consolidation and financial failure in the U.S. during the decade that ended in 2017.”

He says adding tariffs (on goods sold to China, Canada, Mexico and the European Union) to an already hard-hit agriculture economy “has been more than many farmers can bear.”

He says the aid package gives farmers “some breathing room,” but is a short-term solution. “The real solution to this trade war is to take a tough stance at the negotiating table and quickly find a resolution with our trading partners. If we’re going to turn our farm economy around for the long-term, we need to open more export markets with fair trade deals, and the sooner, the better.”

About the Author(s)

Ron Smith

Editor, Farm Progress

Ron Smith has spent more than 30 years covering Sunbelt agriculture. Ron began his career in agricultural journalism as an Experiment Station and Extension editor at Clemson University, where he earned a Masters Degree in English in 1975. He served as associate editor for Southeast Farm Press from 1978 through 1989. In 1990, Smith helped launch Southern Turf Management Magazine and served as editor. He also helped launch two other regional Turf and Landscape publications and launched and edited Florida Grove and Vegetable Management for the Farm Press Group. Within two years of launch, the turf magazines were well-respected, award-winning publications. Ron has received numerous awards for writing and photography in both agriculture and landscape journalism. He is past president of The Turf and Ornamental Communicators Association and was chosen as the first media representative to the University of Georgia College of Agriculture Advisory Board. He was named Communicator of the Year for the Metropolitan Atlanta Agricultural Communicators Association. Smith also worked in public relations, specializing in media relations for agricultural companies. Ron lives with his wife Pat in Denton, Texas. They have two grown children, Stacey and Nick, and two grandsons, Aaron and Hunter.

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