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Trade aid is temporary fixTrade aid is temporary fix

Farmers hopeful USDA Market Facilitation Program payments will lessen financial stress.

May 31, 2019

5 Min Read
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BIG QUESTION: With continuing low market prices, how long can “patriotic farmers” sustain this trade war?

Farmers are hopeful a $16 billion financial assistance package recently announced by USDA will relieve some of the financial stress due to trade disputes between the U.S. and other countries, especially China. But farmers would still rather have disagreements with China and other key trading partners resolved. 

“While another round of payments to farmers from USDA’s Market Facilitation Program may help keep some farms in operation, one thing is very clear: Farmers prefer trade over aid,” said Iowa Farm Bureau President Craig Hill, who attended a White House press conference, where President Donald Trump announced the payment. “The cost of running our farms continues to rise. To remain sustainable, farmers need access to global markets for their products, and securing trade deals will have a much larger and long-term on-farm impact than temporary aid.” 

Hill added, “We continue to encourage the administration to work diligently to reach an agreement that will end this trade war, and we urge Congress to ratify the trade deals they have before them.” 

The May 23 announcement recognized the severe economic damage due to the trade war, says Iowa Soybean Association President Lindsay Greiner. Until mid-May when negotiations fell apart between the U.S. and China, “I had been optimistic we were going to get a trade deal worked out,” said Greiner, who farms in southeast Iowa. “When the negotiations halted, I lost my optimism and began thinking there’s no way soybean farmers are going to get through this without financial help from another round” of MFP payments.

Some farmers are looking at losing $100 an acre. “The losses are hard on every farmer, but especially on young farmers,” Greiner said. “A farmer who has been farming a while perhaps can weather a year of zero income. But for younger farmers trying to get started, this is especially important. We are at risk of losing young farmers” without the MFP.

Current state not sustainable 

Still, the trade aid package isn’t enough, Greiner said. Farmers have been reassured time and again over the past year that results will be achieved in negotiating trade agreements. Yet it’s been all talk and no action. “It’s time for Congress and the administration to put aside partisan differences, break the policy gridlock and get these trade agreements worked out.”

Iowa Ag Secretary Mike Naig agrees that the MFP payments are a temporary fix. “We appreciate President Trump and USDA offering an interim solution to assist farmers,” he said. “However, farmers want trade, not aid. Farmers need markets to sell their products. This current situation isn’t sustainable. We need long-term trade agreements, and I believe we can get there, but we need China to come to the table to negotiate. It’s also imperative that Congress take action and pass USMCA, the U.S.-Mexico-Canada trade agreement, as quickly as possible.”  

Iowa losing $2 billion annually 

Iowa Corn Growers Association President Curt Mether said ICGA welcomes the payment assistance. An Iowa State University study estimates Iowa is losing $2 billion annually from trade disputes. 

Mether, a western Iowa farmer, said agriculture is caught in the middle with low commodity prices due to trade disputes, demand destruction of ethanol by EPA granting [Renewable Fuel Standard] waivers to oil refiners, and difficult weather this spring. All these factors are adversely affecting farm income. 

“Although the amount has not yet been issued by USDA for bushels of corn to be covered in the 2019 version of the MFP, we continue to push for more aid than was given in the first USDA trade aid program last year,” Mether said.

ICGA is urging members to tell the administration that 1 cent per bushel of corn (2018 payment) isn’t enough help. According to an economic analysis by the National Corn Growers Association, corn farmers suffered a loss of at least 44 cents per bushel in the price of corn last year, due to tariff and trade disputes. 

Final rules have yet to be released for 2019’s MFP, but here’s what we know: MFP would pay $14.5 billion directly to farmers. Also, $1.4 billion would go to food purchase and distribution to schools and food bank assistance programs, and $100 million to USDA’s ag trade promotion program. The direct payments to farmers will be provided county by county, based on commodities produced and acres of production. 

“We look at the trade damage each county is feeling,” said USDA Under-secretary Bill Northey. “We’ll divide that by acres planted within the county, and then have a single payment, no matter which crops you plant.” The payment rates won’t be available until July or August. “We want to make sure farmers are planting for the market.” 

This is a shift from how USDA implemented the first trade mitigation package in 2018. The $12 billion 2018 version provided direct payments to farmers based on production. USDA paid different rates, depending on the crop. For example, the MFP payment for soybeans was $1.65 per bushel produced, but only 1 cent per bushel for corn. For 2019, USDA says dairy producers will get assistance based on production history, and pork producers will get aid based on their pig inventory. 

Payments are to be sent to farmers in three installments, with the first check to be sent in late July or early August. If conditions warrant, the second and third installments would be made in November and January. Whether or not those checks come in November and January depends on whether the U.S. reaches a trade agreement with China. 

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